LEARNING ACTIVITY SHEET

Grade Level/ Grade 11 Organization and Management Date: Week 4

Subject:
Topic: Forms and Economic Roles of Business Duration: 2 hours
Organizations
MELC: Analyze the forms and economic roles of Score:
business organizations.
Specific Objectives: 1. Differentiate the forms of business organizations.
2. Explain the role of business concerning the economy.

I. Let’s Know

In the previous lesson, we discussed environmental forces that can potentially affect
business operations and dealing with these forces is a matter of profitability, sustainability,
and survival. The Manager must understand the various aspects of the environment,
respond to discrepancies in business operations, direct the company in decision making and
confronting problems, and offer solutions to those issues.
Another decision a business owner should carefully assess is the way his or her
business is formed and structured. In selecting the form of business organization, the owner
should consider the size and nature of the business, the level of control, the expected profit,
tax implications, and the vulnerability to lawsuits. These considerations will determine the
type of business organization that a company will be shaped into.

THE FIRM AND ITS ENVIRONMENT

FORMS OF BUSINESS ORGANIZATIONS

There are four forms of business organizations based on the ownership

structure. These are sole proprietorship, partnership, and corporation. A wise
manager should consider the characteristics of the business plan as each presents
unique advantages, opportunities, and challenges (Rafael M. Lopez Jr., 2016).

Single or Sole Proprietorship

This is the simplest form of business organization where capital is
owned and provided by one person called Proprietor, who manage the
business by himself or hire another person to do so.
The business does not pay income tax. The net income of the
business is reported in the owner’s income tax return. However, from the
accounting perspective, the business is considered an entity that is separate
from the owner. This is the reason why only business transactions with
financial bearings are recorded in the book of the business while the personal
affairs of the owner are not.

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 Advantages Disadvantages
 Easy to form and easy to stop  Absorbs losses by himself
the operation.  Owner mixed his personal
 Does not need a bigger capital and business assets.
to start  Unlimited personal liability
 Sole decision maker  The difficulty of raising
 Nobody to share in case of capital
profit.
 Tax Advantage

Partnership

Article 1767 of the New Civil Code of the Philippines defines

partnership as a contract. Whereby two or more persons bind themselves to
contribute money, property or industry to a mutual fund with the intent of
profit-sharing among themselves.
At least two or more persons might also create a partnership for
exercising their profession. Contributions to a mutual fund may include
money, actual or personal and tangible property and contribution to enterprise
perhaps may be physical or mental.
The partnership is based on agreement. Persons who can to enter
into an agreement and choose to form a partnership enterprise need to draw
a contract which can be oral or written. Said contract would govern the
formation, operation, division of profits and losses and dissolution of the
partnership. The written contract by the partners which require registration
with the Securities and Exchange Commission (SEC) is referred to as
“Articles of Co-Partnership”.
A partnership agreement needs to be writing, and the same must
reflect in the public instrument to be recorded in the Office of the Securities
and Exchange Commission when:
 The capital of the partnership is P3,000 or more in money or
property and;
 Immovable property or real rights are contributed to the
partnership.

Two (2) Kinds of Partnership

1. General Professional Partnership- is a kind partnership that is

formed by professionals in the exercise of their profession, such as
accountants, lawyers, doctors, engineers, etc. This kind of
partnership is exempted from payment of income tax provided no
part of their income is derived from engaging trade or business.
2. Co-Partnership or Non-General Professional Partnership- is
formed to engage in trade or business and is taxed like a
corporation, hence, subject to a 30% income tax rate based on its
taxable net income.

