BAM 191: Fundamentals of Business Administration

Module #4 Student Activity Sheet

Name: ___________________________________________________________ Class number: _______

Section: ___________________ Schedule: _____________________________ Date: ______________

Lesson Title: Identifying the Forms of Business Organizations Materials:

Lesson Targets: Student Activity Sheets

At the end of the module, I should be able to: References:

1. Describe sole proprietorship, partnership, corporation, and
cooperative forms of business organizations
2. Explain the advantages and disadvantages of sole
proprietorship, partnership, corporation, and cooperative
Which Type of Organization Is Best For Your
Business?
https://www.investopedia.com/articles/personal-fi
nance/120915/which-type-organization-best-your
-business.asp

3. Determine an appropriate business form for a particular Major Forms of Business Organizations
business proposal https://www.indeed.com/career-advice/career-de
velopment/forms-of-businesses

A. LESSON PREVIEW/REVIEW

Introduction
It’s another day of fun and learning. Let’s begin activating your prior knowledge in this lesson by
answering the pre-test below. Do not worry if you do not know the answer to each question. This just
means that you have little or no prior knowledge about the lesson.

Directions: Encircle the letter of your answer.

1. An entrepreneur is defined as:

a. someone who works for another person in a sales capacity.
b. someone who initiates, undertakes the financial risks of, and manages a new business
enterprise.
c. someone who provides financial support for an existing business enterprise.
d. someone who purchases stock in a volatile stock market.
2. In terms of percentages, which form of business enterprise is most prevalent in the Philippines?
a. The corporation.
b. The limited liability partnership.
c. The sole proprietorship.
d. The partnership.
3. The advantages of a sole proprietorship DO NOT include which of the following?
a. The ability to raise capital is limited.
b. They are less costly to start.
c. In terms of management, they are quite flexible.
d. Continues its operation in almost each and every area of business activity and caters to the
needs of the society.

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 BAM 191: Fundamentals of Business Administration
Module #4 Student Activity Sheet

Name: ___________________________________________________________ Class number: _______

Section: ___________________ Schedule: _____________________________ Date: ______________

4. Which of the following IS NOT an important legal factor to consider when forming a business
organization?
a. The liability of owners.
b. The accessibility of transportation.
c. Tax liabilities.
d. Ease of creation.

B. MAIN LESSON
Content Notes

LO 1. Describe sole proprietorship, partnership, corporation, and cooperative forms of business

organizations

There are several forms of business organization, each with its own characteristics, advantages, and
disadvantages. The choice of the business structure depends on factors such as the size of the
business, the number of owners, liability considerations, tax implications, and the level of control
desired. Here are some common forms of business organization:

1. Sole Proprietorship
● A sole proprietorship is the simplest form of business where a single individual owns and
operates the business.
● The owner has full control and assumes all responsibilities and liabilities.
● It's easy to set up and has minimal regulatory requirements.
● However, the owner is personally liable for business debts and obligations.

2. Partnership
● A partnership involves two or more individuals (partners) who jointly own and manage the
business.
● Partners share profits, losses, and decision-making based on terms outlined in a partnership
agreement.
● General partners have unlimited liability, while limited partners have limited liability but reduced
control.
● Partnerships can be general partnerships and limited partnerships. In a general partnership, the
partners manage the company and assume responsibility for the partnership's debts and other
obligations while the limited partnership has both general and limited partners. The general
partners own and operate the business and assume liability for the partnership, while the limited
partners serve as investors only.

3. Corporation
● A corporation is a separate legal entity from its owners (shareholders).
● Shareholders have limited liability, and their personal assets are generally protected from
business debts.
● Corporations issue shares of stock to raise capital and are subject to more complex regulatory
and reporting requirements.

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 BAM 191: Fundamentals of Business Administration
Module #4 Student Activity Sheet

Name: ___________________________________________________________ Class number: _______

Section: ___________________ Schedule: _____________________________ Date: ______________

● Corporations have a clear structure with shareholders, a board of directors, and officers.
● There are two types of corporations: Stock and Non-stock corporations, a stock corporation is a
corporation with capital stock divided into shares and authorized to distribute to the holders of
such shares dividends or allotments of the surplus profits on the basis of the shares held, while
the non-stock corporation is a corporation organized principally for public purposes such as
foundations, charitable, educational, cultural, or similar purposes and does not issue shares of
stock to its members.

