✓ A business is defined as an organization or
BME 1 (prelim)
UNIT I: The Foundation of Business
❖Accounting – A systematic way of recording and
reporting financial transactions for a business or
organization. The process of identifying, measuring
and communicating about an entry to permit
informed judgments and decisions by users of the
information.
❖ Business – It is a general term, which includes all
profit-seeking activities of enterprises that provide
goods and services necessary to an economic
system.
❖ Finance – It is defined as the management of
money and includes activities such as investing,
borrowing, lending, budgeting, saving, and
forecasting.
❖ Management – Management is a process of
planning, decision-making, organizing, leading,
motivation and controlling the human resources,
financial, physical, and information resources of an
organization to each its goals efficiently and
effectively.
❖ Marketing – It refers to activities a company
undertakes to promote the buying or selling of a
product or service. Marketing includes advertising,
selling, and delivering products to consumers or
other businesses.
❖ Organization – It is an entity comprising a group
of people, established to accomplish certain goals.
❖ Profit – It is the money that remains after a firm
deducts its expenses related to producing and
marketing goods or services from its revenues. The
firm receives money arising out of sales,
commissions, and the like.
Topic 1: What is Business?
✓ It refers to any activity that provides goods or
services to consumers for the purpose of making a
profit.
✓ The term business refers to the organized efforts
and activities of individuals to produce and sell
goods and services for profit.
enterprising entity engaged in commercial,
industrial, or professional activities.
•For example, when Steve Jobs and Steve Wozniak
created Apple Computer in Job’s family garage,
they started a business. The product was the Apple
I, and the company’s founders hoped to sell their
computers to customers for more than it cost to
make and market them. If they were successful
(which they were), they’d make a profit.
✓ Before we go on let’s make a couple of
important distinctions concerning the terms in our
definitions:
•First, whereas Apple produces and sells goods
(Mac, iPhone, iPod, iPad), many businesses provide
services. Your bank is a service company, as is your
internet provider. Hotels, airlines, law firms, movie
theaters and hospitals are also service companies.
Many companies provide both goods and services.
For example, your local cat dealership sells goods
(cars) and also provides services (automobile
repairs).
•Second, some organizations are not set up to
make profits. Many are established to provide
social or educational services. Businesses can be
for-profit entities or non-profit organizations that
operate to fulfill a charitable mission or further a
social cause.
✓ It is important to note also that people have
conducted business since ancient times;
historically, businesses have involved mercantile
operations, trade guilds, or shared agricultural
production.
Key Takeaways
● In the hope of making profits, businesses
produce and market goods and services.
● In satisfying customers’ needs and wants, the
firm will generate sales revenues, which make
profits possible

Topic 2: What is Profit?
✓ It is important to note that profit is the primary
reason why people go into business.
✓ Businesses that do not make profits are bound
for extinction.
✓ Profit is the revenue remaining after all costs are
paid. These costs include labor, materials, interest
on debt, and taxes.
✓ Profit is usually used when describing business
activity. But everyone with an income has profit.
It’s what left over after paying the bills.
» Profit is the reward to business owners for
investing. In small companies, it’s paid directly as
income. In corporations, it’s often paid in the form
of dividends to shareholders.
When expenses are higher than revenue, that’s
called a loss. If a company suffers losses for too
long, it goes bankrupt.
Key Takeaways
● Profit is income remaining after settling all
expenses.
● Three forms of profit are gross profit, operating
profit and net profit.
● The profit margin shows how well a company
uses revenue.
● Profit drives capitalism and free market
economies.
● Increasing revenue and cutting costs increase
profits.
Topic 3: What is an Organization?
✓ Remember, most of us have worked in an
organization of people – even a family is a type of
organization.
✓ The word is widely used that its meaning can
sometimes be lost.
✓ The word means a collection of resources that
are working together somehow to achieve a
common purpose.
✓ When we talk about an organization, we are
usually referring to a group of people.
✓ It is important to note that organizations of
people come in many forms.