Types of Partnership as to Liability

1. A General partnership is when all the Partners has unlimited

liability to the business just like to a Single Proprietorship, so a
partner can be made liable for another partner’s debts.
2. A Limited partnership, on the other hand, is when there is at
least one General Partner who has the more significant share of

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 the business and Limited Partners whose liabilities depend only on
their share in

Characteristics of Partnership

1. Mutual Agency- every partner has the authority to act for the
partnership and become binding if such an act is within his
express or implied power.
2. Co-Ownership is when a partner invests a property, such property
is no longer owned by him but by the partnership. Partners are co-
owners; every one of them acquired equity over such investment
equivalent to their profit and loss sharing agreement.
3. Limited Life- partnership exists on the contract drawn by the
partners. It can be terminated the partners anytime, so desire to
cause the partnership to dissolve. Retirement, withdrawal, death,
bankruptcy, the incapacity of a partner and admission of new
partners dissolve the partnership.
4. Unlimited Liability- a partnership is said to have unlimited liability
because the partnership’s creditors can run after the partners’
assets (except limited partners) after all partnership assets have
been exhausted in payment of its obligation.

Classification of Partners as to Contribution

1. Capitalist partner- is a partner who contributes money or property

to the partnership.
2. Industrial partner- is a partner who contributes only his services
to the partnership. He shares in profit on what is just equitable but
not in losses.
3. Capitalist-industrial partner- is a partner who contributes not
only money and property but services as well.

Advantages Disadvantages
 Better control may be  A partner’s personal
attained thinking about the assets can be run after by
mixed knowledge of the the partnership if the
partners. partnership could not pay
 A more considerable all its obligations (except
amount of capital can be for a limited partner after
raised as compared to a all partnership assets are
sole proprietorship. exhausted).
 There is a great advantage  Misunderstanding and
of forming a partnership for disputes may arise among
the exercise of the partners.
profession because such  The limited source of
partnership is exempted capital as compared to a
from payment of income corporation
tax.  The possible divisiveness
 One partner’s interest in reaching a decision
cannot be transferred to a  The limited life of
new partner without the existence.
consent of other partners.

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Corporation

It is “an artificial being made by operations of law, having the right of

successions and the powers, attributes and properties expressly authorized
by law or incident to its existence”. (The Corporation Code of the Philippines,
Sec. 2)

The definition emphasizes the following attributes of a corporation:

1. A corporation is an artificial being. It means that it is an entity separate

and distinct from the individual owners.
2. Operations of law create it. Means that it cannot come into existence by a
mere agreement of parties as in the case of a partnership form of
business organization.
3. It enjoys the right of succession. It means that a corporation is not
affected by death, withdrawal, incapacity, insolvency of individual
Shareholders, or the sale shares of stocks by old to new shareholders
without dissolving the corporation.
4. There are powers, attributes and properties as authorized by law. It
means that as a juridical person created by operation of law, a corporation
can enjoy only the powers, attributes and properties expressly organized
by law and incident to its existence.

A corporation is the biggest and most complicated form of business

organization. It is organized by at least five, but not more than fifteen
natural persons called incorporators, and the corporate charter that is
being registered with the Securities and Exchange Commission is called
Articles of Incorporation, which is filed together with the by-laws.

By-laws refer to "rules and regulations" adopted by the corporation

administering its internal government. It should arise among the others;
the time, place and manner of calling and conducting a regular and
special meeting of directors or trustees and the shareholders and
members, the way of voting and the list of proxies, etc.

The Securities and Exchange Commission has adopted some guidelines

to safeguard the public interest and avoid conflict regarding the corporate
name as follows:
1. The proposed corporation name shall not be identical with or similar to
one already registered with SEC.
2. The name of the corporation must have at its suffix the word “INC.” or
“Incorporated” unless it includes the word “Corporation” as part of its
corporate name.

Its corporate capital is called Share Capital, which is divided into units
called shares, and each has a designated value called Par Value. There are
two (2) classes of share capital, Ordinary and Preference Shares. Owners
of the shares of stocks are called Shareholders. Their ownership is based on
evidence called “Share Certificate”. Shares of stock can be transferred
without dissolving the corporation, so it enjoys unlimited life.
Although the maximum number of years for a corporation to exist is 50
years, it can extend its life by amending the “Articles of Incorporation”. This is
the reason why there are corporations that have existed for more than 100
years.

