Ownership and

Structural Forms of
Business Enterprise
Reporter: Jona Abisado
BSHM 4B
 to understand the types
1 of ownership in
business

Objectiv
es 2
to Learn what are the
advantages &
disadvantages in each
type of ownership

to Understand what are

3 the importance of
ownership in business
pes of Ownership in Business
Ownership is a legal term. Most commonly it means the legal title to a thing or control over the
thing owned, the right of possession and disposal. As applied to business enterprise, the term
ownership means title to and possession of the assets of the enterprise, the power to determine
the policies of the operation, and the right to receive and dispose of the proceeds.

Business Enterprises
Classification
Private Ownership - When an enterprise is so organized that private individuals
exercise and enjoy the rights and privileges of an owner in their own interest, the
ownership is said to be private.
Public Ownership - When the organization of the enterprise is effected and
management is controlled by political bodies as a municipal, provincial, or national
government or by any instrumentality created by them, we have public ownership.
Mixed Ownership - Mixed ownership exists when the elements of ownership are
divided such that private persons and public bodies share in the operation of the
same enterprise.
 The Individual or Single Proprietorship
Where ownership is vested in one person, we have a single proprietorship. This form of
ownership is small, requires but little amount of capital, and is readily established under
the control of one man. It is the oldest known form of ownership and is usually referred
to as the sole proprietorship or the individual entrepreneurship.

Advanta disAdvanta
• It is geasy
e s :to start and to • g e s : and wisdom
Limited judgment
terminate. • Limited amount of capital
•  Control or management lies • Unlimited Liability
entirely in the hands of the owner. • Difficulties of management
• Only a small amount of capital is
required in starting.
• Profits belong entirely to the
owner.
•  High Credit Standing.
 Partnersh
lead to the ip
As business expands and develops the inherent limitations and disadvantages of a single
proprietorship, development of other forms of ownership.
The Partnership organization is formed.

Advanta disAdvanta
• It gcould
e s :be as easily formed as the single g e s :liability
• Unlimited of partners
proprietorship • Disagreement between partners
• There are more persons to conduct the often lead to delay and difficulties
business and to handle problems. which could endanger the enterprise
• A partnership has access to greater or better • Easy dissolution
credit facilities • Frozen investment
• The combined ability and resources of
partners are a source of strength
• There is a combined judgment of the
partners for better solution of the business
problems
• Retention of Valuable Employees
Agreement and Control of
Partnership:
The partnership organization is formed as easily as that of a single proprietorship.
By an oral or written agreement, the partners outline the nature of the
enterprise, set forth their respective rights and obligation, determine the shares
each one is to have and how the profits are to be divided, and stipulate other
terms and conditions affecting their joint venture. Mere agreement, without a
written document, is sufficient to form a partnership. When two or more persons
buy a booklet of sweepstakes tickets, intending to divide the winnings equally, we
have a partnership. It is, however, preferable that the partnership agreement
should be drawn up in writing by a reliable attorney and signed
 Silent partner, who is not Ostensible partner, who
Liquidating partner, who
given a voice in publicly makes known his
handles the affairs of
management. coop connections with a
dissolution of the business.
Industrial partner, who partnership.
contributes his services, Secret partner, whose
talents, skills, and abilities but identity is not publicly made .
not property. known, unlike the ostensible
Dormant partner, who is both partner.
secret and silent, and Managing partner, who
administers the operations
Capitalist partner, who and manages the business
contributes money or directly.
property to the organization
Nominal partner, who is no
Limited partner - earlier partner at all because the
referred to firm continues using his
General partner - earlier name for business or
referred to prestige purposes only.
Kinds of Partners
 The Cooperative
Organization
A cooperative association has some elements of a large and also many features of a
corporation, although it is distinct from both. The principal theory of the cooperative
association is the elimination of profit as the controlling motivation and reduction of certain
economic evils. Under the cooperative system, enterprises are formed to provide goods and
service, to the members at cost.

Kinds of Cooperative
• organ
The Consumer's i z a t i o nThis
Cooperative: : cooperative organization usually draws its members from the
general public. It is familiar form of cooperative, as most cooperative stores are consumer's
cooperatives. This cooperative carries on retail trade operations.
• The Producers' Cooperative: This cooperative draws its membership chiefly from the producers
of grains and other farm product.
• The Marketing Cooperative: Closely related to the producer's cooperative and often merged
with it into one organization, is the marketing cooperative.
• The Financing Cooperative: This cooperative association makes possible for people of small means
to acquire a home and to borrow money for other purposes at relatively low rates of interest
 Corporati
on
A corporation is an artificial being created by operation of law having the right of succession
and the powers, attributes, and properties, expressly authorized by law or incident to its
existence.

N a t u re a n d c h a r a c t e r i s t i c s o f a
• It is an artificialcbusiness
o r p o runit,
a t iand
o nits
: creation is
through the process of law
• The basic structure of a corporation is simple
• The corporation organization is of wide scope
• The existence of a corporation is practically permanent
by operation of law.
• The term of life of a corporation is usually limited by
statute to a period of years, subject to renewal
• The function of a corporation is public.
 Kinds of private
A c o r p o r ais tone
stock corporation i o nwhich
: the capital stock is divided into shares, authorized to distribute
dividends to the holders of the shares, or allot the surplus profit on the basis of the shares.

