GROUP 3

FO RMS O F
BUSINESS
OWNE RSHIP
Prepared by:
Nedeline A. Arapan
Jullian Argoncillo
Lesson Objective:
 name the various form of business
organization
 described the nature and characteristics of sole
proprietorship, partnership and corporation
 asses modification of corporate form
 examine other form of business organization
Three (3) major types of
business ownership
• Sole Proprietorship
• Partnership
• Corporation The minor types consist of the joint
stock company, the joint venture and
the business trust.
 Forms of Business Ownership

Major Forms Minor Forms

Sole Proprietorship Corporation Joint Stock Company

Partnership Joint Venture

Business Trust
General Partnership Limited Partnership
 Sole Proprietorship
-is a type of business entity owned
and operated by a single person.
Advantage
1. Ease and Cost of Formation
- easiest and least costly to organize
The only requisites for its legal existence are the following:
a. the sole owner’s resolve to start operating; and
b. getting the required permits and licenses
2. Secrecy- One of the way of effectively competing with other
firm is to know the moves as well as the strengths and
weaknesses of the competitors
- keeping his intentions secret
3. Distribution and Use of Profits – if because of his effort,
the business made some profits, the sole proprietorship is
the sole beneficiary.
4. Control of the Business- the owner
is the only vested with the power to
solely authority is very important especially
under critical competitive situations

5. Government Regulation - is spared from various

government rules, which apply to partnerships and
corporations
- are required by the government to submit fewer
reports and also spared from charter restrictions on operations.

6. Taxation. The net income of the sole proprietorship is treated as the

personal income of the sole owner and is taxed accordingly.

7. Closing the Business - can be dissolved by the owners at will.

Although this is not always exercised, it remains an option of the
owners. If business conditions had become unprofitable, the
sole proprietor has the advantage of immediate cessation of
operations.
 1. Owner's Lack of Ability and Experience. The success of
the sole proprietorship will depend largely on the
management skills of the owner.
2. Difficulty in Attracting Good Employees - are not
known for surviving long periods. The existence of a sole
proprietorship is co-terminus with the life of its owner.
3. Difficulty of Raising Capital - raising capital will depend
on the financial resources of the sole owner.
4. Limited Life of the Firm. The existence of the sole
proprietorship depends on the physical well-being of the
owner and prolonged illness may make the firm go
bankrupt.
5. Unlimited liability of the Proprietor is the greatest

Disadvantage disadvantage of the sole proprietorship.

PARTNERSHIP is a legal
association of two or more persons as co-
owners of an unincorporated business.
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.
Advantage
1. Ease of Formation - are easy to form. The only
requirement before the partnership commences
operations is for the partners to agree on basic aspects of
the business like the nature of the business, location,
capitalization, and so on.

2. Pooling of Knowledge and Skills. The combined

knowledge and skills of the partners provide the
partnership with a distinct advantage.
- advantage of inviting a person who possesses a
much needed skill as a partner if for some reason, he
could not be hired as an employee.

3. More Funds Available. The combined resources

of the partners provide a bigger source of funds.
The condition leads to a higher credit
rating for the partnership.
4. Ability to Attract and Retain Employees. Attracting and
retaining employees is a difficulty inherent to sole
proprietorships. Partnerships have the ability to
overcome this difficulty by offering partner status to
valuable employees.

5. Tax Advantage. The income of the partnership is not taxed

separately from the partners' incomes. Any profits
derived by the partners are treated and taxed as their
individual incomes.
 1. Unlimited Liability. Partnerships, like sole proprietorships, are
saddled with the disadvantage of unlimited liability. Although one
or two partners may opt to have limited liability, the remaining
partner or partners carry the burden of unlimited liability.
2. Limited Life. The life of the partnership, in essence, is more limited
than the sole proprietorship.
3. Potential Conflict Between Partners. When conflict between
partners persists, operations are affected. This may even lead to
bankruptcy.
4. Difficulty in Dissolving the Business. In partnership dissolution, it
may not be easy to divide whatever assets are left for distribution
to the partners. This is because the assets may be fixed or

Disadvantage immovable.
The corporate form of business is the third
ownership option open to businesspersons.

