FORMS OF SMALL

BUSINESS
OWNERSHIP
SOLE PRORIETORSHIP

 Business owned and operated by a single person

ADVANTAGES

 EASE AND COST FORMATION

 SECRECY

 DISTRIBUTION AND USE OF

PROFITS  CONTROL OF THE
BUSINESS
 GOVERNMENT REGULATION
 TAXATION

 CLOSING THE BUSINESS

DISADVANTAGES

 POSSIBILITY
THAT THE OWNER LACKS ABILITY
AND EXPERIENCE
 DIFFICULTY
IN ATTRACTING AND KEEPING
QUALITY EMPLOYEES
 DIFFICULTY RAISING ADDITIONAL
CAPITAL  LIMITED LIFE OF THE FIRM
 UNLIMITED LIABILITY OF THE PRORIETOR
PARTNERSHIP

 LEGALASSOCIATION OF TWO OR MORE PERSONS AS

CO-OWNERS OF AN UNINCORPORATED BUSINESS
ADVANTAGES

 EASE OF FORMATION
 POOLING OF KNOWLEDGE AND SKILLS
 MORE SOURCES OF CAPITAL
 ABILITY TO ATTRACT AND RETAIN
EMPLOYEES  TAX ADVANTAGE
DISADVANTAGES

 UNLIMITED

LIABILITY  LIMITED
LIFE
 POTENTIAL CONFLICT BETWEEN
PARTNERS  DIFFICULTY IN DISSOLVING
THE BUSINESS
TYPES OF PARTNERSHIPS

 GENERAL PARTNERSHIPS – an association of two or more

persons, each with unlimited liability and who are actively
involved in the business.
 LIMITED PARTNERSHIP – is an arrangement in which the
liability of one or more partners is limited to the amount of
assets they invested in the business.
 PARTNERSHIP AGREEMENTS

A DOCUMENT DESIGNED TO PREVENT OR AT LEAST

MINIMIZE DISAGREEMENTS BETWEEN PARTNERS.
 IT USUALLY COVERS THE
FOLLOWING: 1. PURPOSE OF THE
BUSINESS
2. TERMS OF THE PARTNERSHIP
3. GOALS OF THE PARTNERS AND PARTNERSHIP
4. FINANCIAL CONTRIBUTION MADE BY EACH
PARTNER AT THE BEGINNING AND DURING THE
LIFETIME OF THE BUSINESS
5. DISTRIBUTION OF PROFITS AND LOSSES
6.

6. WITHDRAWAL OF CONTRIBUTED
ASSETS OR CAPITAL BY A PARTNER
7. MANAGEMENT POWERS AND
WORK RESPONSIBILITIES OF EACH
PARTNER
8. PROVISIONS FOR ADMITTING NEW
PARTNERS
 9. PROVISION FOR EXPELLING A PARTNER
 10.PROVISIONS FOR CONTINUING THE BUSINESS IN
THE EVENTS OF PARTNER’S DEATH, ILLNESS,
DISABILITY OR WITHDRAWAL
 11.
PROVISION DETERMINING THE VALUE OF A
DEPARTING PARTNER’S INTEREST AND METHOD
OF PAYMENT OF THAT INTEREST
 12.METHODS OF SETTLING DISPUTES
THROUGH MEDIATION OR ARBITRATION
 13.DURATION OF THE AGREEMENT AND THE
TERMS OF DISSOLUTION OF THE BUSINESS
CORPORATION

Alegally chartered enterprise with most of the legal rights of a

person, including the right to conduct a business, to own and
sell property, to borrow money and to sue and be sued.
Advantages

1. Limited liability
2. Ease of expansion
3. Ease of transferring ownership 4.
Relatively long life
5. Greater ability to hire specialized management
Disadvantages

1. More expensive and complicated to organized 2. Double

taxation
3. More extensive government restrictions and
reporting requirements
4. Employees lack personal identification and
commitment
More expensive and complicated to
organize

 Requires more time and money to organize

 SEC (Securities and Exchange Commission) a
certificate of incorporation
 The SEC will only issue the certificate of incorporation after
reviewing the articles of incorporation previously submitted
by the initial set of corporate officers.
 Articles of incorporation contains the
following:
 Name of the corporation
 Specific ;purpose or purposes
 Principal office of the corporation
 Term of existence of the corporation
 Names, nationalities and residences of incorporators  Number
of directors
 Amount of authorized capital stock  Other
matters
Double Taxation

