ORGANIZATION

AND
MANAGEMENT
THE FIRM
AND ITS
ENVIRONMENT
LESSON 4:
 FORMS OF These firms are
BUSINESS owned by one
ORGANIZATIONS
person, usually the
individual who has
A. SOLE
day-to-day
PROPRIETORSHIPS
responsibility
The vast majority of
for running the
small businesses
business.
start out as sole
proprietorships.
 ADVANTAGES OF A control, and within
SOLE the parameters of
PROPRIETORSHIP the law, may make
decisions as they
1. Easiest and least see fit.
expensive form of 3. Profits from the
ownership to business flow-
organize. through directly to
2. Sole proprietors the owner’s personal
are in complete tax return.
4. The business is legally responsible
easy to dissolve, if for all debts against
desired. the business.
2. May be at a
DISADVANTAGES disadvantage in
OF A SOLE
raising funds and
PROPRIETORSHIP
are often limited to
1. Sole proprietors using funds from
have unlimited personal savings or
liability and are consumer loans.
3. May have a hard owner’s medical
time attracting high- insurance premiums
caliber employees, are not directly
or those that are deductible from
motivated by the business income
opportunity to own (only partially as an
a part of the adjustment to
business. income).
4. Some employee
benefits such as
B. PARTNERSHIPS ADVANTAGES OF A
In a Partnership, PARTNERSHIP
two or more people
1. Partnerships are
share ownership of a
relatively easy to
single business. Like
establish; however,
proprietorships, the
time should be
law does not
invested in
distinguish between
developing the
the business and its
partnership
owners.
agreement.
2. With more than employees may be
one owner, the attracted to the
ability to raise funds business if given the
may be increased. incentive to become
3. The profits from a partner.
the business flow 5. The business
directly through to usually will benefit
the partners’ from partners who
personal tax return. have complementary
4. Prospective skills.
 DISADVANTAGES OF 3. Since decisions
A PARTNERSHIP are shared,
disagreements can
1. Partners are occur.
jointly and
individually liable 4. Some employee
for the actions of the benefits are not
other partners. deductible from
2. Profits must be business income on
shared with others. tax returns.
 liability, as well as
TYPES OF
the shares of profit
PARTNERSHIPS
THAT SHOULD BE or loss according to
CONSIDERED: their internal
agreement.
Equal shares are
1. General
assumed unless
Partnership -
there is a written
Partners divide
agreement that
responsibilityfor
states differently.
management and
2. Limited as well as limited
Partnership and input regarding
Partnership with management
limited liability - decision, which
“Limited” generally
means that most of encourages
the partners have investors for short
limited liability (to term projects, or for
the extent of their investing in capital
investment) assets.
3. Joint Venture - C. CORPORATIONS
Acts like a general A Corporation,
partnership, but is chartered by the
clearly for a limited state in which it is
period of time or a headquartered, is
single project. considered by law to
be a iniquity,
separate and apart
from those who own
it.
 ADVANTAGES OF A 2. Generally,
CORPORATION shareholders can
only be held
1. Shareholders accountable for their
have limited liability investment in stock
for the corporation’s of the company.
debts or judgments 3. Corporations can
against the raise additional
corporation. funds through the
sale of stock.
4. A Corporation DISADVANTAGES OF
may deduct the cost A CORPORATION
of benefits it
provides to officers 1. The process of
and employees. incorporation
requires more time
and money than
other forms of
organization.
2. Corporations are 3. Incorporating
monitored by may result in higher
federal, state and overall taxes.
some local agencies, Dividends paid to
and as a result may shareholders are not
have more deductible from
paperwork to business income;
comply with thus, this income
regulations. can be taxed twice.
 The persons making
D. COOPERATIVES
up the group are
A Cooperative is a
called members.
business
organization owned
by a group of
individuals and is
operated for their
mutual benefit
 Universal to use its services
Cooperative and willing to accept
Principles responsibilities of
membership,
1. Voluntary and without gender,
Open Membership. social, racial,
Cooperatives are political or religious
voluntary discrimination.
organizations, open
to all people able
2. Democratic who actively
Member Control. participate in setting
Cooperatives are policies and making
democratic decisions.
organizations 3. Member’s
controlled by their Economic
members – those Participation.
who buy the goods Members contribute
or use the services equally to, and
of the cooperative – democratically
control, the capital 4. Autonomy and
of the cooperative. Independence.
This benefits Cooperatives are
members in autonomous, self-
proportion to the help organizations
business they controlled by its
conduct with the members.
cooperative rather
than on the capital
invested.
5. Education,
can contribute
Training, and
effectively to the
Information.
development of their
Cooperatives
cooperative.
provides education
6. Cooperation
and training for
Among
members, elected
Cooperatives.
representatives,
Cooperatives serve
managers and
its members most
employees so they
effectively and
strengthen the While focusing on
cooperative member’s needs,
movement by cooperatives
working together work for the
through local, sustainable
national, regional development of
and international communities
structures. through policies and
7. Concern for programs accepted
Community. by the members.
 current degree of
5 (Five) STAGES economic
development. These
Walt Rostow took a are:
historical approach
in suggesting that
developed countries
have tended to pass
through 5 stages to
reach their
1. Traditional
in very low labor
society. This is an
productivity and
agricultural
little surplus output
economy of mainly
left to sell in
subsistence farming,
domestic and
little of which is
overseas markets.
traded The size of
2. Pre-conditions
the capital stock is
for take-off.
limited and of low
Agriculture becomes
quality resulting
more mechanized
and more output is for example in the
traded. Savings and form of overseas aid
investment grow or perhaps
although they are remittance incomes
still a small from migrant
percentage of workers living
national income overseas.
(GDP). Some 3. Take-off.
external funding is Manufacturing
required - industry assumes
greater importance, and investment
although the grow, perhaps to
number of 15% of GDP.
industries remains 4. Drive to
small. Political and maturity. Industry
social institutions becomes more
start to develop - diverse. Growth
external finance should spread to
may still be different parts of the
required. Savings country as the state
of technology
improves - economy
incomes.
moves from being
dependent on factor
5. Age of mass
inputs for growth
consumption.
towards making
Output levels grow,
better use of
enabling increased.
innovation to bring
about increases in
real per capital
ACTIVITY
ACTIVITY1: 1:
IDENTIFICATION.
IDENTIFICATION. Identify thethe
Identify following.
following.
Choose thethe
Choose letter of your
letter answers
of your answersinside thethe
inside
boxbox
below.
below.