• They might be a random group of people who
spontaneously came together to address a short-
term need, such as collecting litter along a certain
stretch or road.
• Or, it might be a carefully collected, aligned and
integrated group of people who came together for
the long-term to address a long-term need, such as
stopping poverty in a certain country.
✓ A mere grouping of people will not qualify as an
organization, the group must have some objectives
to achieve and to be able to do so, they must
interact, use knowledge and techniques, and work
together in patterned relationships.
✓ An overall organization can have a variety of
small organizations within it, for example, various
departments and teams of people.
✓ The way that people work together in an
organization depends on a variety of factors,
including the values in their culture, the nature of
leadership and types of current needs they are
working to address.
Topic 4: Functional Areas of Business
1. Management
✓Managers are responsible for the work
performance of other people.
✓Management involves planning for, organizing,
staffing, directing and controlling a company’s
resources so that it can achieve its goals.
• Managers plan by setting goals and developing
strategies for achieving them.
•They organize activities and resources to ensure
that company goals are met.
•They staff the organization with qualified
employees and
•direct them to accomplish organizational goals.
•Finally, managers design controls for assessing the
success of plans and decisions and take corrective
action as needed.
✓Koontz and O’Donnel (2019) define management
as the process of designing and maintaining an
environment in which individuals, working together
in groups, effectively and efficiently, accomplished
aims”.
•This definition implies:
1. As managers, people carry out the
managerial functions of planning,
organizing, staffing, leading and controlling.
2. Management applies to any kind of
organization.
3. It applies to managers at all organizational
levels.
4. The aim of all managers is the same: to
create a surplus.
5. Managing is concerned with productivity;
this implies effectiveness and efficiency
2. Operations
All companies must convert resources (labor,
materials, money, information and so on forth) into
goods or services. Some companies, such as Apple,
convert resources into tangible products – Macs,
iPhones, iPods, iPads, Others such as hospitals,
convert resources into intangible products – health
care. The person who designs and oversees the
transformation of resources into goods or services
is called an operations manager. This individual is
also responsible for ensuring that products are of
high quality.
3. Marketing
Marketing consists of everything that a company
does to identify customer’s needs and designs
products to meet those needs. Marketers develop
the benefits and features of products, including
price and quality. They also decide on the best
method of delivering products and the best means
of promoting them to attract and keep customers.
They manage relationships with customers and
make them aware of the organization’s desire and
ability to satisfy their needs.
4. Accounting
Managers need accurate, relevant, timely financial
information, and accountants provide it.
Accountants measure, summarize and
communicate financial and managerial information
and advise other managers on financial matters.
there are two fields of accounting. Financial
accountants prepare financial statements to help
users, both inside and outside the organization,
assess the financial strength of the company.
managerial accountants prepare information, such
as reports on the cost of materials used in the
production process, for internal use only.
5. Finance
Finance involves planning for, obtaining, and
managing a company’s funds. Finance managers
address such questions as the following: How much
money does the company need? How and where
will it get the necessary money? How and when will
it pay the money back? What should it do with its
funds? What investments should be made in plant
and equipment? How much should be spent on
research and development? How should excess
funds be invested? Good financial management is
particularly important when a company is first
formed, because new business owners usually need
to borrow money to get started.
Topic 5: Management Principles
Henri Fayol named these 14 Management
principles based on fundamental truth. These
principles of management serve as a guideline for
decision-making and management actions. They
are drawn up by means of observations and
analyses of events that managers encounter in
practice. Henri Fayol was able to synthesize 14
principles of management after years of study,
namely:
 1. Division of Labor
This means breaking a job down into specialized
tasks to increase productivity. For example, the
total job of financing appliance sales may be broken
into tasks like credit investigation, collection and
accounting.
2. Authority
This is the right given to a person on position to
give orders plus the power to exact obedience. For
example, a sales manager must have the right to
expect from the sales supervisor the required
volume of sales for a given period.
3. Discipline
This provides uniform application of behavior to
certain activities the outcome of which is readily
predicted. If discipline is not practiced, objectives
will be very hard to achieve.