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 Advantages
 A greater supply of capital
due to the fact there may
be as many shareholders
as there are authorized
shares to be issued.
 Shareholders are not liable
to corporate obligations in
excess of their contribution.
This is, however, a pay its obligation.
disadvantage at the part of
the creditors.
 Death of any of the
shareholders will now no
longer dissolve the
corporation due to the
transferability of shares.
 The created governing
body consists of “expert”
shareholders who direct the
company affairs. More
achievement may be
attained.
Disadvantages
 It is not always simple to put up
due to complex legal
requirements.
 Creditors may extend a limited
credit line to a corporation
because creditors cannot run
after the shareholders' personal
assets if a corporation cannot
 Since management of a
corporation is vested on the
Board of Directors who may
happen to be the majority
shareholders, abuse of powers
is possible.
 Subject to strict governmental
control.

Cooperatives

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 the risks and benefits of
the undertaking in accordance with universally accepted cooperative
principles. (Republic Act No. 9520, Art. 3)

A cooperative is created by fifteen (15) or more natural persons. They

are Filipino citizens, of legal age, with the same bond of interest and are
merely living or operating in the supposed location of operation, might also
additionally organize a primary cooperative under this code. Provided, that a
prospect of a primary cooperative must have completed a Pre-Membership
Education Seminar (PMES).

The net surplus of any cooperative shall not be construed as profit but
as an excess of payments made by the members for the loans borrowed or
the goods and services availed. It is free of tax if transactions are extended to
cooperative members only. Moreover, the patronage refund is given to
cooperative members who patronized their business activities.

Advantages Disadvantages
 Equality of each member  The decision must come from
 Tax-free the general assembly, which will
 Limited liability result in the division of the
house.

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TYPES OF ORGANIZATION ACCORDING TO ACTIVITIES

According to Rafael M. Lopez, 2016, there are five types of an

organization according to its activities as follows:

Service Concern

The business enterprise derived its earnings from rendered services

to customers in case of professional services, like that of Accountants,
Lawyers, Doctors, Dentists, etc., or to clients. And in services offered by
inexperienced person, like that of a hotel in which rental of the room is the
primary line in their enterprise, laundry shop, automobile repair services,
janitorial services, net café, etc.

Merchandising Concern

The business enterprise is involved in buying items or commodities or

any form of finished merchandise and sells them at a profit. It is probably at a
retail or wholesale basis. Grocery shops are an example of this nature of the
enterprise. It additionally consists of meals and beverage offered in
restaurants and associated establishments.

Manufacturing Concern

The business enterprise is involved in purchasing of supplies and raw

materials to be processed or manufactured, changing them into finished
merchandise on the market at a profit. Examples are, furniture shop,
producers of automobiles and domestic appliances, etc. bakeries and
restaurants are no exemptions.

Agriculture

The business enterprise is involved in the planting of vegetables. It

sells its merchandise at a profit either in raw or finished.

Hybrid

Hybrid are those involved in more than one type of activity, which is
manufacturing, merchandising and service. The trend of our business
establishments nowadays is more hybrid companies wherein you can hardly
identify as to what activities they are engaged in.

THE ROLE OF BUSINESS IN THE ECONOMY

No economy can survive without a flourishing business sector. It feels a

nation’s economy since business organizations take part in exchanges that keep up
a smooth progression of exchange relations among producers, service providers,
and households. These various business transactions include manufacturing,
distribution, delivery, and selling of products and providing different kinds of services
to the consumers. These transactions stimulate the movement of money and
resources in and out of a country resulting in overall economic growth. A dynamic
economy with a functioning business segment pulls in more ventures from different
nations, which empowers further economic growth.

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 A flourishing economy gives a decent domain for more start-up businesses.
They create new products and services through the advancement and broad,
innovative work, which in the end lead to facilitate upgrades in the lives of the
individuals. These improvements come in the form of better job opportunities and an
increased assortment of products and services available to consumers.

II. Let’s Perform & Practice

General Instruction: Answer the quick learning review questions given, and
write your answer in a short bond paper.

1. Enumerate the forms of business organizations based on ownership

structure. What are their respective advantages and disadvantages?
2. Compare the types of business organization according to activities. Which
among these businesses do you often encounter in real life?

