EASTER A.

LUMANG
Teacher
 “Suppose you want to open your
own sari-sari store that will need PHP
10,000 to start and you used your PHP
10,000 savings to start the said business.
You are the sole owner of the said sari-
sari store. This type of business is called
sole/single proprietorship.”
➢ A sole proprietorship is a business owned by
only one person; the simplest, and the most
common form of business organization.
➢ The owner faces unlimited liability; meaning,
the creditors of the business may go after
the personal assets of the owner if the
business cannot pay them.
➢ It is not separated from the owner. The
business and the owner are inseparable.
➢ A sole proprietorship must apply for a
Business Name and be registered with the
Department of Trade and Industry (DTI).
❑The owner  The life of the business
is limited to the life of
keeps all the the owner.
profits  Creditor would
❑The owner normally have a right
against all of his or her
makes all the assets, business or
decisions personal (unlimited
❑It is easy to form liability)
and operate  The amount of capital
is limited only by the
wealth of the
proprietor.
 “What if the needed amount to
start your dream sari-sari store is
PhP20,000 and you only have PHP
10,000 cash savings. You ask Juan, your
friend if he is willing to invest his
PHP10,000 and become part owner of
the sari-sari store. Assuming he agrees,
what form of business organization was
created?”
➢ A partnership is a business owned by two or
more persons. The details of the
arrangement between the partners are
outlined in a written document called
article of partnership.
➢ Profits are divided among partners based
on their agreed sharing.
➢ The owner is called a partner.
➢ A contract of partnership having a capital
of three thousand pesos (Php 3,000.00) or
more, in money or property, must register
with the Securities and Exchange
Commission (SEC).
❑Higher capital ❖ The profits are divided
because two or among the partners.
❖A partner can be held
more person will
liable for the acts of the
contribute to other partners.
the common ❖In a lawsuit, the
fund personal properties of
❑It is easy to the partners can be held
operate like a beyond their
sole/single contributions and may
proprietorship be used to answer for
any liability of the
partnership.
 “Assuming your dream is to open a
grocery store and not just a sari-sari store but
you will need PHP1,000,000 to start the said
business. You have only PHP10,000, your friend
Juan has PHP10,000 and your mother is willing
to invest her PHP20,000, but still these are not
enough to start your dream grocery store.
Where will you get the money to raise the
PHP1 million? You may consider setting up a
corporation?”
➢ A corporation is a business organized as a separate
legal entity (artificial person) under the corporation
law with ownership divided into transferable shares of
stocks
➢ The law ( Corporation Code of the Philippines) creates
a corporation.
➢ The corporation begins its existence from the date the
Articles of Incorporation is approved by the Securities
and Exchange Commission (SEC).
➢ The SEC (Securities and Exchange Commission) 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.
➢ The voting rights of a shareholder is generally based
on the percentage of ownership.
➢ 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 PHP10 per share.
➢ The proof of ownership is evidenced by a stock
certificate.
❑Can easily raise  Closely regulated
additional funds by  The most
selling shares of stocks to expensive form to
the public. organize
❑Perpetual
 Extensive record
keeping
life(succession) –
necessary
continuous existence
 Higher taxation
❑Limited liability (double taxation
(shareholders are not of dividens, larger
personally liable for the business tax
debts of the corporation. rates)
 “Assuming all the mothers in your barangay
decided to open a sari-sari store where all the members
can buy in cash or in credit. Some mothers were also
taught how to sew dresses and bags as part of the
project of the group. These bags are then sold to a
certain company. Aside from that, the organization
provides seminars to the members on various topics
involving mothers and their roles. At the end of the year,
the profits are distributed among the members based
on their capital contribution. The amount of their
purchases in the sari-sari store during the year is also
computed and they receive something out of the
profit/surplus based on their purchases. This form of
business organization is called a cooperative”
➢ A cooperative is a 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
equitably 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).
1. Easy Formation:
Compared to the formation of a company, formation of a cooperative
society is easy. Any ten adult persons can voluntarily form themselves into an
association and get it registered with the Registrar of Co-operatives.
Formation of a cooperative society also does not involve long and
complicated legal formalities.
2. Limited Liability:
Like company form of ownership, the liability of members is limited to the
extent of their capital in the cooperative societies.
3. Perpetual Existence:
A cooperative society has a separate legal entity. Hence, the death,
insolvency, retirement, lunacy, etc., of the members do not affect the
perpetual existence of a cooperative society.
4. Social Service:
The basic philosophy of cooperatives is self-help and mutual help. Thus,
cooperatives foster fellow feeling among their members and inculcate moral
values in them for a better living.
5. Open Membership:
The membership of cooperative societies is open to all irrespective of
caste, colour, creed and economic status. There is no limit on
maximum members.
6. Tax Advantage:
Unlike other three forms of business ownership, a cooperative society
is exempted from income-tax and surcharge on its earnings up to a
certain limit. Besides, it is also exempted from stamp duty and
registration fee.
7. State Assistance:
Government has adopted cooperatives as an effective instrument of
socio-economic change. Hence, the Government offers a number of
grants, loans and financial assistance to the cooperative societies – to
make their working more effective.
8. Democratic Management:
The management of cooperative society is entrusted to the
managing committee duly elected by the members on the basis of
‘one-member one -vote’ irrespective of the number of shares held by
them. The proxy is not allowed in cooperative societies. Thus, the
management in cooperatives is democratic.
1. Lack of Secrecy:
A cooperative society has to submit its annual reports and accounts
with the Registrar of Cooperative Societies. Hence, it becomes quite
difficult for it to maintain secrecy of its business affairs.
2. Lack of Business Acumen:
The member of cooperative societies generally lack business
acumen. When such members become the members of the Board
of Directors, the affairs of the society are expectedly not conducted
efficiently. These also cannot employ the professional managers
because it is neither compatible with their avowed ends nor the
limited resources allow for the same.
3. Lack of Interest:
The paid office-bearers of cooperative societies do not take interest
in the functioning of societies due to the absence of profit motive.
Business success requires sustained efforts over a period of time
which, however, does not exist in many cooperatives. As a result, the
cooperatives become inactive and come to a grinding halt.
4. Corruption:
In a way, lack of profit motive breeds fraud and corruption in
management. This is reflected in misappropriations of funds by the
officials for their personal gains.
5. Lack of Mutual Interest:
The success of a cooperative society depends upon its members’
utmost trust to each other. However, all members are not found
imbued with a spirit of co-operation. Absence of such spirit breeds
mutual rivalries among the members. Influential members tend to
dominate in the society’s affairs.
Sole/Single Proprietorship

