Forms and

Types of
Business
Organizations
1. FORMS OF
BUSINESS
ORGANIZATIONS
“
DEFINITION OF TERMS
Organization – a collection of people working
together to achieve a common purpose in relation to
their organization’s mission, vision, goals, and
objectives, sharing a common organizational
culture.

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SINGLE PROPRIETORSHIP
▸ a form of business that is owned,
managed and controlled by an individual.
It is the simplest and the most numerous
form of business organization.

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 DIFFERENT
TYPES OF SOLE
PROPRIETORSHIP

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Self-Employed Business Owner
A self-employed business owner
is someone who conducts a trade
or business with the intent of
making a profit. The self-
employed individual may conduct
the business on a full-time basis
or as a part-time venture.

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 Franchise
A franchise may also take on the form of a sole proprietorship. In a
franchise, the sole proprietor, also referred to as a franchisee, pays a fee
to a franchisor in exchange for the right to use the company brand. The
franchisee is obligated to follow a predetermined business model that
controls such areas as operations, marketing, pricing and the ability to
expand. The franchisee must also pay the franchisor royalties, which are
typically a percentage of the franchise unit's gross sales. A franchise can
be a good choice for the sole proprietor who has little business
experience, as the franchisor provides a successful business model as
well as marketing and operational support.

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SOLE PROPRIETORSHIP
ADVANTAGES DISADVANTAGES

EASE OF FORMATION UNLIMITED LIABILITY

OWNER HAS FULL DIFFICULTY OR

CONTROL OF THE RAISING ADDITIONAL
BUSINESS CAPITAL
THE OWNWER CAN ONWER’S BIAS
FREELY MIX
PERSONAL ASSESTS
WITH BUSINESS
ASSETS
OWNER HAS ALL THE
PROFITS FOR
HIMSELF OR
HERSELF
SIMPLE TAXATION
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PARTNERSHIP

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“
By the contract of Partnership, two or more
persons bind themselves to contribute
money, property, or industry to a common
fund with the intention of dividing the profits
among themselves. Two or more persons
may also form a partnership for the
exercise of profession. Art. 1767, Civil
Code
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Different Types of Partners
▸ General partners, who invest in the
partnership, participate in the day-to-day
operations and are liable for debts and
lawsuits of the partnership
▸ Limited partners, who invest in the
partnership but who have no participation
in day-to-day operations and who are not
usually considered to have liability.
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 Different Types of Partners
▸ General Partnership
An association of two or more persons that carry on as
the co-owners of a business in order to generate a profit.
The default rule is equality between all members and the
only way to change this is through a formal written
agreement. Each partner possesses an equal voice in
management and the authority to act as agent for the
partnership. Each partner can be held liable for all debts of the
partnership, and for torts committed by other partners within
the course of the partnership's business.

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Different Types of Partners
▸ Limited Partnership A limited partnership is formed by
two or more persons, having one or more general
partners and one or more limited partners. A limited
partner has no voice in the active management of the
limited partnership, which is conducted by the general
partner(s). Every limited partner's liability is limited to
the capital he has contributed to the partnership.

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Different Types of Partners
▸ Limited Liability Partnership With an LLP, partners will
receive the same beneficial taxation provided by a
general partnership, and will also be shielded from the
debts, and liabilities of the business. In addition, every
partner in an LLP will be protected from the actions of
other partners.

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Different Types of Partners
ADVANTAGES DISADVANTAGES

EASIER TO CREATE THAN UNLIMITED LIABILITY

CORPORATION
BETTER ABILITY TO ACQUIRE MUTUAL AGENCY
ADDITIONAL CAPITAL THAN
SOLE PROPRIETORSHIPS
LARGER POOL OF HUMAN LIMITED LIFE
CAPITAL THAN SOLE
PROPRIETOSHIP

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CORPORATION

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CORPORATION
▸ Is an artificial being created by operation of law,
having the right of succession and powers,
attributes and properties expressly authorized by
law or incident to its existence. - Sec. 2 of B.P.
Blg. 68 (Corporation Code of the Philippines)

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CORPORATION
▸ Many different types of corporations exist, and they are
generally classified depending on specific factors, which
include:
▸ The business purpose of the corporation
▸ The manner in which the corporation's income is taxed
▸ The number of shareholders and amount of stock to be
issued
▸ Whether the corporation is incorporated to make a profit

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CORPORATION
▸ A corporation formed to engage in commercial activity
for a profit. Another name for this type is a "for-profit"
corporation.
▸ A corporation whose income is taxed through the
corporation rather than its shareholders. Any
corporation that does not choose S Corporation tax
status under the Internal Revenue Code is a C
Corporation by default.