The non-stock corporation is one in which the capital stock is not so divided. It issues
certificates of stock which in reality are merely certificates of memberships.
These certificates cannot be transferred except to members and only upon the members' death.
This corporation does not engage in any profit making enterprise and is not allowed to pay
dividends.

Classes of
The C a p i t aStock:
Common l S Totheccommon
k: stock carries with it the right of voting, through which the
holders have great residual ownership or power over the corporation.

The Preferred Stock: gives the owners special protection or advantages over the common
stockholders.
 Advantages of the
corporation: Reasons for the
Organizational corporations
• A d v alarge
Ease of acquiring n t aamount
g e s of capital • The e m i n e cannot
corporation n t A doperate
v a n tthe
a g business
es in
• Flexible ownership any old-fashioned way as can the sole proprietor
• Limited liability of stockholders who has only himself to please.
• More or less permanent existence • It has a direct responsibility to investors who
• Legal Entity expect and demand concrete results. Investors
are generally critical of management and remain
Operational quiet only when satisfied at the performance of
• The advan
corporation t a g eans
offers excellent
•
the enterprise.
The corporation must compete actively for more
mechanism for mobilizing the large
capital needed for modern industrial capital, land, raw materials, trained managers,
operations. and labor, for efficiency in operation and for
• It permits extended specialization in wider markets.
management, plant and equipment, • The corporation is subject to searching criticism
factory organization, labor, and from investors, competitors, labor and the
marketing. public.
Disadvantages of corporate
o wExpense
• Organizational nership
• Government Restrictions and Reports
• Lack of Personal Interest
• Lack of Secrecy

The corporate
Manycof
om theb conditions
i n a t i o nthat
:led to the development of the corporation suggested a
further step - the combining of two or more corporations.

The Merger - called "integration", merger means the union effected by the absorbing of
one or more existing corporations by another which survives and continues the combined
businesses.

The Trust - the trust as a form of business organization had its origin in a principle of
law originally developed for safeguarding the property of minors and other persons not
able or willing to administer their own affairs.
Disadvantages of corporate
o wExpense
• Organizational nership
• Government Restrictions and Reports
• Lack of Personal Interest
• Lack of Secrecy

The corporate
Manycof
om theb conditions
i n a t i o nthat
:led to the development of the corporation suggested a
further step - the combining of two or more corporations.

The Merger - called "integration", merger means the union effected by the absorbing of
one or more existing corporations by another which survives and continues the combined
businesses.

The Trust - the trust as a form of business organization had its origin in a principle of
law originally developed for safeguarding the property of minors and other persons not
able or willing to administer their own affairs.
 Forms of Public
Ownership
The Public Corporation: Greater use of being made of the corporate divide and it takes the
form of the public corporation. The government organization of economic affairs is seemingly
along the corporate form.

How Public Corporation is Promoted: The active promoters are the political administration and
the recognized departments of government. The President, a provincial group, a department
secretary may become the spokesman for the proposals to have the government undertake
some economic enterprise.

How Public Corporation is Organized: A public corporation is presented in the form of

legislative bills. Proposals are therefore laid before the law-making body. The bill sets forth the
bread policies and scope of the public enterprise, outlines the form in which it is to be set,
describes its powers, designates the government agency responsible for its management and
prescribes all other basic features.
 Forms of Public
Ownership
The legislative bill, performs a function for the public enterprise similar to the application for
a corporate charter in the private economy, and when the law is passed, it becomes the
organic law of the public enterprise, serving very much as does the corporate charter in the
private economy.

How Public Corporation is Operated: The people are the' stockholders, acting through their
legislative representatives. A board of directors is usually designated by law. The corporate
funds came from the public treasury. Loans may be secured from bonds, and from the
operations of the company. When so established, it operates very much like private
corporation.

Reasons for Govt. to Engage in Business - The main reasons to the government's engagement
in business activities are for the promotion of public welfare and out of necessity. The
government's ownership of business enterprises does not mean the gradual take over of
industries from the private sector.
 D i f f e re n c e b e t w e e n p a r t n e r s h i p
A corporation is
aThe
n d c o r pcorporate
oration
The existence of a
an artificial The corporation organization is of a corporation is
business unit, and operates through wider scope since it practically permanent
its creation is delegated results out of the by of operations of
through the authority and combined resources law. The life span of
process of law responsibility. The of the members. a corporation is
while a partnership owners who are These same determined and
is a business the stockholders, individuals' who limited by law,
relationship usually, do not cannot afford to subject to renewal. It
between two or take active put up a business is however,
more persons participation in its enterprise can terminated by
competent to day-to-day organize a big forfeiture of rights
make contracts to operations and business unit through misuse,
engage in a management. through grouping nonuse,
business activity. together of nonperformance of
resources. obligations to the
state.
Thank You