4. Cooperative
● A cooperative is owned and operated by its members, who might be customers, employees, or
suppliers.
● Members share in the profits and have a say in the decision-making process.
● Cooperatives are often used in industries such as agriculture, retail, and credit unions.

5. Limited Liability Company (LLC)

● An LLC combines features of a corporation and a partnership.
● Owners (members) have limited liability for business debts, like in a corporation, but enjoy the
flexibility of a partnership in terms of management and taxation.
● LLCs offer pass-through taxation, where profits and losses are reported on the owners'
individual tax returns.

LO 2. Explain the advantages and disadvantages of sole proprietorship, partnership,

corporation, and cooperative

Forms of Business Advantages Disadvantages

Organization

Sole Proprietorship ● Ease of formation ● Limited resources

● Full control ● Unlimited liability
● Tax benefits ● Limited expertise
● Direct incentives ● Limited growth potential
● Low start-up costs

Partnership ● Capital ● Disagreements

● Flexibility ● Agreements
● Shared responsibility ● Unlimited liability
● Decision making ● Profit sharing
● Limited life

Corporation ● Limited liability ● Double taxation

● Source of capital ● Excessive tax filings

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 BAM 191: Fundamentals of Business Administration
Module #4 Student Activity Sheet

Name: ___________________________________________________________ Class number: _______

Section: ___________________ Schedule: _____________________________ Date: ______________

● Ownership transfers ● Independent management

● Perpetual life or existence ● Regulatory requirements
● Pass through ● Loss of control

Cooperative ● Easy formation ● Lack of secrecy

● Limited liability
● Perpetual existence
● Social service
● Tax advantage
● Shared decision making
● Pooling resources
● Lack of interest
● Corruption
● Complex decision making
● Limited funding and
expertise

LLC ● Limited Liability ● Associated costs

● Pass-through taxation ● Seperate records
● Flexible management ● Taxes

LO 3. Determine an appropriate business form for a particular business proposal

To determine the appropriate business form for a specific business proposal, you need to
consider various factors related to the nature of the business, ownership structure, liability
considerations, tax implications, funding requirements, and long-term goals. Here's a step-by-step
process to help you make an informed decision:

Step 1: Understand the Business Proposal

- understand the nature of the business, its products or services, target market, and operational
requirements. Identify the unique characteristics that will impact your choice of business form.

Step 2: Ownership and Decision-Making

- Determine the number of owners and their roles in the business. Consider whether you want full
control or if you're open to shared decision-making.

Step 3: Liability Protection

- the level of liability protection you need. Do you want personal assets to be shielded from
business debts and legal claims?

Step 4: Tax Implications

- Examine the tax implications of each business form. Consider how you want to be taxed and
whether pass-through taxation (where profits are only taxed at the individual level) is important
to you.

Step 5: Funding and Growth

- Assess the funding requirements of your business. Do you need to raise capital from investors
or lenders? Consider which business forms allow you to access funding sources effectively.

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 BAM 191: Fundamentals of Business Administration
Module #4 Student Activity Sheet

Name: ___________________________________________________________ Class number: _______

Section: ___________________ Schedule: _____________________________ Date: ______________

Step 6: Long-Term Goals

- Consider your long-term goals for the business. Are you planning for rapid growth, expansion,
or a long-term venture?

Step 7: Business Form Options

- choose one business form

Step 8: Consult Legal and Financial Professionals

- Discuss your business proposal and goals with legal and financial professionals.

Skill Building Activities

Group activity 1. Stop and Go. Stop and Go games are a fantastic way to test your listening skills.
The game is simple - have your students do a task or action, and when the 'Go' sign switches to 'Stop',
they must freeze. It can be used for so many activities. Keep your students alert and involved with the
ever-popular Stop and Go game!