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DIFFERENT TYPES OF CORPORATION
▸ Close Corporation Any corporation whose stock is freely traded and is
held by only a few shareholders who are often within the same family.
The requirements and privileges of Close Corporations vary by
jurisdiction.
▸ Controlled Corporation A corporation in which the majority of stock is
held by one individual or firm.
▸ Cooperative Corporation A corporation primarily organized for the
purpose of providing services and profits to its members rather than for
a corporate profit. The most common kind is one formed to purchase
real property (such as an apartment building), so that its shareholders
may lease the apartments.

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 DIFFERENT TYPES OF CORPORATION
▸ Foreign Corporation A corporation that is registered in one state, but is also
“authorized to do business” in one or more different states. Usually created to
take advantage of tax breaks and state incorporation laws. May also refer to
overseas corporations doing business in the Philippines.
▸ Non-Profit Corporation A corporation organized for some purpose other than
making a profit. Non-profits are typically granted special tax treatment.
▸ Private Corporation A corporation founded by and composed of private
individuals principally for a nonpublic purpose, such as manufacturing, banking,
and railroad corporations (including charitable and religious corporations).
▸ Professional Corporation A corporation that provides services of a type that
requires a professional license. These are typically corporations made up of
architects, accountants, lawyers, physicians, veterinarians, etc.
▸ Public Corporation A corporation whose shares are traded to and among the
general public. These are government-owned corporations that engage in
activities benefiting the general public, usually while remaining financially
independent. Such a corporation is managed by a publicly appointed board. 21
 DIFFERENT TYPES OF CORPORATION
▸ A corporation whose income is
taxed through its shareholders
rather than the corporation itself.
Only corporations with a limited
number of shareholders can elect
S-corporation tax status under the
Internal Revenue Code. 22
CORPORATION
ADVANTAGES DISADVANTAGES

