Different Forms Of BUSINESS ORGANIZATIONS JS

INTRODUCTION
A business can be organized in one of several ways, and the form its owners choose will affect the companies and owners'
legal liability and income tax treatment. Here we’ll discuss the most common options and their major defining characteristics.
TYPES
1. Sole Proprietorship
2. Partnership (General & Limited)
3. Corporation Limited
4. Liability Company (LLC)
SOLE PROPRIETORSHIP
A sole proprietorship is a business owned and operated by one individual. Sole proprietorships own all the assets of the
business and the profits generated by it. They also assume complete responsibility for any of its liabilities or debts. In the eyes of the
law and the public, you are one in the same with the business.
 Advantages of Sole Proprietorship
 Easy to start
 No registration
 No profit sharing
 Easy decision-making
 Keep Secrets (business techniques)
 Complete Control
Disadvantages of Sole Proprietorship
 Unlimited liability
 Employee benefits such as owner’s medical insurance premiums are not directly deductible from business income (taxes)
 Raising funds
 Limited Life
 Loss in absence
PARTNERSHIP
A Partnership is a legal relationship formed by the agreement between two or more individuals to carry on a business as co-
owners. Each member of such a group is individually known as ‘partner’ and collectively the members are known as a ‘partnership
firm’. These firms are governed by the Indian Partnership Act, 1932.
Characteristics of Partnership
1. Number of Partners: Maximum limit is 10 in case of banking business and 20 in case of all other types of business.
2. Contractual Relationship: The agreement in writing is known as a ‘Partnership Deed’.
3. Competence of Partners: Minors and insolvent persons are not eligible.
4. Sharing of Profit and Loss: In absence of an agreement, they share it equally.
5. Transfer of Interest: No partner can sell or transfer his interest in the firm to anyone without the consent of other partners.
6. Voluntary Registration: Registration of partnership is not compulsory. But since registration entitles the firm to several
benefits, it is considered desirable.
Advantages of Partnership
 Relatively easy to start.
 The ability to raise funds.
 More skilled persons.
 Loss sharing.
 No loss in absence.
Disadvantages of Partnership
 Unlimited liability.
 Profit sharing.
 Conflicts
 Limited life.
 Transferability is difficult.
CORPORATIONS
A Corporation, 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. A Corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a
corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The
corporation has a life of its own and does not dissolve when ownership changes.
Types Of Corporations
Advantages of Coporations
 Limited Liability.
 Transfer of ownership by sale of stock.
 Easier to raise capital through shares & bonds.
  Continuity of existence.
 Benefits of large scale operation.
 Professional Management.
 Social Benefit.
Disadvantages of Corporations
 Formation is not easy.
 Control by a Group.
 Many Legal Formalities.
 Excessive government control.
 Delay in Policy Decisions.
 Limited Liability Company
An LLC is a limited liability company. This business structure protects the owner's personal assets from financial liability
and provides some protection against personal liability. It is designed to provide limited liability features of a corporation and the tax
efficiencies and operational flexibility of a partnership. Formation is more complex and formal than that of a general partnership.
LLC’s must not have more than two of the four characteristics that define corporations: Limited liability to the extent of assets;
continuity of life; centralization of management; and free transferability of ownership interests.
 Advantages of LLC
 Limited Liability.
 Tax Flexibility.
 Less Paperwork.
 Investment allocation flexibility.
 Freedom in management.
 Limitless ownership.
Disadvantages of LLC
 Higher registration fees.
 Government regulation.
 Lack of case law.
 Limit on Building capital.
 Self-Employment Taxes
Social Function of Business
• Is experienced and understood differently by different people in different regions and at different times
• Poverty is conceptualized as a deficiency or shortage of some sort typically in comparison either to the living standards of
others within the same society or culture (relative poverty) or to universal measure of adequate provision (absolute poverty)
• The shortage has been considered synonymous with lack of income or at least insufficient income to meet household’s daily
needs.
Absolute Poverty
Household’s income falls on the universal poverty line
Relative Poverty
The household can afford to buy basic goods necessary for survival

Continuing Extreme poverty in the Midst of Economic Growth:

