Subject: FABM 1

Topic: FORMS OF BUSINESS ORGANIZATIONS

💡 SOLE/SINGLE PROPRIETORSHIP

“Suppose you want to open your own sari-sari store that will need PHP10,000 to start and you used your
PHP10,000 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 form of business that is owned by one person; the simplest, and the most common form of business
organization

• It is not separate from the owner. The business and the owner are inseparable

b. ADVANTAGES OF SOLE/SINGLE PROPRIETORSHIP

• The owner keeps all the profits.

• The owner makes all the decisions.

• It is easy to form and operate.

c. DISADVANTAGES OF SOLE/SINGLE PROPRIETORSHIP

• The life of the business is limited to the life of the owner. Once the owner dies,
the business will cease to operate under the name of the proprietor.

• The amount of capital is limited only by the wealth of the proprietor.

💡 PARTNERSHIP

“What if the needed amount to start your dream sari-sari store is PHP50,000 and you only have

PHP25,000 cash savings. You ask Juan, your friend if he is willing to invest his PHP25,000 and

become part owner of the sari-sari store. Assuming he agrees, what form of business organization

was created?”

a. PARTNERSHIPS

• A form of business owned by two or more persons. The details of the

arrangement between the partners are outlined in a written document called

articles of partnership.

• Profits are divided among partners based on their agreed sharing.

• The owner is called a partner.

b. ADVANTAGES OF PARTNERSHIP

• Higher capital because two or more persons will contribute to the common fund.

• It is easy to operate like a sole/single proprietorship

c. DISADVANTAGES OF PARTNERSHIP

• The profits are divided among the partners.

• A partner can be held liable for the acts of the other partners.

• In a lawsuit, the personal properties of the partners can be held beyond their

contributions and may be used to answer for any liability of the partnership.

💡 CORPORATIONS

“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 PHP25,000, your friend Juan has

PHP25,000, and your mother is willing to invest her PHP50,000, 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. CORPORATIONS

• 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

• Emphasize that it is the law (Corporation Code of the Philippines) that 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.

b. ADVANTAGES OF CORPORATION

• Can easily raise additional funds by selling shares of stocks to the public.

• Shareholders are not personally liable for the debts of the corporation. The extent of their liability is
limited to their equity

(ownership) in the corporation.

c. DISADVANTAGES OF CORPORATION

• It is relatively complicated to set up.

• Subject to several legal restrictions as listed in the Corporation Code of the Philippines

💡 COOPERATIVES

“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. COOPERATIVES

• 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).
b. ADVANTAGES OF COOPERATIVES

• Enjoys certain tax exemption privilege

• Promotes the concept of sharing resources

c. DISADVANTAGES OF COOPERATIVES

• Limited distribution of surplus

• Requires continuous education programs for members.

• The members have active and direct participation in the business of the cooperative.

---

📌Full credits to the Commission on Higher Education in collaboration with the Philippine Normal
University