ABILITY TO ACQUIRE HEAVILY REGULATED

ADDITIONAL CAPITAL BY GOVERNMENT
TRANSFERABLE DOUBLE TAXATION
OWNERSHIP
LIMITED LIABILITY NOT EASY TO FORM

VIRTUALLY MORE EXPENSIVE TO

UNLIMITED LIFE FORM THAN SOLE
PROPRIETORSHIP
AND PARTNERSHIP
LAGE POOL OF
HUMAN CAPITAL

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COOPERATIVE

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 COOPERATIVE
▸ a duly registered association of persons, with
common bond of interests, who have
voluntarily joined together to achieve a lawful
common social or economic end, making
equitable contributions to the capital required
and accepting a fair share of the risks and
benefits of the undertaking in accordance with
universally accepted cooperative principle. ~
Cooperative Code of the Phil
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 DIFFERENT TYPES OF
COOPERATIVE
▸ Credit Cooperative - is one that promotes and undertakes savings and lending
services among its members. It generates a common pool of funds in order to
provide financial assistance and other related financial services to its members
for productive and provident purposes;
▸ Consumer’s Cooperative – is one the primary purpose of which is to procure and
distribute commodities to members and non-members;
▸ Producer’s Cooperative - is one that undertakes a joint production whether
agricultural or industrial. It is formed and operated by its members to undertake
the production and processing of raw materials or goods produced by its
members into finished or processed products for sale by the cooperative to its
members and non-members. Any end product or its derivative arising from the
raw materials produced by its members, sold in the name and for the account of
the cooperative, shall be deemed a product of the cooperative and its members;
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 DIFFERENT TYPES OF
COOPERATIVE
▸ Marketing Cooperative – is one which engages in the supply of production inputs
to members and markets their products;
▸ Service Cooperative – is one which engages in medical and dental care,
hospitalization, transportation, insurance, housing, labor, electric .light and
power, communication, professional and other services;
▸ Multipurpose Cooperative – is one which combines two (2) or more of the
business activities of these different types of cooperatives;
▸ Advocacy Cooperative – is a primary cooperative which promotes and
advocates cooperativism among its members and the public through socially-
oriented projects, education and training, research and communication, and
other similar activities to reach out to its intended beneficiaries;
▸ Agrarian Reform Cooperative – is one organized by marginal farmers majority
of which are agrarian reform beneficiaries for the purpose of developing an
appropriate system of land tenure, land development, land consolidation or land
management in areas covered by agrarian reform; 27
 DIFFERENT TYPES OF
COOPERATIVE
▸ Cooperative Bank – is one organized for the primary purpose of providing a wide
range of financial services to cooperatives and their members;
▸ Dairy Cooperative – is one whose members are engaged in the production of
fresh milk which may be processed and/or -marketed as dairy products;
▸ Education Cooperative – is one organized for the primary purpose of owning and
operating licensed educational institutions, notwithstanding the provisions of
Republic Act No. 9155, otherwise known as the Governance of Basic Education
Act of 2001;
▸ Electric Cooperative – is one organized for the primary purpose of undertaking
power generation, utilizing renewable energy sources, including hybrid systems,
acquisition and operation of sub-transmission or distribution to its household
members;
▸ Financial Service Cooperative – is one organized for the primary purpose of
engaging in savings and credit services and other financial services;
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 DIFFERENT TYPES OF
COOPERATIVE
▸ Fishermen Cooperative – is one organized by marginalized fishermen in
localities whose products are marketed either as fresh or processed products;
▸ Health Services Cooperative – is one organized for the primary purpose of
providing medical, dental and other health services;
▸ Housing Cooperative – is one organized to assist or provide, access to housing
for the benefit of its regular members who actively participate in the savings
program for housing. It is co-owned and controlled by its members;
▸ Insurance Cooperative – is one engaged in the business of insuring life and
property of cooperatives and their members;
▸ Transport Cooperative – is one which includes land and sea transportation,
limited to small vessels, as defined or classified under the Philippine maritime
laws, organized under the provisions of this Code.
▸ Water Service Cooperative – is one organized to own, operate and manage
water systems for the provision and distribution of potable water for its members
and their households; 29
 DIFFERENT TYPES OF
COOPERATIVE
▸ Worker’s Cooperative – is one organized by workers,
including the self- employed, who are at the same time the
members and owners of the enterprise. Its principal purpose is
to provide employment and business opportunities to its
members and manage it in accordance with cooperative
principles; and

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COOPERATIVE
ADVANTAGES DISADVANTAGES

DIFFERENT TYPES BUSINESS CONTROL

MAY BE FORMED SHARED
(FARMERS; ETC.)
MOST COOPERATIVE IDEAS AND
MAY APPY TO TAX DECISIONS MADE BY
EXEMPTION. THE BOARD OF
DIRECTORS HAVE TO
BE ACCEPTED BY
THE GENERAL
MEMBERSHIP
LARGE POOL OF
TALENTS, SKILLS,
AND KNOWLEDGE
LIMITED LIABILITY OF
MEMBERS
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 TYPES OF BUSINESS
ACCORDING TO ACTIVITY
▸ SERVICE - firms that generally use their employees to provide
intangible products or services to customers.
▸ Cash on Hand Pays employees and other expenses Performs
services Receives payment from customers
▸ MERCHANDISING / TRADING firms that buys finished or almost
finished goods from their suppliers and resells the same to customers.
▸ Cash on Hand Buys goods Stores goods as inventory Sells inventory
Receives payment from customers
▸ MANUFACTURING firms that create or manufacture their own
products / goods.
▸ Cash on Hand Buys goods Stores goods as inventory Sells inventory
Receives payment from customers
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REFERENCE;
1)ENTREPINOY2012
(INTRODUCTION TO
ENTREPRENEURSHIP),
PEREDA ET. AL