4. Unity of Command
This means that each employee must have only one
supervisor. Reporting to more than one boss
creates and reduces productivity.
5. Unity of direction
This means that the efforts of everyone in the
organization must be coordinated and focused in
the same direction. It will be hard to achieve an
organizational objective if some components of the
organization are not moving towards the identified
objective.
6. Subordination of the individual interests to
the general interest
This refers to the goals of the organization that
should take precedence over individual goals.
When the reverse happens, it will be difficult for
the organization to succeed because its goals will
always be set aside.
7. Remuneration
Employees should be paid fairly in accordance with
their contribution to the organizational effort. This
must be applied to pay, bonuses and benefits.
8. Centralization
Power and authority must be centralized as much
as possible. Decentralization must be instituted,
however, when the firm grows to considerable size.
9. Scalar chain
This means that subordinates should observe the
official chain of command unless authorized by
their respective superiors to communicate with
each other.
10. Order
This means that human and non-human resources
should be in their proper places. The production
manager, for example, must hold office at the
production site.
11. Equity
This is the result of kindliness and justice and is a
principle to guide management-employee relations.
12. Stability of Tenure
High employee turnover is counterproductive. To
motivate employees to stay with the company,
effective manpower planning and implementation
are necessary.
13. Initiative
Management should encourage employees to act
on their own volition when confronted with an
opportunity to solve a problem.
14. Esprit de corps
This means that managers should emphasize
teamwork by building harmony and a sense of
unity among employees. Harmony breeds high
morale and is more productive than discord.
UNIT II: Ethics and Social
Responsibility
Topic 1: Ethics
✓The behavior of individuals and groups which are
governed by standards, rules, and codes of conduct
consist of the subjects covered by ethics
✓Simply put, ethics is a system of moral principles.
They affect how people make decisions and lead
their lives.
✓ Ethics is concerned with what is good individuals
and Society and is also described as moral
philosophy.
✓ It involves learning what is right or wrong, and
then doing the right thing – but “the right thing” is
not nearly as straightforward as conveyed in a great
deal of business ethics literature.
✓Ethics covers the following dilemmas:
● how to live a good life
● our rights and responsibilities
● the language of right and wrong
● moral decisions – what is good and bad?
Topic 2: Business Ethics
✓Business ethics, also called corporate ethics, is a
form of applied ethics or professional ethics that
examines the ethical and moral principles and
problems that arise in a business environment.
✓It can also be defined as the written and
unwritten codes of principles and values,
determined by an organization’s culture, that
govern decisions and actions within an
organization.
• It applies to all aspects of business conduct on
behalf of both individuals and the entire company.
✓In the most basic terms, a definition for business
ethics boils down to knowing the difference
between right and wrong and choosing what to do
what is right.
✓The concept has come to mean various things to
various people, but generally its coming to know
what is right or wrong in the workplace and doing
what is right – this is in regard to effects of
products/services and in relationships with
stakeholders.
✓It implores them to adhere to certain ethical
conduct when dealing with anybody especially
those affected by their business activities.
✓Note that many people react that business ethics,
with its continuing attention to “doing the right
thing,” only asserts the obvious (“be good”, “don’t
lie”, etc.), and so these people don’t tae business
ethics seriously. For many of us, these principles of
the obvious can go right out the door during times
of stress. Consequently, business ethics can be
strong preventative medicine.
Areas of Concern for Business Ethics
Business ethics covers all areas encompassed by
business transactions. The ethical conduct of
business persons may be measured against how
the following are adhered to:
1. Laws and regulations promulgated by the
government; and
2. Specific ethical conduct not yet passed into
law.
A list of concern relating to laws and regulations
requiring ethical behavior is provided as follows:
1. Product safety and quality;
2. Fair employment practices;
3. Fair marketing and selling practices;
4. The use of confidential information for
personal gain;
5. Community involvement;
6. Bribery; and
7. Illegal payments to foreign governments to
obtain business
Topic 3: Social Responsibility
● This definition indicates that the firm must
perform its function without harming the
community; instead it must improve the quality of
life. It must produce goods or services that will not
adversely affect any component of the society. It
can make profits but not to the detriment of
society.
