SHS

Organization and
Management
Quarter 1 – Module 4
Forms and Economic Roles of Business
Organizations

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Organization and Management – SHS

Quarter 1 – Module 4: Forms and Economic Roles of Business Organizations

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Module

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 Good day Learner! Today, you are about to learn the different
FORMS AND ECONOMIC ROLES OF BUSINESS ORGANIZ

This module explains and discusses the various forms of business organization
and its economic roles in the business organization including the advantages and
weaknesses to determine the best practices in choosing a business.

The following are the things that you will learn after
the lesson:

identify the different forms of business;

identify the best practice in choosing a business; and
recognize the weak and strong point of the different form of business.

Here are words that can help you understand thoroughly the lesson:
Business – is an organization or economic system where goods and services are
exchanged for one another or for money.

Hybrid Business – refers to companies that may be classified with more than one type
of business.

Merchandising Business – refers to businesses which buy product at wholesale

price and sell the same at retail price.

Manufacturing Business – refers to businesses which buy productions with the

intention of using them as materials in making a new product.

Sole Proprietor – a business is owned and managed by only one person.

Partnership – a business owned by two or more persons who contribute resources

into the entity.

Corporation – is a business organization that has a separate legal personality from

its owners.

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 Cooperative – is a business organization owned and managed by a group of
individuals for their mutual benefits.

Now, let’i iee how far you know…

Answer the questions below.

Pretest:

Direction: Read carefully the statement below and choose your answer from the
given options.

Hybrid Business Corporation General Partnership

Cooperative Merchandising Business Partnership
Manufacturing Business Sole Proprietorship Manufacturing Business
Joint Ventures Business General Partners

1. It is a business being run by a group of individuals for mutual benefits.

2. A type of business that may be classified with more than one type of
business.

3. It is said to be an artificial business created by legal personality from its

owners and its ownership is represented by shares of stock.

4. It is an organization of people where good and services are exchanged

from one another or for money.

5. This is the easiest and least expensive form of ownership to organize.

6. It is a type of business which provides intangible products.

7. The business is owned by two or more persons who contributed

resources but may have limited life; it may end upon withdrawal or death of partner.

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 8. Also known as “buying and selling” business.
9. A type of business that buy products or raw materials for the purpose of
transforming it into finished product to be sold to the customers.

10. It is a type of partnership where partners divide responsibility, liability and

shares of profit or loss in the business.

How do you find the test? Don’t worry if you feel you got a low score. Just
remember that there’s always room for learning. Proceed to the next activity.
Learning is fun!

Before you proceed to the discussion, can you identify t

Activity #1 – Picture Identification as to What Type of Business

Direction: Identify the following pictures below whether it is a service,

merchandising, manufacturing or a hybrid type of business.

1. 3.
2.

4. 5.

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 6. 7.

Now, try to know this… There are Different Types of Business

Business is an entity or enterprise that provides goods and services in exchange for
some form of money or another. It can be a privately owned, non-profit organization or state-
owned business. These entities consider the three basic problems in economy in establishing
their business:
a.) What to produce?
b.) How to produce?
c.) For whom to produce?

There are four major types of businesses:

Service Business a type of business which provides intangible products. Service
type firms offer professional skills, expertise, advice, and other similar products.

Examples of service businesses are schools, repair shops, hair salons, banks,
accounting firms and law firms.

Merchandising Business is a business which buys products at wholesale price

and sells the same at retail price. They are known as “buy and sell” businesses. They
make profit by selling the products at prices higher than their purchase costs.

Examples are grocery stores, convenient stores, distributors and other

resellers.

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 Manufacturing Business unlike a merchandising business, buys products with the
intention of using them as materials in making a new product. A manufacturing
business combines raw materials, labor, and factory overhead in its production
process. The manufactured goods will then be sold to customers.

Examples are baked good, shoe manufacturing, grape wine production,

cosmetic manufacturing, processed food, canned goods, and others.

Hybrid Business is a company that may be classified in more than one type
business. A restaurant, for example combines ingredients in making a fine meal
(manufacturing), sells a cold bottle of wine (merchandising), and fills customer orders
(service).

Now, I know you can do this out. Try the next activity. Have

Activity #2 – Business Ownership Identification

Direction: Identify the pictures below whether it is a sole, partnership, corporation, or a

cooperative business.

1. 2. 3.

4. 5.

