3rd Floor Ever Gotesco Building Commonwealth Ave.

, Cor Batasan,
Quezon City, 1126 Metro Manila /
Tel. No. (028) 2533859
MODULE
Organization and Management
Grade 11
2nd Quarter – Week Nine
Forms of Business Ownership

Name: ______________________________________________ Date: ____________

Grade & Section: _____________________________________ Score: ___________

I. SUBJECT CONTENT:

Forms of Business Ownership

II. OBJECTIVES:
At the end of this lesson. The students are expected to:
1. Name the various forms of business organization
2. Describe the nature and characteristics of sole proprietorship
3. Describe the nature and characteristics of partnership
4. Describe the nature and characteristics of corporation
5. Assess modifications of the corporate form
6. Examine other forms of business organization

III. REFERENCE/S

Book: Business Organization and Management

Publisher: (Roberto G. Medina Rex Book Store)

IV. PRE - TEST

Fill in the blank. Supply the correct answer.

1. The major types of business ownership are sole proprietorship, partnership and
___________.

2. ___________ is that type of business entity owned and operated by a single person.

3. Partnership may either be general or ___________.

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4. The ease of transferring ownership is an advantage of ___________.

5. Double taxation is an advantage of ___________.

6. ___________ is an organization composed of individuals or business that have banded

together to reap the benefits of belonging to a large organization.

7. ___________ is a type of cooperative that accepts deposits from the members and lends
money to its members at a very reasonable interest rate.

8. ___________is a financial service firm owned by its policyholders or depositors.

9. ___________ is an association of two or more persons, each with unlimited liability and who
are actively involved in the business.

10. ___________ is a legal form or organization in which a trustee is appointed to manage the
business and its operations through a trust relationship.

Organization and Management 2

 3rd Floor Ever Gotesco Building Commonwealth Ave., Cor Batasan,
Quezon City, 1126 Metro Manila /
Tel. No. (028) 2533859
MODULE
Organization and Management
Grade 11
2 Quarter – Week Nine
nd

Forms of Business Ownership

Name: ______________________________________________ Date: ____________

Grade & Section: _____________________________________ Score: ___________

V. LESSON PROPER:

The form of business ownership to adapt is the strategic decision that must be considered
at the inception of the business. The decision may later prove to be supportive of the owner’s
objectives or may the biggest obstacle to achieving them.

Careful thinking must be considered in determining the ownership form as each of the
various types has its own unique features, as well as advantages and disadvantages.

There are three types of business ownership; sole proprietorship, partnership, and
corporation. The minor types consists of the joint stock company, the venture and the business
trust.

VI. A. MOTIVATION:

1. What are the three major types of business?

2. As a students, what is the best types of business for you that you want to build?

B. DISCUSSION: Forms of Business Ownership

Organization and Management 3

Sole Proprietorship

The Sole Proprietorship is a type of business entity owned and operated by a single person.
The big percentage of businesses owned by a sole proprietors indicates the popularity of this
ownership type. This is so because of certain advantages unique to sole proprietorships.

Advantages of Sole Proprietorship

Sole Proprietorship are afforded with advantages pertaining the following.

1. Ease and Cost of Information

2. Secrecy

3. Distribution and Use of Profits

4. Control of the business

5. Government Regulation

6. Taxation

7. Closing the business

Disadvantages of Sole Proprietorship

The smooth operation of Sole Proprietorship is hindered by the following disadvantages.

1. Owners Lack of Ability and Experience

2. Difficulty in attracting Good Employees

3. Difficulty in Raising a Capital

4. Limited Life of the Firm

5. Unlimited Liability of the Proprietor

Partnership

A partnership is a legal association of two or more persons as co – owners of an

unincorporated business.

Advantages of Partnership

Partnership have the distinction of eliminating some of the disadvantages of the sole
proprietorship while retaining some of their advantages. The advantages are as follows.

1. Ease of Formation

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2. Pooling of Knowledge and skills

3. More Funds Available

4. Ability to Attract and Retain Employees

5. Tax advantage

Disadvantages of Partnership

The partnership are hindered by the following disadvantages:

1. Unlimited Liability

2. Limited Life

3. Potential Conflict between Partners

4. Difficulty in Dissolving the Business

Types of Partnership

Partnership may be classified according to the liability of the partners. They are as follows.