● Movies, for example may be produced and
shown to the public but they must not be those
that devalue morals.
Social responsibility and business ethics are often
regarded as the same concepts. However, the social
responsibility movement is but one aspect of the
overall discipline of business ethics.
Topic 4: Corporate Social Responsibility
✓Social responsibility means that individuals and
companies have a duty to act in the best interests
of their environment and society as a whole.
✓Social responsibility, as it applies to business, is
known as corporate social responsibility (CSR).
✓The crux of this theory is to enact policies that
promote an ethical balance between the dual
mandates of striving for profitability and benefiting
society as a whole.
✓ These policies can be either ones of commission
(philanthropy – donations of money, time, or
resources) or omission (e.g., “go green” initiatives
like reducing greenhouses gases, etc.)
✓Social responsibility and business ethics are often
regarding as the same concepts. However, the
social responsibility movement is but one aspect of
the overall discipline of business ethics.
✓The social responsibility movement arose
particularly during the 1960s with increased public
consciousness about the role of business in helping
to cultivate and maintain highly ethical practices in
society and particularly in the natural environment.
UNIT III: Forms of Business
Organization and Ownership
Topic 1: Sole Proprietorship
✓The sole proprietorship is that type of business
entity owned and operated by a single person.
✓ It is a one-man enterprise because the owner
shoulders all the losses when the business fails but
all profits accrue to him if the business prospers.
From his own resources, the owner provides the
necessary funds for operating the business.
Decision-making is monopolized by the owner.
✓The big percentage of businesses owned by sole
proprietors indicate the popularity of this
ownership type. This is so, because of certain
advantages unique to sole proprietorships.
ADVANTAGES
1. Ease and Cost of Formation
Among the three forms, the sole proprietorship is
the easiest and least costly to organize. The only
requisites for its legal existence are the following:
a. The sole owner’s resolve to start
operating; and
b. Getting the required permits and
licenses. The cost involved in
forming the sole proprietorship is
less than either the partnership or
corporation. This is because only
one person makes the decision in
the actual formation of the business.
Also, documentary requirements are
not as extensive as those of the
other two forms of ownership.
3. Secrecy
One way of effectively competing with other firms
is to know the moves, as well as the strengths and
weaknesses of competitors. The sole proprietor has
the advantage of keeping his intentions secret. As
he does not have, and is not required by law, to
share information with anyone, he can proceed
with his activities in secrecy. His competitors can
only guess what his intended moves are.
 4. Distribution and use of Profits
If because of his efforts, the business made much
profits, the sole proprietor is the sole beneficiary.
He does not have to share those with anyone. If he
decides to use the profits for expansion, he is not
required to consult anybody. If he decides to use it
anyway he pleases, he is free to do so.
5. Control of the Business
The sole owner is also vested with the power to
control solely the business. This sole authority is
very important especially under critical competitive
situations. For instance, a consumer is confronted
with a situation where he or she must choose to
buy either from a sole proprietorship, a
partnership, or a corporation. If all the prices
quoted by the three firms are identical and the
prospective buyer is asking for a lower one, the
sole proprietorship has the advantage of making an
immediate decision while the partners will still
have to consult with each other.
6. Government regulation
The sole proprietorship is spared from various
government rules which apply to partnerships and
corporations. Also, sole proprietorships are
required by the government to submit fewer
reports. Sole proprietorships are also spared from
charter restrictions on operations. An insurance
corporation, for example, cannot engage in the
retailing of groceries. On the other hand, a sole
proprietorship manufacturing furniture can switch
to selling agricultural products in a few days
without worrying about violating any restriction.
7. Taxation
The net income of the sole proprietorship is treated
as the personal income of the sole owner and is
taxed accordingly. This is not true with partnerships
and corporations where their respective net
incomes are taxed and will be subject to taxation
again when the owners individually receive their
shares of the profits.