 Profits
derived by stockholders are taxed twice by the
government
 First when corporation realizes profits
 Second, when individual stockholders declare as part of their
personal income the dividends they receive from the
corporation.
More Extensive Government Restrictions
and Reporting Requirements

Corporations are subject to stringent government restrictions

and are required to submit various reports on periodic basis.
Ex: Prohibition of certain actions without the approval of the SEC.
For instance, corporations cannot distribute stock dividends
without prior approval of the SEC
Employees Lack Personal
Identification and Commitment

 Many stockholders are detached from the daily operations of

the corporation. Those who are employed by the
corporation mostly do not own even a shar
Strategic
Planning for
Small
Business
What is Strategic
Planning?
• It refers to the process of determining the primary
objectives of the entrepreneurship and then adopting
courses of action and allocating resources to achieve
those objectives.
Three Steps in Strategic Planning

DETERMINATION OF ADOPTION OF ALLOCATION OF

OBJECTIVES COURSE OF ACTION RESOURCES
 The Mission
Statement
The
Determination

The Strategic
of Objectives

Objectives
Adoption of Course of
Action/Strategy

1. SWOT Analysis
2. Forecasts of Future Sales performance
Implementing Strategic Plans

01 02
Identifying the specific Deploying the resources
methods to be used needed to implement the
intended plans.
Fundamental Strategies for Small Business

The Strategy of
The Flexibility The Strategy of
effectiveness as
Strategy Starting Simple
priority
Strategy Concerns of Small Business

Is he Is he currently
organizing a running an old
new business business
New Business

Organizing Organizing a new business

Buying Buying a franchise
1. Compete
with small
business
2.Compete
with Large
Business
Types of Business According To size
1. Micro - SMBE
2. Cottage
3. Small
4. Medium
5. Large
TYPES OF SMALL BUSINESS
1. MANUFACTURING
2. SERVICE
3. WHOLESALING
4. RETAILING
5. GENERAL CONSTRUCTION FIRMS
 MANUFACTURING
 Involved in the conversion of raw materials
 into products needed
 Ex: bakeries
 Tricycle sidecar assembly shops
 Bagoong manufactures
 Restaurants
 SERVICE
Those that provide service in one way or
another
 Business services – provide service to other
business. Ex: accounting firms, janitorial
service firms, security service firms, collection
agencies
 Personal services – provide service to the
person. Ex: tutoring services, massage parlors,
voice lesson
c. Repair services – provide repair services to
owners of various machinery and appliances
ex: auto repair shops, watch repair shops,
plumbing services
d. Entertainment and recreation – includes movie
houses, resorts, billiard pool centers
e. Hotels and motels
f. Education services – include Montessori schools
for children, high school, corresponding schools.
 WHOLESALING
Refers to the activities of persons or establishments which
sell to retailers or other merchants and/or to industrial,
institutional and commercial users but who do not sell in
large amounts to final consumers.
Ex; softdrinks wholesalers in local areas, dealers of supplies
and office equipment, grains wholesalers
Note: a large number of these wholesale businesses are
owned by small business operators
 Retailing
 Activities involved in the sale of goods and or
services to the final consumers.
 Ex: retail drug stores, fast food shops,
appliance stores
 General Construction Firms
 Those engaged in construction of buildings
whether for private individuals or firms or
government
Characteristics of Small Business
Independent management – owner is also
the manager
Small capital requirement – requires only
small capital and can be supplied by single or
a few individuals
Mostly local operation – operates in certain
locality
 Economic Importance
1. Providers of economic opportunities for
entrepreneurs
2. Providers of products and services to consumers
3. Suppliers of products and services to other
businesses
4. Distributors of products and services of other
businesses
5. Supporters of government
6. Providers of employment
Advantage of operating small business
1. Options to improve his economic lot
a) Employee
b) Professional
c)SBO( small business operator)
2. Opportunity to gain control over his own destiny
3. Opportunity to reach full potential
4. Opportunity to reap unlimited profits
5. Opportunity to make a contribution to society and receive
recognition for his efforts
Disadvantages
1. Uncertain income
2. Risk of losing your entire capital investment
3. Lower quality of life until the business gets established
4. Complete responsibility
5. Having to serve undesirable customers
6. Paper work and other chores
7. Long hours and demanding work conditions