Forms of Business

Organization
What is a Business?
A business is an organization, economic
system, or enterprising entity that is
engaged in commercial, professional,
industrial activities and operates in
exchange for one another or of money.
It produces goods or offers services to
satisfy the needs and wants of
society. Business, then, operates with
people working together to meet a
common goals (which is to earn a
profit).
Profits in business are not
necessarily money. It can be a
benefit in any form which is
acknowledged by the business
(entity) involved in the business
(activity).
 Basic Forms of Business Organization
A business organization is an entity formed
to carry on commercial enterprise.
Four different types of business organization:
single proprietorship, partnership,
corporation, and cooperative.
 SINGLE PROPRIETORSHIP
⮚ A sole proprietorship as the name implies is
a business owned and operated by only one
person for their benefit.
⮚ The owner and the business are considered
the same. Moreover, there is no legal
separation between the two when it comes
to taxes and liabilities and of course assets
and profits.
⮚ That is why sole proprietorship has
unlimited liability for all of its
obligations because of this kind of
condition but also has all the rights
when it comes to assets and profit
incurred by the business
 Advantages of Sole/Single proprietorship
1. The Easiest and inexpensive to put up
2. All profits will go to the owner
3. Complete and direct control of the business
4. Freedom from government regulations
5. No special taxation
6. Easy to dissolve if desired
 Disadvantages of Sole/Single proprietorship
1. Unlimited liability
2. Difficult to raise capital or additional capital
3. Limited managerial expertise
4. Has a hard time finding qualified talents
5. Consumes personal time
6. Unstable business life
 PARTNERSHIP
According to The Philippine Civil Code, it
defines partnership as “Art. 1767. By the
contract of partnership two or more
persons bind themselves to contribute
money, property, or industry to a common
fund, to divide the profits among
themselves.”
 Advantages of Partnership
1. Ease of Formation
2. Availability of capital
3. Diversity of expertise
4. No special taxes
5. Relative freedom from government control
 Disdvantages of Partnership
1. Unlimited liability
2. Conflicts between
3. The complexity of profit-sharing
4. Limited life
 Types of Partnership
1. General Partnership
All partners agree to have unlimited
liability.
✔ It means that when the company is
bankrupt, the personal assets of
partners can be used to pay the
remaining debt of the firm.
2. Limited Partnership
✔ As to the term “limited” it means
that the liability of partners is
bounded only within their
capital/investment in the company.
✔ Their assets are secured and will
not be used to pay for the
company’s debt.
✔ But there should at least one
partner that is considered a
general partner and be the one
who has unlimited liability.
3. Limited Liability Partnership
⮚ type of partnership is common only
to professional service businesses
such as doctors, lawyers,
accountants, engineers, architects,
and other professional fields.
✔ Their personal assets are
protected for business’ debts and
liabilities but do not protect the
personal assets of partners for
malpractices.
 CORPORATION
✔ A corporation is defined as “A corporation
is an artificial being created by operation of
law, having the right of succession and the
powers, attributes, and properties expressly
authorized by law or incident to its
existence” as stated in the Batas Pambansa
Blg. 68 also known as The Corporation
Code of the Philippines
✔ Owners of a corporation are called
shareholders (for Stock Corporation) and
members (for Non-stock Corporation).
✔ The corporation is considered as a unique
entity, separate and apart from those who
own it.
✔ A corporation itself can be sued, taxed, and
enter into a contractual agreement.
 Advantages of Corporation
1. Limited liability
2. Ease of transfer of ownership
3. Unlimited life
4. Raise additional funds
 Disadvantages of Corporation
1. Double taxation
2. Cost and complexity of formation
3. Government restrictions
Limited Liability Corporation (LLC)
✔ Limited liability companies are a hybrid business that has
characteristics of both corporation and partnership.
✔ An LLC is a separate entity like a corporation that conducts
business and owns assets.
✔ There is no restriction on the number of members (owners
referred to as members).
✔ The owners have limited liability because of its distinction with
the company but are taxed like a general partnership
Advantages of Limited Liability Corporation
1. Limited liability- the business is a separate entity from
the owner that is why personal assets of owners are
restricted from the debt of the business.
2. Pass-through tax structure – income from your business