8. Closing the business
Sole proprietorships can be dissolved by the
owners at will. although this is not always
exercised, it remains an option of the owners. Once
the owner decides to close shop, he does seek the
approval of co-owners or partners for he does not
have any. If business conditions had become
unprofitable, the sole proprietor has the advantage
of immediate cessation of operations. This allows
him to cut his losses to the minimum.
DISADVANTAGES
1. The owner’s possible lack of ability and
experience
The success of the sole proprietorship will depend
largely on the management skills of the owner. The
firm will need a “generalist” with sufficient grasp of
the various specialized functions performed like
those for marketing, production, finance,
accounting, personnel, and research.
Unfortunately, it is difficult to find qualified
generalists to manage sole proprietorships. If the
sole proprietor lacks the skills of a generalist, then
it will be very hard for the firm to succeed.
2. Difficulty in Attracting Good Employees
Sole proprietorships are not known for surviving
long periods. The existence of a sole proprietorship
is co-terminus with the life of its owner. As a
consequence, good employees tend to get
employment in a more stable enterprise which is
most often a corporation.
3. Difficulty in Raising Capital
In sole proprietorships, raising capital will depend
on the financial resources of the sole owner. Even if
he can obtain credit, the amount will depend on his
sole capacity to pay. This problem is especially felt
when business expansion is required and which
becomes more difficult when credit is getting tight
and interest rates become prohibitive. The difficulty
in raising additional capital often aggravates the
problem of meeting competition.
 4. Limited Life of the Firm
The existence of the sole proprietorship depends
on the physical well-being of the owner. When he is
ill, business operations may be affected. Prolonged
illness may make the firm go bankrupt. His death
will mean liquidation of the firm. In any
case, customers and creditors are saddled with
some degree of anxiety as a result of the limited life
of the firm. This limits the opportunities for growth
and expansion which could be afforded to the sole
proprietorship.
5. Unlimited Liability of the Proprietor
Any liability incurred by the sole proprietorship
extends to the owner’s personal assets. In theory,
the sole proprietor could lose “even his shirt” if all
his other assets are not enough to cover all claims
against his business. Unlimited liability is the
greatest disadvantage of the sole proprietorship.
The lives of quite a number of former sole
proprietors became miserable because of this
disadvantage.
Topic 2: Partnership
✓A partnership is formed by two or more persons
binding themselves together to contribute money,
property or industry to a common fund with the
intention of dividing profits among themselves.
✓A partnership begins from the time the contract
is executed. The articles of partnership must be
registered with the Securities and Exchange
Commission (SEC).
Types of Partnerships
Partnerships may be classified according to the
liability of the partners. They are as follows:
1. General partnership
2. Limited partnership
✓A general partnership is an association of two or
more persons, each with unlimited liability, who are
actively involved in the business.
✓A limited partnership is an agreement in which
the liability of one or more partners is limited to
the amount of assets they have invested in the
business.
ADVANTAGES
1. Ease of Formation
Like sole proprietorships, partnerships are easy to
form. The only requirement before the partnership
commences operations is for the partners to agree
on basic aspects of the business like the nature of
the business, location, capitalization, and the like. A
written agreement called the contract of
partnership is drawn to formalize what has been
agreed upon.
2. Pooling of Knowledge and Skills
The combined knowledge and skills of the partners
provide the partnership with a distinct advantage.
One partner, for instance, may possess the required
skills in manufacturing, while another has the skills
in accounting, and another in marketing. These
skills may be used to the advantage of the
partnership. This condition also paves the way for
specialization which is a very important competitive
tool in business.
3. Availability of more funds
The combined resources of the partners provide a
bigger source of funds. This condition leads to a
higher credit rating for the partnership. The
Resource potentials of the partners combined with
high credit rating result to a formidable capability
for the partnership.