The students will be grouped into 3-5 groups, and every representative per group will fall in line. The
teacher will set a crossing line where the student should answer the question about the forms of
organization.

The group with the most number of correct answers will be the winner. Scores will be recorded as part
of Class participation or group activity.

Activity no. 1
Part 1. True or False. Write T of the statement is true and F is the statement is false.

____1. Partnerships are the most common forms of business organizations.

____2. The liability of all owners in a partnership is limited to his/her investment in the business.
____3. A small business owned by one person can only be set up as a sole proprietorship.
____4. A partnership must have a written agreement.

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 BAM 191: Fundamentals of Business Administration
Module #4 Student Activity Sheet

Name: ___________________________________________________________ Class number: _______

Section: ___________________ Schedule: _____________________________ Date: ______________

____5. A limited partner cannot legally have any management responsibility.

Part 2. Venn Diagram.

1. Compare and contrast the sole proprietorship and partnership using the Venn diagram.

2. Compare and contrast corporations and cooperatives using the Venn diagram.

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 BAM 191: Fundamentals of Business Administration
Module #4 Student Activity Sheet

Name: ___________________________________________________________ Class number: _______

Section: ___________________ Schedule: _____________________________ Date: ______________

Check for Understanding

Instruction: You are almost there! Read the case and answer the following questions.

Case Analysis:
Dulip’s business had been operating successfully for two years when he decided to expand. He
wanted his business to grow so that he could eventually bring his two sons into it. ‘I need to start
using the timber I cut to make furniture and other products that will allow me to add value to the
natural products that I produce,’ he explained to his family. Dulip realized that he would need
much more capital to build a furniture making factory. Although his business was profitable, it
was not making enough surplus to cover the extra costs involved. ‘Why don’t you ask one of your
friends to invest in your business? ’ asked Maria his wife. This would mean that you wouldn’t
have to borrow so much from the bank. Dulip thought about this and replied, ‘I could do this and
also ask them to help me manage the business. I am not sure that I could carry out all of the
management responsibilities. I may consider making my business a legally recognized
business—called a company—because this would be easier toleave to our sons and offer some
protection for our savings.’

1. Would you advise Dulip to convert his business into a partnership or corporation? Explain
possible pros and cons before giving your recommendation.
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________

C. LESSON WRAP-UP

FAQs

1. What is the difference between a partnership and a corporation?

A partnership involves shared ownership and often shared decision-making among partners,
with varying levels of liability. A corporation is a separate legal entity with limited liability for
shareholders and a more structured management hierarchy.

2. What are the tax implications of an LLC?

LLCs offer pass-through taxation, where profits and losses are reported on owners' individual
tax returns, avoiding double taxation.

3. Can a corporation be a sole owner of another corporation?

Yes, a corporation can own another corporation. The owning corporation is referred to as the
parent company, while the owned corporation is the subsidiary.

4. Which form of organization is best for a small business with multiple owners?

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 BAM 191: Fundamentals of Business Administration
Module #4 Student Activity Sheet

Name: ___________________________________________________________ Class number: _______

Section: ___________________ Schedule: _____________________________ Date: ______________

An LLC or partnership may be suitable for small businesses with multiple owners. The choice
depends on liability protection, tax preferences, and management structure.

Thinking about Learning

A. Work Tracker

You are done with this session! Let’s track your progress. Shade the session number you just
completed.

B. Think about your Learning

Did you have any challenges learning the concepts in this module? If none, which parts of the module
helped you learn the concepts?
_________________________________________________________________________________
_________________________________________________________________________________

Some question/s I want to ask my teacher about this module

is/are:_____________________________________________________________________________
__________________________________________________________________________________

KEY TO CORRECTIONS

Answer to Skill Building Activities

Pre-test
1. B 2.C 3.A 4.B

Activity no. 1

Part 1
1. F 2.F 3.F 4.F 5.T
Part 2
1. Answer based on disadvantages and advantages.

CASE STUDY
Possible Answers:
Answers may vary. Dulip can convert his business into a partnership, so he can use the advantages of
the partnership form of organization to address his problems.

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