Chapter 3 –

Business
Organization
 Learning Competencies
The learners should be able to …….

1. Differentiate the forms of business organization.

2.Identify the advantages and disadvantages of each form of
business organization.
3.Compare and contrast the types of business according to
activities.
4.Identify the business requirements of each type of business
organization.
WHAT IS BUSINESS ORGANIZATIONS

The term “business organization” refers to how

business is structured.
➢ It refers to a commercial or industrial enterprise
and the people who constitute it.
FORMS OF BUSINESS ORGANIZATIONS
1. Sole or single proprietorship – this business organization has a single owner
called proprietor who generally is also the manager.

2. Partnership – is a business owned and operated by two or more persons who

bind themselves to contribute money, property, or industry to a common fund,
with the intention of dividing the profits among themselves.

3. Corporation – a corporation is a business owned by its stockholders. It is an

artificial being created by operation of law, having the rights of succession
and the powers, attributes and properties expressly authorized by law or
incident to its existence.

4. Cooperative – is a business owned by a group of individuals and is operated

for their mutual benefit.
 FORMS OF BUSINESS ORGANIZATIONS

Sole or single proprietorship – this business organization has a

single owner called proprietor who generally is also the
manager.
❑It is the most common and simplest form of a business
organization.
 ADVANTAGES AND DISADVANTAGES
SOLE PROPRIETORSHIP
Advantages
❖ Ease and cost of formation;
❖ Secrecy;
❖ Distributions and use of profits;
❖ Control of the business;
❖ Government regulation;
❖ Taxation; and
❖ Closing the business.
Disadvantages
Possibility that the owner lacks ability
and experience;
Difficulty in attracting and keeping
quality employees;
Difficulty in raising additional capital;
Limited life of the firm; and
Unlimited liability of the proprietor.
FORMS OF BUSINESS ORGANIZATIONS

Partnership – is a business owned and operated by two or

more persons who entered into a contract to carry on the
business and divide among themselves the earnings
therefrom.
 ADVANTAGES AND DISADVANTAGES
PARTNERSHIP

Advantages Disadvantages
❖ease of formation; unlimited liability;
❖Pooling of knowledge and skills; Limited life;
❖More sources of capital; Potential conflict between
partners; and
❖Ability to attract and retain Difficulty in dissolving the
employees; and business.
❖Tax advantages.
 FORMS OF BUSINESS ORGANIZATIONS

Corporation – is an artificial being or a juridical person, created

by operation of law, having the right of succession and the
powers, attributes, and properties expressly authorized by law
or incidentals to its existence.
 ADVANTAGES AND DISADVANTAGES
CORPORATION

Advantages Disadvantages
❖ Limited liability; More expensive and complicated to
organize;
❖ Ease of expansion; Double taxation;
❖ Ease of transferring ownership; More extensive government
restrictions and reporting
requirements; and
❖ Relatively long life; and Employees lack personal identification
and commitment.
❖ Greater ability to hire specialized
management.
 FORMS OF BUSINESS ORGANIZATIONS

Cooperative – is an association of individuals who joined

together to contribute capital and cooperate in order to achieve
certain goals.
 ADVANTAGES AND DISADVANTAGES
COOPERATIVE

Advantages Disadvantages
❖Elimination of middlemen. Lack of capital
❖Saving in management Limited scale
expenses.
❖Minimum stock. Inefficient management
❖Economy in distribution and Lack of prompt decision
production expenditure.
❖Integration
 FORMS OF BUSINESS ORGANIZATIONS
Forms of Business Ownership
Organization
1. Sole proprietorship ➢ One individual
( i.,e., sole proprietor )
2. Partnership ➢ More than one
( i.,e., partners )
3. Corporation ➢ More than one
( i.,e., stockholders )
Formation/Registration
➢ Registered with DTI.
➢ Formed by contractual
agreement.
➢ Registered with the SEC.
➢ Formed by operation of law.
➢ Registered with the SEC.

4. Cooperative ➢ More than one ➢ Formed in accordance with

( i.,e., members ) Philippine Cooperative
Code of 2008.
➢ Registered with the CDA.
 TYPES OF BUSINESS ACCORDING TO
ACTIVITIES
SERVICE BUSINESS
➢ A service business is one that offers services as its main
product rather than physical goods.

MERCHANDISING BUSINESS
➢ A merchandising business (or trading business) is one that buys
products at wholesale and sells goods at retail price.

MANUFACTURING BUSINESS
➢ A manufacturing business is one that buys raw materials and
processes them into final products.
ADVANTAGES AND
DISADVANTAGES
THE DIFFERENT
TYPES OF
BUSINESS
❑ SERVICE BUSINESS
ADVANTAGES DISADVANTAGES
❖ You don’t need to worry Flexible Hours
about inventory, warehousing
and distribution costs because
you don’t have any inventory.
❖ You may only need a small Steady Work
capital because what you are
selling is your skill set and
need yourself to render a
service.
❖ You are perceived as an Entry into Entrepreneurism
expert in your chosen field.
Skill Enhancement
❑ MERCHANDISING
ADVANTAGES DISADVANTAGES
❖ Compare to Bringing them in.
manufacturing firm,
you may need a
much lower start-up
capital.
❖ You can take Increased sales
advantage of price
fluctuations.
❖ Lower cost of quality. Changing spaces
❖ It is much easier to Demands on staff.
start a merchandising
business.
Once is not enough.
Expense
❑ MANUFACTURING
ADVANTAGES
❖ You have a high growth
potential.
❖ You have the opportunity
to established a brand
that could last longer than
your lifetime.
❖ Self-satisfaction is high.
❖ You can have a better
pricing policy.
DISADVANTAGES
You need a high start-up
capital to acquire
machineries, to employ
people, and to acquire a
big space for your
production.
Conceptualizing a viable
manufacturing business is
difficult.
You need to be
continuously innovative
and abreast of changes in
technology.
You rely on raw materials