4. Ability to attract and retain employees
Attracting and retaining employees is a difficulty
inherent to sole proprietorships. Partnerships have
the ability to overcome this difficulty by offering
partner status to valuable employees. This
advantage also minimizes the potential harm that
may be done by a key employee moving to a
competitor.
5. Tax Advantage
The income of the partnership is not taxed
separately from the partners’ incomes. Any profits
derived by the partners are treated and taxed as
their individual incomes.
DISADVANTAGES
1. Unlimited Liability
Partnerships, like sole proprietorships, are saddled
with the disadvantage of unlimited liability.
although one or two partners may opt to have
limited liability, the remaining partner or partners
carry the burden of unlimited liability.
2. Limited life
When a partner dies or withdraws from the
business, the partnership is terminated. The life of
the partnership, in essence, is more limited than
the sole proprietorship. Whereas, the life of the
sole proprietorship depends on the state of health
and willingness of all partners. If there are five
partners, the risk of discontinuance of the
partnership business is five times greater than the
sole proprietorship.
3. Potential conflict between partners
There are occasions when partners disagree on
certain ways of operating the business; and there
are many potential areas of disagreement. among
these are the following:
a. Adding new lines;
b. Hiring new employees;
c. Decisions on credit extensions; and
d. Granting employee welfare benefits.
❖ When conflict between partners persists,
operations are affected. This may lead to
bankruptcy.
4. Difficulty in dissolving the business
Partnerships are not easy to dissolve as sole
proprietorships. After dissolving the sole
proprietorship, whatever assets or liabilities left are
concerns of the sole owner alone. In a partnership
dissolution, it may not be easy to divide whatever
assets are left for distribution to the partners. This
is because some of the assets may be fixed or
immovable. The more difficult the dissolution
becomes when liabilities are to be shared by the
partners.
Topic 3: Corporation
✓ A corporation is an artificial being having the
rights of succession and the powers, attributes and
properties expressly authorized by law or incident
to its existence.
✓The Corporation Law (Act 1459) which took effect
on April 1, 1906 governs the corporate form of
business ownership in the Philippines. It provides
the requisites in forming/organizing corporations,
defines their powers, fixes the duties of directors
and officers, prescribes the rights and liabilities of
stockholders and members as well as the
conditions under which corporations may do
business.
● A corporation is an enterprise chartered by law,
with most of the legal rights of a person, including
the right to conduct a business, to own and sell
property, to borrow money, and to sue or be sued.
✓ The corporate form of business is the third
ownership option open to business persons.
owners of corporations are called stockholders.
They are issued certificates of ownership called
stocks. Some of these are openly traded in the
country’s stock exchange.
ADVANTAGES
1. Limited liability
The liability of the stockholders are limited to the
amount of their shareholding. A stockholder may
lose the entire value of his stocks in the event of a
bankruptcy. Beyond the said value, he has no more
liability. The limited liability advantage attracts all
kinds of investors, big or small. An investor who has
only a few thousand pesos to spare may become a
part owner of the corporation by purchasing a
limited number of shares. Those who have more
money may buy more shares.
 2. Ease of expansion
The authority granted to corporations to sell its
own shares of stock provide a means to pool a large
amount of funds. The price per share of stocks
could be made low enough to attract even the
smallest investor. As the ownership of the stocks
can be easily transferred, this provides more reason
for the investor to buy stocks. The ability of
corporations to accumulate large amounts of
capital, make it easier for them to consider
business expansion.
3. Ease of transferring ownership
If a stockholder loses interest in the corporation he
partly owns, he may disassociate himself from it by
selling or donating his shares to another person. In
effect, the ownership of a corporation may change
as often as it could without actually, dissolving it.
4. Relatively long life
Corporations may be established to have lives of up
to 50 years and may be extended indefinitely
through renewals of documents. Since ownership is
readily transferrable, the death or withdrawal of
any or all stockholders do not terminate the
corporation. This advantage makes the corporation
the most stable among the three major forms of
ownership.