Partnership

Corporation

Cooperatives
 ITEM Sole Partnership Corporation Cooperatives
Proprietorship

1. Number of
Possible Owners

2. Management
(who manages the
business)
3. Termination of the
Business

4. Government
agency assigned
primarily to regulate
5. Transfer of
ownership

6. Liability of Owners
According
to Activities
 According to Activities
• Chris Rodrigo Beauty Parlor
• Crisostomo Law Firm
• JTC Mall
• Queen Laundry
• AIM Tutorial
• Novelty Enterprises
• ESC Merchandise
• K-Servico
• Shell Gasoline Station
 A service type of business provides
intangible products (products with no
physical form). Service type firms offer
professional skills, expertise, advice,
consultations and other similar
products.

Examples of service businesses are:

schools, repair shops, hair salons, banks,
accounting firms, and law firms.
 This type of business buys products at
wholesale price and sells the same at retail
price. They are known as "buy and sell"
businesses. They make profit by selling the
products at prices higher than their purchase
costs.
A merchandising business sells a product
without changing its form.

Examples are: grocery stores, convenience

stores, distributors, and other resellers.
Unlike a merchandising business, a
manufacturing business buys products with the
intention of using them as materials in making
a new product. Thus, there is a transformation
of the products purchased. A manufacturing
business combines raw materials, labor, and
factory overhead in its production process. The
manufactured goods will then be sold to
customers.
Examples are: shoe manufacturing businesses,
car manufacturing plants.
Hybrid businesses are companies that may be
classified in more than one type of business. A
restaurant, for example, combines ingredients
in making a fine meal (manufacturing), sells a
cold bottle of wine (merchandising), and fills
customer orders (service).
Nonetheless, these companies may be
classified according to their major business
interest. In that case, restaurants are more of
the service type – they provide dining
services.
1. Provide services to customers
2. Sells good to customer
3. Raw materials are available
4. Goods to be sold are purchased from a supplier
5. Goods to be sold are produced by the company
itself
6. Supplies are used, no goods to be sold
7. Bakery
8. Barber shop
9. Cellphone store
10. Adessa Home Appliances
 ITEM Sole Partnership Corporation Cooperatives
Proprietorship
1. Number of Possible 1 2 or more At least 5 15 or more
Owners

2. Management (who Owner (but he may Partners (but he Board of Directors Board of Directors
manages the business) hire somebody) may hire and Operating and Operating
somebody) Management Management

3. Termination of the Death of the owner Death of any As stated in the As stated in the
Business partner or Articles of Articles of
withdrawal of a Incorporation, not Cooperatives, not
partner exceed 50 years exceed 50 years
4. Government agency In limited capacity, In limited SEC CDA
assigned primarily to DTI capacity, DTI
regulate

5. Transfer of ownership Sell the business (it’s Sell the business Sell stocks Cannot transfer nor
new entity under a or interest of a sell his membership
new owner) partner (consent
of other partners
is necessary)
6. Liability of Owners Unlimited Two types of Limited to the Limited to the
partners (limited stock investment capital contribution
and unlimited) of the shareholder of the member