BESR  the combined ethical standards of every
3Q L1 employee set the stage for the
“NATURE AND FORMS OF
BUSINESS ORGANIZATIONS”
Business Ethics
 is defined as the practice of what is morally
and ethically right in
 is essentially doing what is right in any
business transaction.
 all members of the organization, from top
management down the line, should practice
ethical standards that will morally uphold the
organization and sustain its credibility and
integrity at all times.
3 Levels of Business Ethics
To further understand the meaning of business
ethics
Johnson and Scholes
 They define its three levels: macro,
corporate, and individual levels
Macro Level in Ethics
 is defined as the area that represents
business operations bound by the virtues
and norms of the different political and
social systems of every society.
 it clearly defines the crucial role of
business and reinforces the role of the
government in the delivery of benefits to
its people in a morally upright and ethical
manner.
 each society has a code of conduct which
specifies how a business activity is carried
out, guided by national and international
ethical standards.
Corporate Level in Ethics
 represents how each company interprets
the rules and standards of Forms of
Business Organizations
Disadvantages:
Individual Level in Ethics
 is the employee's own moral principles
which guide his/her life.
organization's stand on moral issues.
 when an employee enters the
organization, he/she has to reconcile his/
her own personal convictions on ethics
with the organization's moral and ethical
standards.
3 FORMS OF BUSINESS
ORGANIZATIONS
Sole Proprietorship
 is managed by just one person who
handles all the activities on a day. to-day
basis.
 Small businesses start with sole
proprietorship as a type of business
ownership.
 Sole proprietors, being the sole owners,
also own all the assets including the
profits of the company. In the same way,
they are also responsible for the liabilities
of the company.
 Assets have economic value. Examples
are equipment, cash, office supplies, raw
materials, among others.
 Liabilities are the obligations of the
owners to third parties who have provided
supplies, additional capital, and other
resources.
 Sole proprietors are also morally
responsible for the conduct of all business
activities.
Advantages:
o it is easy to organize and inexpensive
to put up.
o Sole proprietors have the freedom to
make their own decisions and have
complete control of the business.
o Most transactions are done promptly
since decisions are within their
jurisdiction.
o No one can prevent the proprietors if
they want to close the business.
o unlimited liability of the business
which may extend to the personal
assets of the proprietors.
o The liabilities can affect the credit
standing of the sole proprietors,
 resulting in difficulties in obtaining
additional capital.
o A small business may mean small
profit. Employees with excellent
qualifications are not attracted to
small firms and they usually apply in
big companies.
Partnership
 form of business organization where two
or more members share in the business.
 The partners mutually agree on how
profits will be shared and how business
will be conducted.
 Partners also agree on how disputes will
be resolved legally and how additional
partners will be admitted.
 The amount each partner contributes is
also discussed and how much time will be
devoted to the business.
Advantages:
o it is relatively easy to put up and raise
funds because of the pooling of
resources of the partners.
o It is also attractive to potential
partners because of the profits shared
and the incentive of becoming a
partner.
Disadvantage:
o partners are jointly liable for all the
debts and obligations of the partners.
o Any decision made by a partner will
be considered a joint decision of the
other partners In many instances, this
may cause rifts or disagreements
among partners especially if the
decision negatively affects the
partnership.
o Partnerships also have a limited life.
The death or withdrawal of a partner
may dissolve a partnership.
Corporation
 has a distinct personality separate from its
owners.
 it enjoys certain rights and privileges just
like an ordinary individual. It can enter
into contracts, loan and borrow money,
sue and be sued, hire employees, and pay
taxes.
 A corporation has a minimum of five
members called shareholders. The
shareholders elect a board of directors
who oversee the major policies and
decisions of the corporation.
 It has a life of its own and does not
dissolve upon the death or withdrawal of a
shareholder.
Advantages:
o its shareholders have limited liability.
o they can only be held accountable for
their investment in the form of stock
in the corporation.
o It can deduct the benefits it provides
to its employees and consider them as
expenses.
Disadvantages:
o process of establishing a corporation
or incorporation is more tedious than
forming a sole proprietorship and a
partnership.
o A corporation is closely monitored by
the government and other agencies
like the Securities and Exchange
Commission and therefore requires
more paperwork to comply with
permits and other legal requirements.
o Being a separate entity is also a
disadvantage because corporations
are subject to tax, separate from the
individual taxes of its shareholders.
Corporate taxes are not deductible
from the individual taxes of its
shareholders.
The Role of Business in Society
 The main purpose of a business is to
create wealth.
 It has to innovate and deliver products and
services, and use resources in the most
efficient manner.
 A business always strives to become
profitable and gain financial reward.
 It is motivated by the monetary return
from its operations.
 The purpose of business is to meet the
needs of the people. However, many
businessmen fail to realize that meeting
the needs of the people does not only
relate to their customers.
 It also means meeting the needs of those
who do the work, such as the employees.
 Meeting needs also implies the proper
management of people in the supply
chain-suppliers, distributors, warehouse
personnel, logistics team, and others.
 Businessmen are responsible for meeting
the needs of society in the form of taxes,
which are used for infrastructures, for
building hospitals, schools, and roads,
among other facilities.
 They also have a responsibility to the
investors, or stockholders who are entitled
to get a share of the profit.

 Business owners are also responsible to

maintain a conducive and ideal place of
work where employees spend most of
their waking hours. They should ensure a
safe and peaceful environment where their
businesses operate.