BUSINESS ETHICS

▪ Forms of Business Organizations

▪ 1. Sole Proprietorship- It is a one-person business. The owner has full
control over the finances and operations and decides alone.
▪ Advantages:
▪ a. Tax preparation is faster. Simply file an individual income tax return
including losses and profits to your business. Your personal and business
income is considered the same and the tax implications for self-
employed individuals would apply.
▪ b. Sole proprietorship has lower start-up costs.
▪ c. Handling money for the business is easier.
▪ d. Sole proprietorships have the least government rules and regulations
that affect them.
▪ e. The sole proprietor can own the business for as long as he/she wants,
and when he/she wants to move out, he/she can cash in and sell the
business.
▪ f. Even in common practice, the sole proprietor can pass the business
down to his/her heir.
▪ Disadvantages:
▪ a. The sole proprietor is personally liable for all debts and
actions of the enterprise.
▪ b. There is lack of financial control because of looser
structure of sole proprietorship.
▪ c. There could be difficulty in raising capital.
▪ 2. Partnership- It is a business relationship between two
or more people. It refers to an arrangement where
individuals share a business venture's profits and
liabilities. The partners give feedback on how to use the
capital and other critical strategic decisions that may
provide different perspectives.
▪ Advantages:

▪ a. Partnership business lacks formality as compared with managing a limited

company or corporation.
▪ b. It is easy to start. The partnership may be created either verbally or in
writing.
▪ c. You share the burden. You have companion and support.

▪ d. Every partner would add his/her own expertise, skills, experience, and
connections to the business, thus giving it a greater chance of success.
▪ e. There is better decision-making. Two heads are better than one.

▪ f. There is privacy. The business deals may be kept confidential by the

partners.
▪ g. The partners own and control the business.

▪ h. The more partners there are, the more funds are available in the company,

▪ which can be used for possible expansion. Its borrowing capacity is also
likely to be higher.
▪ i. There is an easy access to profits in a business partnership. The partners
just have to divide the profits
▪ Disadvantages:
▪ a. The business does not have any independent legal status.
▪ b. The business has no separate legal personality, so the partners are
personally liable for the debts and losses incurred.
▪ c. The partnership business often seems to lack the sense of prestige
more closely associated with a corporation.
▪ d. A partnership will often find it more difficult to raise money than a
corporation.
▪ e. There is a potential of differences and conflicts.
▪ f. Decision-making can be slower because there is a need for
consultation among partners.
▪ g. The profit must be shared among the partners.
▪ h. It may require a lot of time and energy thus may affect life-work
balance.
▪ i. The profits earned by the partnership will be translated to income on
the individual partners. Thus, they are subject to income tax in the
financial year in which they are made.
▪ j. There are limits on business development like unlimited liability, lack
of
▪ funding opportunities, and a lack of commercial status, etc
▪ 3. Corporation. It is an entity created by law that is independent and distinct

▪ from its owners and relies on the corporate laws of the state in which it is
incorporated to continue its existence. Corporations have an advantage in
generating money for the company. It can raise funds by selling shares of
stocks. It files taxes separately from its owners. Advantages:
▪ a. The liability of the shareholders of a corporation is limited up to the
amount of their investments.
▪ b. A publicly held corporation may sell shares or issue bonds to raise
substantial amounts.
▪ c. It is easy for a shareholder to sell shares in a corporation.

▪ d. A corporation’s life has no limit, ownership can pass through many

generations.
▪ Disadvantages:

▪ a. The corporation pays taxes on its income depending on its type and the

▪ shareholders pay dividend taxes, so income gets taxed twice.

▪ b. The management team of a corporation can operate the business without

any real oversight from the owners