can be treated as your personal income.
3. Organizational Freedom- there are no restrictions when
it comes to the number of members.
4. Limited regulations- the business is not required to abide
by some regulations implemented in a corporation
business such as record keeping, board meeting, and
administrative duties of the corporation
Disadvantages of Limited Liability Company
1. Building Capital –limited liability corporation as a
form of business is not that popular so investors
are not convinced to invest their money in this
kind of company.
2. No perpetual existence – this form of business
organization will cease to exist once one member
of the company died or withdraw.
 COOPERATIVE
Cooperative is well-known as “co-op”
that is organized for-profit and non-profit.
✔ It is a form of business organization with
members working together toward a
common goal for their mutual benefit.
✔ The main purpose of cooperative
business is not merely for making profit
but to provide goods or services at a
reasonable price.
 COOPERATIVE
“A cooperative is an autonomous and duly
registered association of persons, with a common
bond of interest, who have voluntarily joined
together to achieve their social, economic and
cultural needs and aspirations by making equitable
contributions to the capital required, patronizing
their products and services and accepting a fair
share of risks and benefits of the undertaking per
the universally accepted cooperative principles.”
 Advantages of Cooperative
1. Ease of formation
2. Voluntary organization
3. Separate entity
4. Limited liability
5. Government support
6. Low taxes
 Disadvantages of Cooperative
1. Limited Capital
2. Inefficient management
3. Lack of interest
4. Corruption
5. Government Intervention
6. Conflict among members
Basic Classification of Business
1. Service Business
2. Merchandising Business
3. Manufacturing Business
4. Hybrid Businesses
SERVICE BUSINESS – this is a
type of business that provides
intangible products (no physical
form). Some needed people to
deliver service and some needed
goods to deliver service.
 Types of Service Business
a. Service business- this type of service offers intangible
goods and charged because of labor. Examples are
consulting firms, entertainment, salon, and the likes.
b. Financial business- this type of service makes a profit
through investment and asset management like banks,
insurance, lending companies, and others.
c. Transportation service- this type of service includes
logistics and sending people to a certain locations for a
fee.
d. Utilities- this service provides public services such as
water, electricity, telecommunication, and more .
MERCHANDISING BUSINESS- is also known
as “buy and sell” where businessman buys
good at a certain cost and sells it on a much
higher price to earn a profit. Merchandising
business sells products on the same form it
was bought.
 a. Retailers and distributors- these
businesses act as middlemen to satisfy
consumers by delivering goods produced by
manufacturers.
✔ Retailers and distributors make a
profit through mark up.
MANUFACTURING BUSINESS- this
type of business buys raw materials and
converts these materials into a new type of
product. The newly manufactured products
will then sell to consumers.
a. Agriculture and mining businesses- produce raw materials
such as plants or minerals.
b. Manufacturers- produce tangible goods from raw
materials. Examples are canned goods, supplies, and many
more.
c. Real-estate businesses- those who sell or rent properties
such as land, residential, and commercial spaces and other
buildings.
d. Information businesses- those that sell intellectual
properties such as publishers and internet and software
companies.
 HYBRID BUSINESS
✔ from the term “hybrid” means a combination of two or
more types of business.
✔ One best example is a restaurant where it combines
and cooks ingredients to form a new dish
(manufacturing) sells canned soda (merchandising)
and provides dining services (services).
✔ But it will be classified according to the major interest
of the business, for instance, a restaurant will be
classified as a service types of business for it focuses
more on the dining service.
 ACTIVITY: BUSINESS MINDED

1. As future entrepreneur, what classification and specific

type of business you want to establish? Explain why and give
short description of the business.
2. What form of organizations are you planning to use in
your future business? Why?
A. Direction: Distinguish a corporation from proprietorships
and partnership by completing the sentence below.
1. The _________ has separate legal existence from its
owners.
2. The stockholders have ____________ liability.
3. Ability to obtain _________.
4. ____________ ownership
5. The corporation can have a ____________ life.
1. Corporation 2.Limited 3.Capital 4. Transferrable 5. Continous
THANKYOU!