Advantage
1. Limited Liability. The liability of stockholders
is limited to the amount of their shareholdings.
A stockholder may lose the entire value of his
stocks in the event of a bankruptcy.
CORPORATION is an enterprise chartered
2. Ease of Expansion. The authority granted to
by law, with most of the legal rights of a
corporations to sell its own shares of stock
person, including the right to conduct a
provides a means to pool large amounts of
business, to own and sell property, to
funds.
borrow money, and to sue or be sued.
3. Ease of Transferring Ownership. If a stockholder
loses interest in the corporation he partly
owns, he may disassociate himself from it by
selling or donating his shares to another person.
4. Relatively Long Life. Corporations may be
established to have lives of up to 50 years and may
be extended indefinitely through renewals of
documents.
5. Greater Ability to Hire Specialized Management. The
expanded operations of corporations make it
possible to divide the overall job into smaller
specialized positions.
D
I 1. More Expensive and Complicated to Organizer - more time and money are
S required to organize a corporation and can take several months and years before a
A corporation can begin in serving the customers.
D 2. Double taxation-The benefits inferred by investors are burdened twice by the
V government. First, when the organization acknowledges profits• Second,
A Individual investors announce the profits they get from the organization as a
N component of their personal income.
T 3. More extensive Government Restrictions and Reporting Requirements.-
A Corporations are not allowed to distribute stock dividends without first securing
G the approval of the SEC.
E
S
D
I
S
A 4. Employees lack Personal Identification With and Commitment to Corporate

D Goals.-Many stockholders are detached from the daily operations of the corporation.-
V
Those employers the enterprise for the most part do not own the company's stocks.-
A
N Employees of sole proprietorship and partnership most often know the owners

T personally.
A
G
E
S
Area of Concern Sole Partnership Corporation
Proprietorship
1. Liability of Unlimited Limited/Unlimited Limited
Owners
2. Ease of Not easy Not easy Easy
Expansion
3. Life of Firm Dependent on the Dependent on the Independent of
owner partners the owners
4. Decision- Can be made Tends to be slower Tend to be the
making quickly slowest
5. Taxation of Once Once Twice
Income
6. Ease of Easiest Easy Not easy
Formation
MODIFICATIONS OF THE CORPORATE FORM OF OWNERSHIP

Cooperatives- An organization composed of

individuals or small businesses that have
banded together to reap the benefits of a
larger organization

Cooperatives are of various types. They are

classified according to the special interest of its
members. They are as follows:
•Credit Union- Accepts deposits from individuals
and lends money to its members at an entirely
sensible financing cost.
• Producers Cooperative- Helps each other in the
procurement of raw materials, machinery, equipment,
and other time saving devices.
• Marketing Cooperative- assists members in the
marketing of their produce.
• Consumers Cooperative- Gives individuals the quality
goods and services at sensible costs

• Service Cooperative-Makes benefits promptly

accessible and at a lower cost.

Mutual Companies- A financial service firm (such
as an insurance company or a savings and loan
association) owned by its policyholders or depositors.

• Mutual Savings Banks- Claimed by contributors

and have some expertise in reserve funds and mortgage
loans.

• Mutual Insurance Company-Is a helpful

partnership coordinated and owned by its policyholders
 OTHERS FORMS OF BUSINESS ORGANIZATION
Minors forms of Business organization consist of the following:
1. The Joint Stock Company- 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 - created for the purpose of bringing together several partners to engage
in a business activity, which is normally very specialized and which exist for a limited , specific
purpose.

3. The business trust - It is an authoritative document of association wherein a legal

administrator is selected to deal with the business and its tasks through a trust relationship
Thank You