III. Let’s Connect / Let’s Analyze

Imagine yourself as an entrepreneur who wishes to engage in a business in your

community. What type of business do you imagine yourself establishing? Do you see
yourself as a sole proprietor, a partner in a business venture, or a high-ranking officer in a
big corporation? What achievements or goals do you envision to achieve in your company?
How will you attain those goals? Write your answer in a short bond paper.
In connection to real-life applications, write in two or three sentences to complete the
following:

I realized that:
I resolved that:

IV. Let’s Answer

Formative Assessment: Multiple Choice

Instruction: Choose the letter of the correct answer.

1. What is the business organization that is generally the simplest way to set up, owned
by a single individual who is singly responsible for running the business?
A. Sole Proprietorship B. Partnership C. Corporation D. Cooperative

2. What is the business organization composed of two or more persons who combine
their resources in a business intending to make a profit?
A. Sole Proprietorship B. Partnership C. Corporation D. Cooperative

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3. What is the business organization that is organized by people with similar needs to
provide themselves with goods or services or to use available resources to improve
their income jointly?
A. Sole Proprietorship B. Partnership C. Corporation D. Cooperative

4. What is the business organization that is a legal entity separate from its owners, the
shareholders?
A. Sole Proprietorship B. Partnership C. Corporation D. Cooperative

5. What is the type of partnership in which all the Partners has unlimited liability to the
business just like to a Single Proprietorship, so a partner can be made liable for
another partner’s debts?
A. Limited Partnership B. General Partnership

6. What type of business organization is engaged in buying goods or commodities or

any finished products and sells them at a profit?
A. Service Concern C. Manufacturing Concern
B. Merchandising Concern D. Hybrid

7. What type of business organization is engaged in buying raw materials and supplies
to be processed or manufactured, converting them into finished products for sale at a
profit?
A. Service Concern C. Manufacturing Concern
B. Merchandising Concern D. Hybrid

8. What type of business organization derived its income from services rendered to
clients?
A. Service Concern C. Manufacturing Concern
B. Merchandising Concern D. Hybrid

9. Businesses stimulate the movement of money and resources in and out of a country
resulting in overall economic growth.
A. True B. False
10. Businesses create new products and services through the advancement and broad,
innovative work, which in the end lead to facilitate upgrades in the lives of the
individuals.
A. True B. False

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 V. Let’s Explore / Let’s Create

Instruction: Research a company and describe its business organization, ownership, and
the type of business it engages in. Look into the company’s history, its structure, and its
notable products and services. Write it on a short bond paper and submit it to me via Gmail.

You will be graded according to the rubric given below:

Criteria Poor (3 Points) Fair (7 Points) Good (10 Points)

Poor Fair Good

Shows limited and no Shows nearly Shows complete

Understanding understanding about the complete understanding of
topic, perhaps only re- understanding of the whole topic
copying the given task. the topic given and given and
slightly inconsistent. presented it
perfectly

Poor Fair Good

*Uses some important *Uses most of the *Uses only the

elements of the task. important elements important and
*Uses inappropriate strategy of the task. specific elements of
Planning and or application of strategy is *Use an appropriate the task.
Execution unclear. but incomplete *Uses an
*Uses some relevant data. strategy for appropriate and
*Limited use of applications presentation. complete strategy
and presentations. *Uses most of the for presentation.
relevant data. *Uses relevant
*Appropriate but information.
incomplete use of *Uses a clear and
applications and effective strategy of
presentations. application and
presentations.
Poor Fair Good

*Incomplete explanation and *There is a clear *There is a clear

not be clearly presented. explanation and and specific
Communication *The explanation cannot be appropriate use of explanation of the
understood and unrelated to strategy but said topic.
the task. inconsistent in the *All tasks explained
presentation. specifically and
*The topic understood.
discussed
completely but not
specific.

