FORMS OF BUSINESS

ORGANIZATIONS
Sole Proprietorship
form of business owned by one person; the
simplest, and the most common form of business
organization.
Advantages
 The owner keeps all the profits
 The owner makes all the decisions
 It is easy to form and operate.
Sole Proprietorship
Disadvantages
 Thelife of the business is limited to the life of the
owner. Once the owner dies, the business will
cease to operate under the name of the
proprietor.
 Theamount of capital is only by the wealth of the
proprietor.
Partnership
Advantages
 Higher capital because two or more persons will
contribute to the common fund.
 It is easy to operate like a sole/proprietorship
Disadvantage
 The profits are divided among partners
 A partner can be held liable for the acts of the other
partners
 In lawsuit, the personal properties of the partners
can be held beyond their contributions and may be
used to answer for any liability f the partnership.
Corporations
 Business organized as legal entity (artificial
person) under the corporation law with ownership
divided into transferable shares of stocks.
 Emphasize that it is the law (Corporation Code
of the Philippines) that creates a corporation.
 The corporation begins its existence from the
date the Articles of Incorporation is approved by
the Securities and Exchange Commission (SEC)
Corporations
 The SEC is the government agency primarily
tasked to regulate private corporations in the
Philippines.
 The owners are called stockholders or
shareholders.
 The word ‘Corporation/Incorporation/Corp./Inc.’
appears in the name of the entity.
 Thevoting rights of a shareholder is generally
based on the percentage of ownership.
Corporations
 The management of the business is delegated by
the shareholders to the Board of Directors.
 The ownership is divided into shares and the
value of one share may be denominated at a
smaller amount, for example at Php 10 per share.
 The proof of ownership is evidenced by a stock
certificate.
Corporations
Advantages
 Can easily raise additional funds by selling
shares of stocks to the public.
 Shareholders are not personally liable for the
debts of the corporation. The extent of their
liability is limited to their equity (ownership) in the
corporation.
Corporations
Disadvantages
 It is relatively complicated to set up.
 Subject to several legal restrictions as listed in
the Corporation Code of the Philippines.
Cooperatives
 Duly registered association of persons with a
common bond of interest, voluntarily joining
together to achieve their social, economic and
cultural needs.
 The owners are called members who contribute
equitability to the capital of the cooperative.
 The members are expected to patronize their
products and services.
 The word ‘cooperative’ appears in the name of the
entity.
 This form of business organization is regulated by
the Cooperative Development Authority (CDA).
Cooperatives
Advantages
 Enjoys certain tax exemption privilege.
 Promotes the concept of sharing resources.

Disadvantages
 Unlimited distribution of surplus
 Requires continuous education programs for
members.
 The members have active and direct participation in
the business of the cooperative.