FORMS OF BUSINESS ORGANIZATION

LESSON 1
BUSINESS
is an organization that uses
economic resources or inputs to
provide goods or services to
customers in exchange for money
or other goods and services.
SOLE/SINGLE PROPRIETORSHIP
Is a business owned by only one
person who has complete control
and authority of its own. It owns
all the assets and personally
answers all liabilities or losses.
Advantages
1. Ease of formation and
dissolution
2. Low start up costs and low
operational overhead
3.Typically subject to fewer
regulations
4. No corporate income taxes
Disadvantages
1. Unlimited liability
2. Limited life
3. Difficult for an individual to
raise money for capital.
PARTNERSHIP
Is a business owned by two or
more persons who bind
themselves to contribute money
or industry to a common fund
with the intention of dividing the
profits between themselves.
ADVANTAGES
1. Synergy resulting from two or more
individuals combining strengths.
2. Easy to form but requires developing a
partnership agreement.
3. Subject to fewer regulations compared to
corporations.
4. Stronger potential of access to greater
amounts of capital.
5. No corporate income taxes.
DISADVANTAGES
1. Unlimited liability where
general partners are individually
responsible for the obligations of
the business.
2. Limited life with the withdrawal
or death of a partner as reasons to
end partnership.
3. Real possibility of disputes or
conflicts between partners that
may lead to dissolve the
partnership.
CORPORATION
Is a business organization that has
a separate legal or juridical
personality from its owners. It
should be established by or
composed of at least 5 natural
persons and not exceeding 15
persons technically called “
INCORPORATORS”.
 DOCTRINE OF PIERCING THE
CORPORATE VEIL
is a situation in which courts put
aside limited liability and hold a
corporation’s shareholders or
directors personally liable for the
corporation’s actions or debts.
ADVANTAGES
1. Unlimited commercial life
because corporation is an
entity of its own and does not
dissolve when ownership
changes.
2. Greater flexibility in raising
capital through the sale of stock.
3. Ease of transferring ownership
by selling stock.
4. Limited liability
DISADVANTAGE
1. Regulatory restrictions which can
be costly.
2. Higher organizational and
operational costs.
3. Double taxation referring to
income taxes that are paid twice or
the same source of earned income.
COOPERATIVE
Is a duly registered business
organization owned by a group of
individuals and is operated for their
mutual benefit. The persons making
up the group are called Members
who have voluntarily joined
together to achieve a lawful
common social or economic end.
ADVANTAGES
1. Formation and registration is
very simple with only 10 adults
needed.
2. The membership of cooperative
society is open to everybody
regardless of religion, sex, or
color.
3. Liabilities of the members of the
society is limited to the extent of
capital contributed by them.
4. Members are provided with
better goods and services at
reasonable prices.
5. Managed by the elected
members from and among
themselves.
6. Cannot be dissolved by the
death, insolvency, lunacy,
permanent incapability of the
members.
7. The operation is economical due to
the eliminations of middlemen.
8. Portion of the surplus is spent for
the welfare of the members.
9. Government extends many
subsidies to strengthen their
financial stability and sustainable
growth in future.
DISADVANTAGE
1. Financial strength depend on
the capital contributed by its
members.
2. Managed by the members only
who most of the time do not
possess any managerial and
special skills.
3. Maintain no secrecy in business
because the affairs of the society
is openly discussed in the
meeting.
4. Sell their products to outsiders
only in cash.
5. Excessive state regulation
interference with the flexibility
of its operation.
6. Members may not feel
enthusiastic because the law
governing the cooperatives put
some restriction on the rate of
return.
7. Different opinions and disputes
may paralyses the effectiveness of
the management.
 TYPES OF COOPERATIVES IN THE
PHILIPPINES
1. Credit Cooperative – it
promotes and accepts savings
and lending services among its
members.
2. Consumer’s Cooperative – it has
the main intention to buy and
allocate commodities to
members and non-members.
3. Producer’s Cooperative – it
undertakes a combined
production whether agricultural
or industrial.
4. Marketing Cooperative – it
engages in the supply of
production inputs to members
and market their products.
5. Service Cooperative – it engages
in medical and dental care,
hospitalization, transportation,
insurance, housing, labor,
electric, light and power,
communication, professional and
other services.
6. Multipurpose Cooperative – it
combines two or more of the
business activities of these
different types of cooperatives.
7.Advocacy Cooperative – it is a
primary cooperative which
promotes and advocates cooperative
spirit among its members through
socially-oriented projects,
education and training, research
and communication, and other
similar activities to extend to its
proposed recipients.
8. Agrarian Reform Cooperative –
it is organized by poor farmers
majority of them are agrarian
reform beneficiaries with the
intention of developing a suitable
system of land tenure, land
development and other areas
covered by agrarian reform.
9. Cooperative Bank – it is one
organized for the main idea of
offering an extensive range of
financial services to cooperatives
and their members.
10. Dairy Cooperative – it is one
whose members are engaged in
the production of fresh milk
which may be processed and/or
marketed as dairy products.
11. Education Cooperative – it is
one organized for the prime
intention of owning and
operating licensed educational
institutions.
12. Electric Cooperative – it is one
organized for the principal
reason of undertaking power
generation, utilizing renewable
energy sources.
13. Financial Service Cooperative -
it is one organized for the chief
purpose of engaging in savings
and credit services and other
financial services.
14. Fishermen Cooperative - it is
one organized by poor fishermen
in localities whose products are
sold either as fresh or processed
products.
15. Health Services Cooperative - it
is one organized for the primary
reason of giving medical, dental
and other health services.
16. Insurance Cooperative - it is
one engaged in the business of
insuring life and property of
cooperatives and their members.
17. Housing Cooperative - it is one
organized to help or make
available, access to housing for
the advantage of its regular
members who aggressively
participate in the savings
program for housing.
18. Transport Cooperative - it 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.
19. Water Service Cooperative - it is
one organized to own, operate
and manage water systems for the
provision and distribution of
drinkable water for its members
and their households.
20. Worker’s Cooperatives - it is one
organized by workers, including
the self-employed, who are at the
same time the members and
owners of the enterprise. Its
principal function is to provide
employment and business
opportunitiesto its members.
 PURPOSES OF ESTABLISHING A
BUSINESS
1. Money
2. Control
3. Adventure
4. Service
SOCIO-ECONOMIC DEVELOPMENT
It is the process of social and
economic development in a
society. It is calculated with
indicators, such as Gross
Domestic Product ( GDP ), life
expectancy, literacy and
employment rates.
GROSS DOMESTIC PRODUCT (GDP)
It is the sum of gross value added
by all resident producers in the
economy plus any product taxes
and minus any subsidizes not
included in the value of the
products.
 Life Expectancy
It is a statistical measure of how
long an organism may live, based
on the year of their birth, their
current age and other
demographic factors including
sex.
 Literacy Rate
It is simply the total percentage of
the population aged 15 and above
who can, with understanding,
read and write a short, simple
statement on their everyday life.
 Employment Rate
It is a measure of the number of
people who are both jobless and
looking for a job.