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 What more ihould I knowY

There are basic forms of business ownership:

Business is owned by
Business is owned and
two or more person
operated by only one who contribute
person resources for the
entity
Sole
Proprietorship Partnership

Business Ownership

Corporation Cooperative

A business A business owned

organization that has and operated by
separate personality group of individuals
from its owners. for their mutual
benefit

fiow do they differ from the otherY

By considering the advantages and disadvantages of the different business ownership,

best practices will then be recognized in choosing a business to be established.
SOLE PROPRIETORSHIP
Advantages
 Easiest and least expensive form of ownership
 Sole proprietors are in complete control, and
within the parameter of the law, may make
decisions as they see fit.
 Profit from the business flow-through directly
Disadvantages
 Sole proprietors have unlimited liability and are
legally responsible for all debts against the
business. Their business and personal assets are at
risk.
 May be at a disadvantage in raising funds and are
often limited to using funds from
personal savings or consumer loans.

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 to the owner’s personal tax return.
 May have a hard time attracting high-caliber
 The business is easy to dissolve, if desired. employees, or those that are motivated by the
opportunity to own a part of the business.

 Some employees’ benefits such as owner’s

medical insurance premiums are not directly
deductible from business income.

Examples: sari-sari store, flower shop, vulcanizing shop, car wash, etc.

PARTNERSHIP
Advantages
 Partnerships are relatively easy to establish;
however, time should be invested in developing
the partnership.
 With more than one owner, the ability to raise
funds may be increased.
 The profits from the business flow directly
through to the partners’ personal tax return.
 Prospective employees may be attracted to the
business if given the incentive to become a
partner.
Disadvantages
 Partners are jointly and individually liable for the
actions of other partners.
 Profits must be shared with others.
 Since decisions are shared, disagreement can
occur.
 Some employee benefits are not deductible from
the business income on tax returns
 The partnership may have a limited life; it may
end upon the withdrawal o death of a partner.

 The business usually will benefit from partners

who have complementary skills.

Examples: Law firms, medical clinics, and Travel and Tours

Types of Partnerships that you should consider:

1. General Partnership. Partners divide responsibility for management and liability as well as the
shares of profit or loss according to their internal agreement. Equal shares are assumed unless there is
a written agreement that states differently.

2. Limited Partnership and Partnership with limited liability. “Limited” means that most of
the partners have limited liability as well as limited input regarding management decision, which
generally encourages investors for short term projects, or for investing in capital assets.

3. Joint Venture is like a general partnership, but is clearly for a limited period of time or a single
project. If the partners in as joint venture repeat the activity, they will be recognized as an ongoing
partnership and will have to file as such, and distribute accumulated partnership assets upon
dissolution of the entity.

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 CORPORATION
Advantages Disadvantages
 Shareholders have limited liability for the  The process of incorporation requires more time
corporation’s debts or judgements against the and money that other forms of organization.
corporation.

 Generally, shareholders can only be held
accountable for their investment in stock of the
company. (Note however, that officers can be
held personally liable for their actions, such as the
failure to withhold and pay employment taxes.
 Corporations can raise additional funds through
the sale of stock.
 Corporations are monitored by federal, state and
some local agencies, and as a result may have
more paperwork to comply with regulations.
 Corporations may result in higher overall taxes.
Dividends paid to shareholders are not deductible
from business income; thus this income can be
taxed twice.

 A corporation may deduct the cost of benefits it

provides to officers and employees.

 Can elect Corporation status if certain

requirements are met. This election enables
company to taxed similar to a partnership.

Examples: Smart Communications, Inc, SM Development Corporation, Medical

Doctors, Inc. (Makati Medical Center), Avida Land Corporation

COOPERATIVE
Advantages Disadvantages
 Less Taxation  Less Operational Control

 Funding opportunities  Fixed Pricing

 Further marketing reach  Cooperative may suffer from slow cash flow since
a member’s incentive to contribute depends on
 Reduce costs and improve product and services how much they use the cooperative’s services and
products.
 Perpetual existence, members can join or leave
the business without causing dissolution.  Lack of membership and participation may cause
risk of losing members.
 Democratic organization, monetary investment
does not affect the weight of each vote, so no
member owner can dominate the decision-making
process.

Example: water and electricity (utility) cooperatives, Cooperative banking, Credit

Unions, and Housing Cooperatives

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 Now let see what you have learned…
Please answer the succeeding activities below.

