24 March 2023

MODULE 4

FORMS AND ECONOMIC

ROLES OF BUSINESS
ORGANIZATIONS
KEY TERMS
Business
Hybrid Business
Merchandising Business
Manufacturing Business
Sole Proprietor
Partnership
Corporation
Cooperative
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PRELIMENARY ACTIVITY

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WHAT IS BUSINESS?

Business is an entity or enterprise that provides

goods and services in exchange for some form of
money or another. It can be a privately owned, non-
profit organization or state-owned business.

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FOUR MAJOR TYPES OF BUSINESSES:

Service Business - provides intangible products.

Merchandising Business - buys products at wholesale price
and sells the same at retail price.
Manufacturing Business - buys products with the intention
of using them as materials in making a new product.
Hybrid Business - classified in more than one type business.

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BASIC FORMS
OF BUSINESS
OWNERSHIP:

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SOLE PROPRIETORSHIP
Business is owned and operated by only one person.

DISADVANTAGE:
ADVANTAGE:
Responsible for all debts.
Easiest and least expensive
Raising funds and are often limited to
complete control
using.
Profit from the business
Hard time attracting high-caliber
directly
employees.
easy to dissolve, if desired.
Benefits not directly deductible from
business income.

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PARTNERSHIP
ADVANTAGE:
Owned by two Relatively easy to establish.
ability to raise funds may be
or more person
increased.
who contribute
Profits from the business flow
resources for directly.
the entity Attract employees to be a business
partner.

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 DISADVANTAGE:
jointly and individually liable for the actions of other partners.
Profits must be shared.
Disagreement can occur.
Benefits are not deductible
partnership may have a limited life;

TYPES OF PARTNERSHIPS THAT YOU SHOULD

CONSIDER:
General Partnership.
Limited Partnership and Partnership with limited liability.
Joint Venture
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COOPERATIVE owned and operated by group of
individuals for their mutual benefit

ADVANTAGE: DISADVANTAGE:
Less Taxation Less Operational Control
Funding opportunities Fixed Pricing
Further marketing reach Cooperative may suffer from
Reduce costs and improve slow cash flow.
product and services Lack of membership and
Perpetual existence participation may cause risk of
Democratic organization, losing members.

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CORPRATION
owned and operated by group of individuals for their mutual
benefit

ADVANTAGE:
Shareholders have limited liability for the corporation’s debts
or judgements.
shareholders can only be held accountable for their
investment.
Corporations can raise additional funds.

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Corporation may deduct the cost of benefits.
Can elect Corporation status.

DISADVANTAGE:
process of incorporation requires more time and money.
may have more paperwork to comply with regulations.
Corporations may result in higher overall taxes.

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