ON BUSINESS

ORGANIZATIONS
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FORMS OF BUSINESS ORGANIZATIONS

1. Single or Sole Proprietorship

2. Partnership
3. Corporation
4. Joint-Stock Company
5. Cooperative
Sole Proprietorship

The enterprise is owned and managed by

one person.
The oldest and simplest form of business

organization and the easiest to establish.

Advantages
 Open to all;
 Flexible and uncomplicated;
 Easy to organize, start and terminate;
 The owner acquires all the profits from his
business;
 Smaller operational expenses;
 Easier to increase and decrease capital.
Disadvantages
 Limited amount of capital;
 No specialization;
 If business fails, the proprietor stands to lose his
entire fortune;
 The owner is subject to unlimited liability against
his entire property.
 No direct inputs from other people knowledgeable
in the business.
Partnership

-Two or more persons combining their

skills, money and materials.
- Each of the partners is required to give
his respective share.
Classification of Partners
1. General Partner
-one whose liability extends to his separate
property

2. Limited Partner
-one whose liability is limited to his capital
contribution.
Classification of Partners
3. Managing Partner
-one whose share is the management of the day-to-
day operations of the partnership.

4. Industrial Partner
-contributes his talents and skills.

5. Silent Partner
 Scenario
Five Chinese businessmen formed a partnership ,Wahl Layh Lam
Eh Partnership, and engaged in a fine dining business.
Chin Chan Sue , the general partner, contributed 570,000pesos;
Bah Leh Ling, limited partner, contributed 300,000pesos;
Kuh Se Ahj contributed his managerial skill; and
Kah Wa Tan and Te Naj He are industrial contributors.

The partnership decided to borrow money from a bank amounting

to one million pesos. After a month, the partnership was
dissolved. Who will be held liable?
Advantages

a. The borrowing capacity is increased.

b. Better management
c. Division of labor
d. Accumulate a larger amount of capital
e. A certain degree of specialization
Disadvantages
 Unlimited liability, except limited partners.
 Limited life.
-when partners die or quit the partnership, the
venture is automatically dissolved.
-when a new partner joins, a new partnership must
be formed.
 Prone to personal conflicts especially in the
division of labor.
Corporation
-”an artificial being created by operation of law,
having the right of succession and the powers,
attributes, and properties expressly authorized by
law or incidents to its existence”
-Corporation code
- The owners have an agreed ownership, share
specific objectives on their business vision as stated
in their charter or articles of incorporation.
Characteristics of Corporation
1. Creation of the state.
2. A legal entity, distinct and separate from the
individuals who run it.
3. Members must not be less than 5 but not more
than 15, all must be of legal age, and majority of
whom are resident of the Philippines.
4. Has a perpetual life.
Advantages
 Has limited liability.
 Permits easily the transferability of ownership
interest because it can be divided into share of
stocks.
 Has the most effective means of raising money
capital for its operation.
-can sell securities to investors with large
amount of capital
Advantages
 Better access to management given its huge
resources and large-scale operation.
 Has a permanent life.
life span: 50 years
renewable for another 50 years
Disadvantages
 Not easy to organize.
-aside from complying with capital
requirements, a number of documents must be
prepared like the articles of incorporation and by-
laws.
 Regulations and formalities required by SEC may
slowdown the implementation of major decisions
like insurance of stocks per expansion plans
Disadvantages

 Lack of communication.
 Unscrupulous officials may exploit workers.
TYPES OF CORPORATION SECURITIES

STOCKS
-certificate of ownership

BONDS
-certificate of indebtedness
THE STOCKHOLDERS
-the actual owner of the corporation who have the
complete control of the management
--two kinds:
1. Preferred stockholders
-have the first claim against the earning and assets
of the corporation.
-dividends received by them are based on
cumulative and with fixed rate.
-preferred shares
THE STOCKHOLDERS
2. Common Stockholders
-have claims against the earnings and assets of
the corporation next to those of the preferred
stockholders.
-the dividends depend upon the earnings of the
business
-has the control of the management and possess
a voting right
-common shares
BONDHOLDERS
-enjoy the greatest security among the investors in
corporate securities.
-hold the first claim before the dividends are paid to
the stockholders.
-have no voice in the management of the business but
their interests must be paid regularly
KINDS OF BONDHOLDERS
1. First Mortgage Bondholders
-holds the first claim
-rate of interest is the lowest among bondholders
2. Second Mortgage Bondholders
-holds the second claim against the assets and earnings of
the corporation
-higher than FMB
3. Third Mortgage Bondholders
-holds the last claim since their interest is the highest
among bondholders
FORMS OF JOINT-STOCK-COMPANY

1. Common-Law Form
-known as LLP or limited liability partnership
-almost a partnership
-its capital is divided into transferable shares
which will be sold without the consent of other
members
-can’t be dissolved by death or incapacity of any
of its members
-has more members than a partnership
FORMS OF JOINT-STOCK-COMPANY

2. Statutory Form
-also known as LLC, limited liability company
-almost a corporation
-possess characteristics of a sole proprietor
-no legal personality, less permanent than
corporation
-has no right to limited liability unless expressly
authorized by the state.
COOPERATIVE
-an autonomous association of people who
voluntarily cooperate for their mutual social,
economic, and cultural benefit
-a jointly owned enterprise engaging in the
production or distribution of goods or the
supplying of services, operated by its members for
their mutual benefit
IDENTITY
Cooperatives are typically based on the cooperative
values of:
 Self-help

 Self-responsibility

 Democracy and equity

 Equity and solidarity

SEVEN COOPERATIVE
PRINCIPLES
1. Voluntary and open membership
2. Democratic member control
3. Economic participation by members
4. Autonomy and independence
5. Education, training and information
6. Cooperation among cooperatives
7. Concern for community
TYPES OF COOPERATIVE
1. Non-monetary Cooperative
-provides a service based on entirely voluntary labor in the
maintenance and provision of a particular service or good
-locally owned and operated and provides the free rental of
equipments of all kinds
2. Retailer’s Cooperative
-is an organization which employs economies of scale on behalf of
its members to receive discounts from manufacturers and to pool
marketing
-members of the cooperatives are businesses rather than
individuals , ie. Grocery stores, Hardware and Pharmacies
TYPES OF COOPERATIVE
3. Workers/ Producer Cooperative
-owned and democratically controlled by its “worker-owners”
4. Consumers’ Cooperative
- is a business owned by its customers
-employees can also generally become members
5. Housing Cooperative
-a legal mechanism for ownership of housing where residents
either own shares reflecting their equity in the cooperative’s real
estate, or have membership and occupancy rights and they
underwrite their housing through paying subscriptions or rents
TYPES OF COOPERATIVE
6. Utility Cooperative
- a type of consumers’ cooperative that is tasked with
delivery of a public utility such as electricity, water
or telecommunications services to its members
7. Agricultural Cooperative
-or Farmers’ Cooperatives
-cooperatives where farmers pool their resources for
mutual economic benefit
8. Multi-purpose Cooperative