A. Economic Development
A. Economic Development B. General Partnership
C. B.
Members D. Joint Venture
General Partnership E. Walt Rostow
C. Members
F. Sole Proprietorship
D. Joint Venture G.Walt
E. Partnership
Rostow
H. Limited Partnership
F. Sole Proprietorship I. Cooperatives
G. Partnership
J. Corporations
H. Limited Partnership I. Cooperatives
J. Corporations
ACTIVITY 1: divide responsibility for
1. Partners
IDENTIFICATION.
management andIdentify the
liability, asfollowing.
well as the
Choose theofletter
shares profitoforyour
lossanswers
accordinginside the
to their
boxinternal
below. agreement.
2. Own all the assets of the business and
A. Economic Development B. General Partnership
the profits generated by it.
C. Members D. Joint Venture E. Walt Rostow
3. Acts like a general
F. Sole Proprietorship
partnership,
G. Partnership
but is
clearly for a limited
H. Limited Partnership period of time
I. Cooperativesor a
single
J. Corporations
project.
ACTIVITY 1:
4. A business organization owned
IDENTIFICATION. Identify the following. by a
group of individuals and is operated
Choose the letter of your answers inside the for
their
box below.mutual benefit.
5. Two or more people share ownership of a
single business.
A. Economic Development B. General Partnership
6. The process
C. Members by which
D. Joint a nation
Venture improves
E. Walt Rostow
F. Sole
the Proprietorship
economic, politicalG. Partnership
and social well-
H. Limited Partnership
being of its people. I. Cooperatives
J. Corporations
7. Chartered by the state in which it is
headquartered, is considered by law to be a
unique entity, separate and apart from
those who own it.
8. The author of Five Stages of Economic
development.
9. This form of ownership is not often used
for operating retail or service businesses.
10. The persons involved in cooperatives
are called ______.
B. Identify whether the following
advantages or disadvantages are for Sole
proprietorship, Partnerships, or
Corporations.
ASSIGNMENT: Describe the Five Stages
of Economic Development/Growth based
on what you have learned. (3 points each)

1. Traditional Society
2. Preconditions to Take-off
3. Take-off
4. Drive to Maturity
5. Age of Mass Consumption