Advantages and

disadvantages of the
different forms of business
organization
LECTURER: Hanifa S. Odal

Your business, your choice!

 S!
MSU – IIT
FRESHIES!
2020-2021
 WELCOME TO
BS ACCOUNTANCY
FAM!
Advantages and
disadvantages of the
different forms of business
organization
LECTURER: Hanifa S. Odal

Your business, your choice!

 01
SOLE PROPRIETORSHIP
Keep all the profits and
assume all the risks.

Complete control of the

business and take all the
responsibilities

Easier and lesser cost but more

difficult to raise capital

LoweR taxes and owns all liabilities.

02
PARTNERSHIP
2 heads are better than one yet conflict
may raise among the partners.
You share the business risk with a partner
yet profits are not all yours

Greater capital compared to

partnership but is lesser compared to
corporation.
 02
PARTNERSHIP
Contractual an limited life.

Low extent of gov’t regulation compared to

corporation yet taxed like corporations.

Unlimited liability.
 03
CORPORATION
A stockholder who is not member
of the corporation’s board of
directors is relieved from
responsibilities yet those who owns
more shares are the bosses.
Limited liability but corporations
are difficult to form because more
formal business requirements are
needed.
Greater capital and ease. But greater
extent of gov’t regulations and
higher taxes.
 03
CORPORATION
Easy transfer of shares by selling them but
you have to wait for the board of directors
for the declaration of profits.

Unlimited life in the sense that the

withdrawal, retirement does not dissolve the
corporation.
04
COOPERATIVE
More than one individual.
Your say on cooperative is not affected by
number of shares you own. Yet is prone to
poor management.

Generally exempted from paying taxes and may

receive assistance from the government but
susceptible to corruption.
04
COOPERATIVE
Fewer formal business requirements

Limited liability, unlimited life. However

has strict transfer of shares.
Types of business
organization

SERVICE BUSINESS
Offers businesses as its main product.
Types of business
organization

Merchandising
Buys and sells goods without changing
their physical form.
Types of business
organization

Manufacturing
Buys raw materials and processes
them into final products.
15 ITEMS
EXERCISE
TRUE/FALSE
 May the best be with you!

01 02 03
What is one of the advantage of a sole
which of the ff. refers to a proprietorship? This type of business offers
manufacturing business? professional skills, expertise, advice
a. sharing the business risk and and etc.
a. Ability or potential to mass responsibility of running the business
produce with a partner a. Manufacturing

b. sale of a skill-set and not b. lower extent of government b. Corporation

necessarily a physical object regulation and lower taxes
c. Merchandising06
c. buying and selling of goods in c. it is easy to raise greater capital and
their original form ease in raising additional funds d. Service business

d. absence of ability to stick goods d. you are personally liable for the ans: D
for future sale debts and obligations of the business

answer: A ans: B
 May the best be with you!

04 05 06
Examples of a manufacturing business
The following are one of the is TRUE OR FALSE
disadvantages of a
cooperative, except
a. car manufacturers 1. In a sole proprietorship, it is more
a. susceptible to corruption difficult to raise capital because you
b. rice wholesalers rely mostly on your personal assets
and loans to initially finance the
b. the Cooperative Code places some
business.
restrictions on the distribution c. grocery store
of a cooperative's profit to its
TRUE.
members. d. entertainment and event planners 06
c. prone to poor management
ans: A.
d. most difficult and more costly to
form because there are more
formal business requirements

ans: D
 May the best be with you!

07 08 09
TRUE OR FALSE TRUE OR FALSE
TRUE OR FALSE

2. A stockholder who IS A member of 4. The members are liable for

3. The main reason why cooperatives
the corporation's board of directors is cooperative debts only up to the
are organized is mainly because they
relieved from managerial amount they have invested.
are exempt from paying taxes and
responsibilities.
receives assistance from the
government

06
TRUE.
FALSE.
TRUE
 May the best be with you!

10 11 12
TRUE OR FALSE TRUE OR FALSE
TRUE OR FALSE

5. In a corporation, you have to wait 7. Decision making is simple in a sole

6. The Cooperative Code requires
for thr Board of Directors to declare proprietorship because you have
cooperatives to appropriate a portion
dividends before you canget your complete control over the business.
of its annual profit to some funds after
share in the profits.
they have distributed the annual profit
to their members.

06
TRUE.
TRUE.
FALSE.
 May the best be with you!

13 14 15
TRUE OR FALSE TRUE OR FALSE
TRUE OR FALSE

8. Partnership can be easily dissolved 10. Technology companies, Banks and

9. A manufacturing business is one
by the withdrawal, retirement, or other financial institutions, Factories
that buys and sells goods without
death of one of the partners and car manufacturers are all
changing their physical forms
examples of a manufacturing
business.

TRUE
FALSE. 06
FALSE. (banks kay service)
THANKS!

HAVE A GOOD RIDE

IN YOUR FIRST YEAR
AT THE UNIVERSITY!
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