Practice Task 1

Direction: Read and identify the statements below. Underline your answer from the given
options.

1. It can be privately owned, state-owned or non-profit organizations that produce goods and services
for the exchange of money or for one another. (Business, Proprietorship)
2. (Service Business, Hybrid Business) is classified for more than one type of business.
3. (Manufacturing Business, Merchandising Business) they are known as “buy and sell”
business.
4. A business that produces intangible products. (Service Business, Manufacturing
Business)
5. A (corporation, cooperative) is a business owned by a group of individual and operated a
business for their common good.
6. The (Sole Proprietorship, Partnership) is the easiest and least costly to set up when
planning a business.
7. It is owned and managed by two or more person who contributed their resources for the entity.
(Sole Proprietorship, Partnership)

Very good learner, you’re doing great! Now, try the next a

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 Practice Task 2

Direction: Write your answer in the crossword puzzle by

referring to the statements below.

1 2

1. A type of business that buys product for the intention of using them to create
finished products to be sold to customers.

2. A business that is owned and managed by a group of people for their common good.

3. It is a combination of different types of business.

4. It is a business owned by two or more person who contributed resources and shares
profit among themselves.

5. A type of business that concerns with buying and selling of the commodities.

6. The ownership of this business is through a share of stock.

7. This business offers intangible products to its customers.

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 Good job! You are now about to complete the module by answering the final test prepared fo

Direction: Encircle the letter from the given options that corresponds to the statement
in each item.

1. It is an organization of people where goods and services are exchanged for one another
or for money.
A. Business C. Commodities
B. Partnership D. Services

2. It is an artificial business created by legal personality from its owners and its
ownership is represented by shares of stock.
A. Corporation C. Sole Proprietor
B. Cooperative D. Partnership

3. A type of business which provides intangible products to the customers.

A. Hybrid business C. Manufacturing business
B. Merchandising business D. Service business

4. A certain business managed by a group of individuals for mutual benefits.

A. Sole Proprietorship C. Partnership
B. Cooperative D. Corporation

5. The business is owned by two or more persons who contributed resources but may
have limited life; it may end upon withdrawal or death of partner.
A. Corporation C. Partnership
B. Sole Proprietorship D. Cooperative

6. This business is classified as having more than one type of business.

A. Service business C. Manufacturing business
B. Merchandising business D. Hybrid business

7. This is the easiest and least expensive form of ownership to organize.

A. Sole Proprietorship C. Partnership
B. Cooperative D. Corporation

8. A type of business where they buy products or raw materials for the purpose of
transforming it into finished product to be sold to the customers.
A. Service business C. Manufacturing business
B. Merchandising business D. Hybrid business

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 9. A partnership where partners divide responsibility, liability and shares of profit or loss
in the business.
A. General Partnership C. Joint Venture
B. Limited Partnership D. Preferred Partnership

10. This business is also known as “buying and selling” business.

A. Service business C. Manufacturing business
B. Merchandising business D. Hybrid business

Additional Task:

Conduct an interview to the owner of a store near you. Know the type and form of
the business. Ask why he/she chooses such business? For how long now he/she manages and
operates his/her business?

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Pretest:
1. Cooperative 5. Sole Proprietorship
2. Hybrid business 6. Service Business
3. Corporation 7. Partnership
4. Business

Learning Activity 1
1. Manufacturing business 5. Merchandising business
2. Services Business 6. Service Business
3. Hybrid Business 7. Manufacturing business
4. Service business

Learning Activity 2
1. Cooperative 5. Partnership
2. Sole Proprietorship 6. Corporation
3. Corporation

Practice Task 1
1. Business 5. Cooperative
2. Hybrid business 6. Sole Proprietorship
3. Merchandising business 7. Partnership
4. Service Business

Practice Task 2 5

M 4

6 C O
E P

R P 0 R A T I O N A

C R

H 2 T

1 M A N U F A C T U R I N G
N O E
D O R
7 S R V I C E P S
E
S E H
I 3 H Y B R I D I
N A P
G T

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Post Test
1. A 6. D
2. A 7. A
3. D 8. C
4. B 9. A
5. C 10.B

Reference:

Samar, Gregorio L. et al. (2016) Introduction to Organization and Management. Hunt

Publishing Center, 41-47.

extracted from:
http://www.mayalaw.com/2015/06/26/advantages-and-disadvantages-of-a-cooperative/

Thank you learner. You did great! Stay safe.