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References:

1. Cabrera, H., Altajeros, A., & Benjamin, R. (2016). “Organization and Management.”
Philippine Copyright ISBN 978-971-07-3860-1 Vibal Group Inc.
2. Zarate, C. (2016). “Organization and Management.” Philippines: C&E Publishing Inc.
3. Lopez, R. (2016). “Fundamentals of Accountancy, Business and Management 1.
Philippines: Lopez Publishing
4. Iñigo, C. (2005). “Management for Filipinos (Revised Edition).” Philippine Copyright
1986

Writer: Editor:

JHON ACE M. QUIBUYEN JOAN T. MARIE YU

TEACHER III TEACHER III
PABLO LORENZO NHS STA. ANA NHS

Evaluator:

JAY M. MAGNO
TEACHER III
DANIEL R. AGUINALDO NHS

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 Answer Key

Grade Level/ Grade 11 Organization and Management Date: Week 4

Subject:
Topic: Forms and Economic Roles of Business Duration: 2 hours
Organizations
MELC: Analyze the forms and economic roles of Score:
business organizations.

II. Let’s Perform & Practice

1. Sole Proprietorship, Partnership, Corporation, Cooperative

Sole Proprietorship

Advantages Disadvantages
 Easy to form and easy to  Absorbs losses by himself
stop the operation.  Owner mixed his personal
 Does not need a bigger and business assets.
capital to start  Unlimited personal
 Sole decision maker liability.
 Nobody to share in case of  The difficulty of raising
profit. capital
 Tax Advantage

Partnership

Advantages Disadvantages
 Better control may be  A partner’s personal
attained thinking, about the assets can be run after by
mixed knowledge of the the partnership if the
partners. partnership could not pay
 A larger amount of capital all its obligations (except
can be raised as compared for a limited partner after
to a sole proprietorship. all partnership assets are
 There is a great advantage exhausted).
of forming a partnership for  Misunderstanding and
the exercise of the disputes may arise among
profession because such partners.
partnership is exempted  The limited source of
from payment of income tax. capital as compared to a
 One partner’s interest corporation.
cannot be transferred to a  The possible divisiveness
new partner without the in reaching a decision
consent of other partners.  The limited life of
existence.

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 Corporation

Advantages Disadvantages
 Greater supply of capital due  It is not always simple to
to the fact there may be as put up due to complex
many shareholders as there legal requirements.
are authorized shares to be  A limited credit line may
issued. be extended by creditors
 Shareholders are not liable to a corporation because
to corporate obligations in creditors cannot run after
excess of their contribution. the shareholders’
This is however, a personal assets if a
disadvantage at the part of corporation cannot pay its
the creditors. obligation.
 Death of any of the  Since management of a
shareholders will now no corporation is vested on
longer dissolve the the Board of Directors
corporation due to the who may happen to be
transferability of shares. the majority shareholders,
 The created governing body abuse of powers is
consists of “expert” possible.
shareholders who direct the  Subject to strict
company affairs. More governmental control.
achievement may be
attained.

Cooperative

Advantages Disadvantages
 Equality of each member  The decision must come
 Tax-free from the general
 Limited liability assembly, which will
result in a division of the
house.

2. Service Concern business derived its income from services rendered to clients;
Merchandising Concern business is engaged in buying goods or commodities or any
form of finished products and sells them at a profit; Manufacturing Concern business
is engaged in buying of raw materials and supplies to be processed or manufactured,
converting them into finished products for sale at a profit; Agriculture business is
engaged in planting of crops and sells its products either in raw or finished form at a
profit while Hybrid business are those involved in more than one type of activity
which are manufacturing, merchandising and service.
The trend of our business establishments nowadays is more hybrid companies
wherein you can hardly identify as to what activities they are engaged in.

III. Let’s Connect/ Let’s Analyze

The following should be present in the answer:

 Type of business to engage in the community.
 The preferred form of business ownership.

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  The goals of the company.
 Ways on how to achieve those goals

IV. Let’s Answer

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

V. Let’s Explore / Let’s Create

The following should be present in the answer:

 Description of the business organization, ownership, and the type of

business it engages in.
 History of the company.
 Structure of the company.
 Products/services offered by the company.

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