5. Ability to hire specialized management
The expanded operations of corporations make it
possible to divide the overall job into smaller
specialized positions. As the various positions will
be quite dissimilar from each other, the demand for
management expertise will be a little more exacting
than those required for sole proprietorship or
partnerships. the said requirement pave the way
for hiring fully trained management experts. With
Specialized management, the corporation is
provided with the opportunity to grow and develop
more vigorously.
DISADVANTAGES
1. More expensive and complicated to
organize
Among the three major forms of ownership, more
time and money are required to organize a
corporation. It takes months or even years before a
corporation can begin serving its customers. It may
start operations only after receiving from the
Securities and Exchange Commission (SEC) a
certificate of incorporation if it finds that the
articles of Incorporation are fully compliant with all
requirements.
2. Double taxation
The profits derived by stockholders are taxed twice
by the government. First, when the corporation
realizes profits, and second, when the individual
stockholders declare as part of their personal
income the dividends they receive from the
corporation. This is not a disadvantage of sole
proprietorships and partnerships.
3. More extensive government restriction and
reporting requirements
Corporations are subject to stringent government
restrictions and are required to submit various
reports on a periodic basis. An example of
restriction is the prohibition of certain actions by
the corporation without approval of the SEC. The
submission of financial statements is an example of
annual reports required by the SEC. In complying
with this requirement, the corporation is exposing
itself to the scrutiny of its competitors. This is so
because annual reports are made available to the
public.
4. Employees lack personal identification
with and commitment to corporate goals
Many stockholders are detached from the daily
operations of the corporation. Those who work for
the corporation usually do not own the company’s
stocks. The relationship between the corporation
and employees are too impersonal. Employees do
not feel deep attachment to the corporation
resulting to less commitment to their work.
Employees of sole proprietorships and partnerships
most often know the owners personally. This
feeling of attachment pushed the employee to
make the company successful. Such concern is
rarely present in a corporate work atmosphere.
✓A cooperative is an organization composed of
individuals or businesses that have banded
together to reap the benefits of belonging to a
large organization.
✓Cooperatives are not organized for profit but to
make its members individually profitable or save
money.
Types of Cooperatives
1. Credit union.
2. Producers’ cooperative
3. Marketing cooperative
4. Consumers cooperative
5. Service cooperative
Manual Companies
✓A mutual company is a financial-service firm
(such as an insurance company or savings and loan
association) owned by its policy holders or
depositors.
Types:
1. Mutual saving banks
It is owned by depositors specializes in savings and
mortgage loans. The profits of the company are
credited to the account of the depositors.
2. Mutual insurance company
It is a cooperative corporation organized and
owned by its policyholders. Voting controls is in the
hands of those insured. Profits earned by the
company can be used to pay policy dividends to
policyholders, and to strengthen the insurer by
building its surplus.
Topic 5: Other Forms of Business
Organization
Minor forms of business organization consist of the
following:
1. Joint stock company
2. The joint venture
3. The business trust
The Joint Stock Company
✓The joint stock company is a form of business
enterprise in which the capital is divided into small
units permitting a number of investors to
contribute varying amounts to the total, profits
being divided between stockholders in proportion
to the number of shares they own.
✓It is largely similar in form to the corporation,
although it has certain features like fewer taxes,
greater ease of formation, mobility, freedom from
government regulation.
The Joint Venture
✓A joint venture is best regarded as a particular
partnership established for a specific undertaking.
✓This type of organization created for the purpose
of bringing together several partners to engage in a
business activity which is normally very specialized
and which exists for a limited, specific purpose.
✓It is mostly formed for the purpose of producing
a movie or a concert, engaging in oil or mining
exploration, constructing a major project such as a
dam or an airport, or perhaps the underwriting or
selling of securities.
The Business Trust
✓The business trust is a legal form of organization
in which a trustee is appointed to manage the
business and its operations through a trust
relationship.
✓Under the trust agreement, the owners of
property, securities, or other assets convey these
too a trustee in exchange for transferable trust
certificates. The certificates entitle the owners to
participate in the profits of the operation. The
liability is transferred to the trustees, however.