Reasons for Persistent Poverty
1. Economic Growth is Rarely Uniformly Distributed Across a Country
China’s coastal provinces linked to world trade and investment have grown much more rapidly than the hinterland to
the west of the country
India’s southern states, also deeply integrated in world trade, have experienced much faster economic development
than the northern regions in the Ganges valley
Thus, even when average economic growth is high, parts of a country may be bypassed for years or decades
2. Failure of Government
 Growth may enrich households linked to good market opportunities but it may bypass the poorest of the
poor even within the same community.
 The very poor are often disconnected from market forces because they lack the requisite human capital –
good nutrition and health and adequate education.
 It is vital that social expenditures directed at human capital accumulation reach the poorest of the poor yet
governments often to make such investments
 Economic growth enriches households, but they are not taxed sufficiently to enable governments to
increase social spending commensurately
 Or even when governments have the revenue they may neglect the poorest of the poor if the destitute
groups are part of ethnic or religious minorities
3. Midst of Growth is Cultural
  In other countries, women face extreme cultural discrimination whether or not those biases are embedded
in the legal and political systems.
 Young women facing undernutrition within the household when there is enough to go around
 Women who are illiterate, are poorly treated by in-laws and lack of social standing and legal protections to
ensure their own basic health and well-being

Businesses’ Role in Overcoming the Poverty Trap

• Small and medium enterprises – defined usually as businesses with up to 250 employees – are believed to be important
contributors to economic growth and a tool to reduce poverty in developing countries
• Microfinance – believed to be an effective tool in the arsenal of the war against poverty by many witnesses to its success in
many developing regions around the world

Areas of Business Most in Need of Ethical Attention

• Authentic and sustainable development – means working at the real solutions in order to eradicate or at least alleviate poverty

Ultimate Solutions in an Agriculture-Based Economies like the Philippines

• Countryside and rural infrastructures

• Quality basic education for the children of the poor and in Muslim areas especially the education of women
• Cash transfers to the poorest of the poor
• Primary health services
• Microcredit and microenterprise programs
• Technical skills training for secondary school students
• Social housing such as that provided by Gawad Kalinga
Food Security in the Philippines

• Addressing constraints on agricultural finance in order to boost food productivity

• Investing in roads since the unreliable and inadequate infrastructure in the Philippines has been found to be a major
impediment to economic growth

• Given the physical and environmental constraints on increasing land and water use for food production and other economic
demand for food, there should be substantial investments must be made by both the government and the private sector.

Unique Responsibilities of Business Organizations

• Obligations of an employee to an employer

• Fiduciary duties of management to the shareholders

• Ethical issues arise in relationships with every corporate constituency including a) employees b) customers c) suppliers d)
shareholders e)society at large

Morality of Advertising

Deceptive Ads – are those that make false statements about or misrepresent the product, for example the picture in the
advertisement is different from the actual product

- May occur not only through pictures, individual words, or through sentences, propositions but also
through pictures, individual words, or through certain combinations of objects which can deceive the eye and the
mind

Article 108 of the Consumer Act of the Philippines.

• Declares the state shall protect the consumer from misleading advertisements and fraudulent sales promotion practices

Article 110 : States that it shall be unlawful for any person to disseminate or to cause the dissemination of any false, deceptive or
misleading advertisement by Philippine mail or in commence by print, radio, television, outdoor advertisement or
other medium for the purpose of inducing or which is likely to induce directly or indirectly the purchase of
consumer products or services

Basic Employee Rights, Job Discrimination, Other Labor Related Ethical Issues
The Labor Code of the Philippines (or Presidential Decree No. 442) (a decree instituting a labor code thereby revising and
consolidating labor and social laws to afford protection to labor, promote employment and human resources
development, and insure industrial peace based on social justice)

Lays down the rights of workers in relation to wages, rights to self-organization, collective bargaining, security of
tenure, and just and humane conditions of work.

Republic Act No. 6727 – Wage Rationalization Act

• Mandates the fixing of the minimum wages applicable to different industrial sectors

• This law rationalized wage determination by establishing the mechanism and proper standards through the creation of
Regional Tripartite Wages and Productivity Boards (RTWPBs) authorized to determine the daily minimum wage rates in the
different regions

Books of the Labor Code of the Philippines

Book 4 - Lays down the Health, Safety and Social Welfare Benefits accorded to workers

Book 5 – Labor Relations – lays down the policies of the State with regard to labor

Policies of Labor Relations

1. To promote and emphasize the primacy of free collective bargaining and negotiations, including voluntary arbitration,
mediation and conciliation, as modes of settling labor or industrial disputes

2. To promote free trade unionism as an instrument for the enhancement of democracy and the promotion of social justice and
development

3. To foster the free and voluntary organization of a strong and united labor movement

4. 4. To promote the enlightenment of workers concerning their rights and obligations as union members and as employees

5. 5. To provide an adequate administrative machinery for the expeditious settlement of labor or industrial disputes

6. 6. To ensure a stable but dynamic and just industrial peace

7. 7. To ensure the participation of workers in decision and policy-making processes affecting their rights, duties and welfare

Insider Trading

• In the stock market is characterized as the buying or selling of shares of stock on the basis of information known only to the
trader (an insider or somebody belonging to the company as opposed to the public) or to a few persons

• Some say, insider trading provides a powerful incentive for creativity and is the only appropriate way to compensate
entrepreneurial activity

Whistle Blowing

• Is the act for an employee or former employee of disclosing what he believes to be unethical or illegal behavior to higher
management (internal whistle blowing) or to an external authority or the public (external whistle blowing)

CODE OF ETHICS AND BUSINESS CONDUCT

 A code of ethics is a guide of principles designed to help professionals conduct business honestly and with integrity.

