Terms of Business

Define the following.

1. Sole Proprietorship
- A sole proprietorship is subject to minimum legal requirements and capital.
2. Partnership
- When two or more individuals come together, contribute resources to form a business,
and agree to divide the profit among them, a partnership is formed. A partnership can
hold assets(properties) and incur debts in its name.
3. Corporation
- A corporation is an entity that is legally recognized as separate and distinct from its
owners.
4. Non-profit Organization
- This organization is formed to serve a public purpose rather than for financial gain
- A non-profit organization does not pay income taxes on money it receives for charitable
purposes.
5. Cooperative
- A cooperative is a business owned and controlled by all the members of the business.

Build Your Business Know-how

1. Ms. Acacia wants to start an Italian restaurant of her own. She is deciding which form of
ownership she should pursue. Persuade Ms. Acacia to choose your form of ownership and
discuss the advantages and disadvantages.
- Sole Proprietorship
The advantages that she will get in this ownership is you can manage your own business
and you will get your own profit and you are the boss on your own business so that you
can handle it as long as you can. And the Disadvantages of this are all the problems that
will be going through is all yours. Also, she is the one who is liable for all the expenses of
the business.

2. Fill the chart below to show the advantages and disadvantages of each form of organization.

Single Proprietorship Partnership Corporation

Business Formation Disadvantages Advantages Advantages
Legal Requirements Advantages Advantages Advantages
Number of Owners Disadvantages Advantages Advantages
Raising Capital Advantages Advantages Advantages
Succession/Continuity Advantages Advantages Advantages
Profit (all, divided, Advantages Advantages Advantages
and declared
Operation Advantages Advantages Disadvantages
 Requirements
Responsibility/ Advantages Advantages Disadvantages
Management of the
Business
Personal Liability of Disadvantages Disadvantages Disadvantages
the Owners
Tax Treatment Advantages Advantages Disadvantages
Transferability Disadvantages Advantages Advantages
Dissolution
Best Suited for
Examples

3. Operation of many household services, such as carpentry, plumbing, and electrical work, do business
as sole proprietors. If they give warranties for their services to be free from detects for a period of time,
but then subsequently sell their business to another individual, is the buyer bound by the original
warranty made by the seller? Explain your answer.

- Yes, because they still have rights to their customer who provided services

4. Name a product or service company that would benefit from forming a partnership. Why would it be
an advantage?

- "National bookstore" Collaboration. As compared to a sole proprietorship, which is essentially the

same business form but with only one owner, a partnership offers the advantage of allowing the owners
to draw on the resources and expertise of the co-partners.

5. With a minimum of PHP 5,000, Individuals as young as 18 years old may apply for an account online
and start investing in stocks. Do basic research of the companies in which you are interested to invest.
Review market information, either directly from the companies in from business reports and news. In
the beginning, one can set a goal for long- term investing. Active trading can be done when one is more
familiar with the stocks exchange.

6. Do you believe that there is a link between ease of organizing a business and the overall economy of
the nation?

-
7. Discuss why Mark Zuckerberg, CEO Of Facebook, decided to establish a for profit corporation instead
of a non-profit organization.

- The reason why he chose profit corporation because profit corporation establishing the Delaware LLC
instead, the Facebook founder can give to political campaigns, keep his spending private, and avoid an
obligation to donate to charity. He can also invest his shares in for-profit companies and potentially make
more money.

Doing Business Right

1. Do you think it is right for a partnership to fire a partner by dissolving the company and then
reforming without the dismissed partner? Justify your answer.

2. Read "Why Fake NGOs Got Away" at http://www.rappler.com/ newsbreak/41913-why-fake-

ngos-got-away to find the reasons why the likes of Janet Napoles were able to register their
companies as nonprofit organizations. Do you think the government is now doing enough to
avoid a repeat of these incidents? Do you have suggestions on how they can further improve
their check and balance system?