1. General partnership is an association of two or more persons, each with unlimited liability
who are actively involved in the business.’

2. Limited partnership is an arrangement in which the liability of one or more partners is limited
to the amount of assets they have invested in the business.

Corporation

A corporation is an enterprise chartered by law, with most of the legal right of a person,
including the right to conduct a business to own and sell property, to borrow money and to sue
or be used.

The corporate form of business is the third ownership option open to businesspersons.
Owners of corporation are called stockholders. They are issued certificates of ownership called
stocks. Some of these stocks are openly traded in the country’s stock exchange.

Advantages of Corporation

The advantages inherent to corporations are the following:

1. Limited Liability

2. Ease of Expansion

3. Ease of Transferring Ownership

4. Relatively Long Life

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5. Greater ability to hire specialized management

Disadvantages of Corporation

Corporation also have advantages. These are the following.

1. More Expensive and Complicated to organize

2. Double Taxation

3. More Extensive Government Restriction and Reporting Requirements

4. Employees Lack Personal Identification With and Commitment to Corporate Goals.

A summary of the Positive and Negative Features of the Forms of Business Ownership

Area of Concern Sole Proprietorship Partnership Corporation

1. liability of owners Unlimited Limited/unlimited Limited
2. ease of expansion Not easy Not easy easy
3. life of firm Dependent on the Dependent on the independent of the
owner partners owners
4. decision making Can be made quickly Tends to be slower Tends to be slowest
5. taxation of income Once Once twice
6. ease of information Easiest Easy Not easy

Modification of the corporate form of ownership

The corporate form of ownership has been modified to cater to special needs. Those that
have become popular are cooperative and mutual companies.

Cooperatives

A cooperatives is defined as an organizational composed of individuals or small businesses

that have banded together to reap the benefits of a larger organizations. A cooperatives is an
organization composed of individuals or businesses that have banded together to reap the
benefits of belonging to a large organization. Cooperatives are not organized for point, but to
make its members individually profitable or to save money.

Cooperatives are of various types. They are classified according to the special interests of
its members. They are follows.

1. Credits Union – accepts deposits from members and lends money to its members at a very
reasonable interest rate.

2. Producers Cooperatives – assists one another in the procurements of raw materials,

machinery, equipment, and other time- saving devices.

Organization and Management 6

3. Marketing Cooperatives – assists members in the marketing of their produce.

4. Consumers Cooperative – provides members with quality goods and services at reasonable
prices.

5. Service Cooperative – makes services readily available and at a lower price.

Mutual Companies

A mutual company is a financial service firm (such as insurance company or a savings

and loan associations) owned by its policyholders or depositors.

Mutual companies may be classified according to products or services they carry. They are as
follows.

1. Mutual savings bank – are owned by depositors and specialized in savings and mortgage
loans.

2. Mutual Insurance Company – is a cooperative corporation organized and owned by its

policyholders. Voting control is in the hands of the insured. Profits earned by the company can
be used to pay policy dividends to policyholders and to strengthen the insurer by its surplus.

Other Forms of Business Organizations

Minor forms of business organization consist of the following:

1. The Joint Stock Company – Bannock and others define joint stock company as” a form of
business enterprise in which the capital is divided into small units permitting a number of
investors to contribute varying amounts to the total, profits being divided between stockholders
in proportion to the number of shares they own.

2. The joint venture – It is the best regarded as a particular partnership established for a specific
undertaking, this type of organization is created for the purpose of bringing together several
partners to engage in a business activity. Which is normally very specialized and which exists
for a limited, specific goals. A joint venture is mostly formed for the purpose of producing a
movie or a concert, engaging in oil or mining exploration, constructing a major project such as
dam or an airport, or perhaps the underwriting or selling of securities.

3. The Business Trust – It is a legal form of organization in which trustees is appropriated to

manage the business and its operations through a trust relationship

C. ACTIVITIES
Direction: Give you own descriptions on the various forms of business organizations in 3 to 5
sentences only. Write your answer in the space provided in bullet form.

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 To discuss Answer
1. Sole proprietorship

2. Partnership

3. Corporation

VI. ASSIGNMENT

1. Collect a data on the number of business operating in the Philippines classified according to
ownership.
2. Write your comments on why one form is bigger in percentage to total compared with the
others.

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