 A code of ethics document may outline the mission and values of the business or organization, how professionals are
supposed to approach problems, the ethical principles based on the organization's core values, and the standards to which the
professional is held.

 American ethical codes were first called or “credos” and those in the 1980s were considered “legalistic” and “more likely to
talk about ethics or the reputation of the company” (Benson, 1989,p.308) they showed concern over issues like affirmative
action.
  Nijjhof et al. (2003) note codes contain open guidelines describing desirable behaviours and closed guidelines prohibiting
certain behaviours.

CORPORATE CULTURE

 Corporate culture refers to the beliefs and behaviors that determine how a company's employees and management interact
and handle outside business transactions.

 A company's culture will be reflected in its dress code, business hours, office setup, employee benefits, turnover, hiring
decisions, treatment of clients, client satisfaction, and every other aspect of operations.

CORPORATE CULTURE

 According to (Unsunier and Lee, 2005; Craig and Douglas, 2006) Cultural influences change and culture evolves as
political, social, economic, and technological forces reshape the cultural landscape.

 The economic and physical environments are important issues for business organization, however the cultural environment
has special importance and relevance.

 Human person is a being of opportunities of choices or alternatives a family and social being, a being who invents, a being
capable of unrestricted growth in time.

 We affirm that man is capable of speech and communication: he is a social being because he speaks, he is able to progress, to
collaborate, and to be ethical because he speaks. And it is a sign of culture to know the meaning of word: human language is
something open.

THE NOTION OF ORGANIZATIONAL CULTURE

 Barnard is the father of the concept of corporate culture.

 According to (Barnad,1938), the entire second half of his Functions of the Executive is long excursus on the importance of
creating a shared vision or purpose, the necessity of generating common meanings and enhanced commitment and the virtues
of increasing individual’s “capacity to be dominated by organizational personality”

 The same culture scholars agree that organizational culture is a phenomenon that involves belief and behaviour; exists at a
variety of different levels in organizations; and manifests itself in a wide range of features of organizational life such as
structures, control and reward systems, symbols, myths and human resource practices (Pettigree, 1979; Schein, 1992;Kotter
and Heskett, 1922

 According to (Allaire and Firsirotu, 1984) the functionalist view of ogranizations and culture considers culture as a
component of an integrated social system which also includes a social structure component to maintain an orderly social life,
adaptation mechanics, and society’s equilibrium with its physical environment.

 The concept of culture was thus coined to represent, in a very broad and holistic sense, the qualities of any specific human
group that are passed from one generation to the next (Kotter and Heskett, 1992)

THE need for ethical organizational culture

 Shiva (1988) states that “Modern science is quintessentially reductionist. Its reductionist nature undergirds an economic
structure based on exploitation, profit maximization and capital accumulation.

 Reductionist science is also at the root of the growing ecological crisis.

 Shiva (1988) states that “Modern science is quintessentially reductionist. Its reductionist nature undergirds an economic
structure based on exploitation, profit maximization and capital accumulation.

 The theory of human action in Organization whereby Perez Lopez (1991) explains that the human person in business
organization is capable or having transcendent motives which are aspect of reality that determine the achievement of learning
from other people with whom the decision maker interacts.

Creating Corporate Codes of Ethics

Sauser and Sims (2013) give the following suggestions for creating Codes of Ethics in business organizations:

1. Adopt code of ethics

 2. Provide ethics training
3. Hire and promote ethical people
4. Correct unethical behaviour
5. Take a proactive strategy
6. Conduct a social audit
7. Protect whistle-blowers
8. Empower the guardians of Integrity
9. Assure commitment from the top

ACTIVITY SHEET FOR Physical Education 12 – 2nd Semester

Preliminary Term
A.Y 2020-2021
NAME:________________________________________________________________Section :__________________

1. How businesses play their roles in social development?

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2. What are the other roles of business in the economy?
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3. What is the role of business in development?\What is the social role of a business?
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4. The labor code is necessary? Why or why not?
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5. The business ethics is a helpful for a business man? Why or Why not?
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