BSBA Eect 3: Entrepreneurial Management 1

LESSON 7
OWNERSHIP AND ORGANIZATION

Objectives

 Increase participant’s awareness of difficult forms of business ownership,

thereby, allowing them to choose the right form of organization in putting up a
new business
 Help participants analyse the advantages and disadvantages of each form or
organization
 Provide participants the legal requirements of each type of ownership and
organization

THINGS TO CONSIDER IN SELECTING THE BEST LEGAL FORM OF ORGANIZATION:

 Ownership
 Management
 Financing
 Liability
 Incentives
 Taxation
 Retention of income
 Protection

FORMS OF OWNERSHIP
1. SOLE PROPRIETORSHIP
The sole proprietorship or single proprietorship is a form of business organization initiated, organized,
owned or capitalized, and managed by a single person.

ADVANTAGES
 Easily created and terminated.
 Direct, undiluted action.
 All rewards to owners.
 Flexibility.
 Minimum regulation and taxation.

DISADVANTAGES
 Unlimited liability.
 Capital limitations.
 Perils of individual.
 Limited skills and capabilities of the sole owner.
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2. PARTNERSHIP
A partnership is an association of two or more business partners who co-own a business for the purpose
of making a profit. In a partnership, the co-owners share the assets, liabilities, and profits of the
business according to the terms of the partnership agreement.

TYPES OF PARTNERS
a. General partner. A general partner is one who shares ownership and management of the
business and is liable to the extent of his separate property after all the assets of the
partnership are exhausted.
b. Limited partners. They refer to partners with limited financial liability and they do not take
active role in the management of the firm. A limited partner is one who is liable only to the
extent of his capital contribution.
c. Dominant partners. They are neither active in the partnership nor they are generally known
to be associated with the business.
d. Capitalist partner. This is a type of partner who contributes money or property to the
common fund of the partnership.
e. Managing partner. This is the partner who is designated to manage the operations of the
business of the partnership.
f. Industrial partner. This is the partner who contributes his knowledge or personal services to
the partnership.
g. Secret partner. This is a partner who takes active part in the business but is not known to be a
partner by outside parties.
h. Nominal partner. This is a partner who is actually not a partner, but held out or represented
as a partner.
i. Liquidating partner. This is a partner who is designated to wind up or settle the affairs of the
partnership after dissolution.

ADVANTAGES
 Pooling of resources.
 Ability to obtain capital.
 Simplicity and incentives.
 Limited regulation and taxation

DISADVANTAGES
 Unlimited liability.
 Tenuous existence.
 Independence on management harmony and coordination.
 Problems in share liquidation.

3. CORPORATION
A corporation is an artificial being, invisible, intangible and only exists only in contemplation of law.
Its owners are the stockholders who can sell their interests in the corporation without affecting the
continuity of its operations because the life of the corporation is dependent or distinct from that of the
owners or stockholders.
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ADVANTAGES
 Limited liability.
 Easy to raise capital.
 Perpetual life.
 Special management.

DISADVANTAGES
 Difficult to organize.
 Strictly regulated and supervised by the government.
 Some corporations are socially irresponsible.
 Formal and impersonal employer-employee relationship.

4. COOPERATIVE: AN ENTERPRISE FOR THE POOR

Republic Act 6938, otherwise as the Cooperative Code of the Philippines defined a cooperative as a
duly registered association of persons, with a common bond of interest, who have voluntary joined
together to achieve a lawful common social or economic end, making equitable contributions to the
capital required and accepting a fair share of the risks and benefits of the undertaking in accordance
with the universally accepted principles of cooperation, which include the following:

 Open and voluntary membership

 Democratic control
 Limited interest on capital
 Division of net surplus
 Cooperative education
 Cooperation with other cooperatives

TYPES OF COOPERATIVES
 Credit cooperative. Promotes thrift among its members and create funds in order to grant
loans for productive and provident purposes.
 Consumer cooperative. Procures and distributes commodities to its members and non-
members.
 Producers cooperative. Undertake joint production in agriculture and industry.
 Marketing cooperative. Engages in the supply of production inputs to members and markets
their products.
 Service cooperative. Undertakes services like transportation and communication.
 Multipurpose cooperative. Combines two or more of the business activities of different types
of cooperative.
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GENERAL REQUIREMENT AND PROCEDURES FOR REGISTRATION

Registering a single proprietorship

 Register the business name with the DTI
 2 pcs. 2x2 picture
 Application fee or registration fee of 110 pesos

Registering a partnership
 Prepare partnership agreement
 File the partnership agreement with the SEC
 Pay filling fee
 Evaluation of the application by the lawyer and staff of Corporate and Legal Department
 Release of the approved registration is within 15-30 days

Registering a corporation
 Prepare Articles of Incorporation and By-laws, bank certification
 File Articles of Incorporation and By-laws with the SEC
 Pay registration fee
 Evaluation of application by lawyer and staff of Corporate and Legal Department
 Release of approved registration is within 15-30 days

Registering a cooperative
 The following documents shall be forwarded to CDA:
o Four copies of the economic survey with a general statement describing briefly the structure,
purpose, economic feasibility, area of operation, size of membership, and other pertinent data.
o Four copies of Articles of Incorporation together with the bond of accountable officers
o Four copies of By-laws
o Registration fee as prescribed by CDA

Permits and Clearances imposed by the LGUs:

1. Mayor’s permit
2. Building permit
3. Sanitary permit
4. NBI clearance
5. Barangay clearance