FUNDAMENTALS OF Accountancy, Business And

management 1

Forms of
Business
Organizations
“Suppose you want to open your
own sari-sari store that will need
PHP10,000 to start and you used
your PHP10,000 savings to start
the said business. You are the
sole owner of the said sari-sari
store.”

What type of business organization was

created?
A sole/single proprietorship
is a form of business that is
owned by one person; the
simplest, and the most
common form of business
organization.
Advantages of sole/single
proprietorship.
• The owner keeps all the profits.
• The owner makes all the
decisions.
• It is easy to form and operate.
Disadvantages of sole/single
proprietorship.
• The life of the business is limited to
the life of the owner. Once the owner
dies, the business will cease to operate
under the name of the proprietor.
• The amount of capital is limited only
by the wealth of the proprietor.
“What if the needed amount to
start your dream sari-sari store is
PHP50,000 and you only have
PHP25,000 cash savings. You ask
Juan, your friend if he is willing to
invest his PHP25,000 and become
part owner of the sari-sari store.”
Assuming he agrees, what form of
business organization was created?”
Partnerships
• A form of business owned by two or
more persons. The details of the
arrangement between the partners are
outlined in a written document called
articles of partnership.
• Profits are divided among partners
based on their agreed sharing.
• The owner is called a partner.
Advantages of a partnership
• Higher capital because two or
more persons will contribute to
the common fund.
• It is easy to operate like a
sole/single proprietorship
Disadvantages of a partnership
• The profits are divided among the
partners.
• A partner can be held liable for the
acts of the other partners.
• In a lawsuit, the personal properties of
the partners can be held beyond their
contributions and may be used to answer
for any liability of the partnership.
“Assuming your dream is to open a grocery
store and not just a sari-sari store but
you will need PHP1,000,000 to start the
said business. You have only PHP25,000,
your friend Juan has PHP25,000, and your
mother is willing to invest her PHP50,000,
but still these are not enough to start
your dream grocery store. Where will you
get the money to raise the PHP1 million?
You may consider setting up a
CORPORATION.
Corporation
• A corporation is a business organized as
a separate legal entity (artificial person)
under the corporation law with
ownership divided into transferable
shares of stocks
• Emphasize that it is the law
(Corporation Code of the Philippines)
that creates a corporation.
• The corporation begins its existence
from the date the Articles of
Incorporation is approved by the
Securities and Exchange Commission
(SEC).
• The SEC (Securities and Exchange
Commission) is the government agency
primarily tasked to regulate private
corporations in the Philippines.
• The owners are called stockholders
or shareholders.
• The word
‘Corporation/Incorporation/Corp./In
c.’ appears in the name of the entity.
• The voting rights of a shareholder
is generally based on the percentage
of ownership.
• The management of the business is
delegated by the shareholders to the
Board of Directors
• The ownership is divided into shares
and the value of one share may be
denominated at a smaller amount, for
example at PHP10 per share.
• The proof of ownership is evidenced by
a stock certificate.
Advantages of a corporation
• Can easily raise additional funds by
selling shares of stocks to the public.
• Shareholders are not personally liable
for the debts of the corporation. The
extent of their liability is limited to their
equity (ownership) in the corporation.
Disadvantages of a corporation
• It is relatively complicated to set up.

• Subject to several legal restrictions as

listed in the Corporation Code of the
Philippines
Cooperative
• A cooperative is a duly registered
association of persons with a common
bond of interest, voluntarily joining
together to achieve their social,
economic and cultural needs.
• The owners are called members
who contribute equitably to the
capital of the cooperative.
• The members are expected to
patronize their products and services.
• The word ‘cooperative’ appears in
the name of the entity.
• This form of business organization is
regulated by the Cooperative
Development Authority (CDA).
Advantages of a cooperative
• Enjoys certain tax exemption
privilege
• Promotes the concept of
sharing resources
Disadvantages of a Cooperative
• Limited distribution of surplus
• Requires continuous education
programs for members.
• The members have active and
direct participation in the
business of the cooperative.
Disadvantages of a Cooperative
• Limited distribution of surplus
• Requires continuous education
programs for members.
• The members have active and
direct participation in the
business of the cooperative.