Forms of Business

Organizations
LESSON 4
FORMS OF BUSINESS ORGANIZATION

“Suppose you want to open your

own sari-sari store that will need
PHP10,000 to start and you used
your PHP10,000 savings to start
the said business. You are the
sole owner of the said sari-sari
store. This type of business is
called sole/single proprietorship.”
FORMS OF BUSINESS ORGANIZATION

1. Sole/Single Proprietorship
A form of business is owned by
one person; the simplest, and the
most common form of business
organization
FORMS OF BUSINESS ORGANIZATION

ADVANTAGE OF SOLE
PROPRIETORSHIP

• The owner keeps all the profits.

• The owner makes all the
decisions.
• It is easy to form and operate.
FORMS OF BUSINESS ORGANIZATION

DISADVANTAGE OF SOLE
PROPRIETORSHIP

• The life of the business is limited to

the life of the owner. Once the owner
dies, the business will cease to operate
under the name of the proprietor.
• The amount of capital is limited only
by the wealth of the proprietor.
FORMS OF BUSINESS ORGANIZATION

“What if the needed amount to start

your dream sari-sari store is
PHP50,000 and you only have
PHP25,000 cash savings. You ask
Juan, your friend if he is willing to
invest his PHP25,000 and become
part owner of the sari-sari store.
Assuming he agrees, what form of
business organization was created?”
FORMS OF BUSINESS ORGANIZATION

2. PARTNERSHIP
• A form of business owned by two or
more persons. The details of the
arrangement between the partners
are outlined in a written document
called articles of partnership.
• Profits are divided among partners
based on their agreed sharing.
• The owner is called a partner.
FORMS OF BUSINESS ORGANIZATION

ADVANTAGE OF
PARTNERSHIP

• Higher capital because two or

more persons will contribute to
the common fund.
• It is easy to operate like a
sole/single proprietorship
FORMS OF BUSINESS ORGANIZATION

DISADVANTAGE OF PARTNERSHIP

• The profits are divided among the

partners.
• A partner can be held liable for the acts
of the other partners.
• In a lawsuit, the personal properties of
the partners can be held beyond their
contributions and may be used to answer
for any liability of the partnership.
FORMS OF BUSINESS ORGANIZATION

“Assuming your dream is to open a

grocery store and not just a sari-sari store
but you will need PHP1,000,000 to start
the said business. You have only
PHP25,000, your friend Juan has
PHP25,000, and your mother is willing to
invest her PHP50,000, but still these are
not enough to start your dream grocery
store. Where will you get the money to
raise the PHP1 million? You may consider
setting up a corporation?”
FORMS OF BUSINESS ORGANIZATION
3. CORPORATION
• A corporation is a business organized as a
separate legal entity (artificial person)
under the corporation law with ownership
divided into transferable shares of stocks
• Emphasize that it is the law (Corporation
Code of the Philippines) that creates a
corporation.
• The corporation begins its existence from
the date the Articles of Incorporation is
approved by the Securities and Exchange
Commission (SEC).
FORMS OF BUSINESS ORGANIZATION
• The SEC (Securities and Exchange
Commission) is the government agency
primarily tasked to regulate private
corporations in the Philippines.
• The owners are called stockholders or
shareholders.
• The word
‘Corporation/Incorporation/Corp./Inc.’
appears in the name of the entity.
• The voting rights of a shareholder is
generally based on the percentage of
ownership.
FORMS OF BUSINESS ORGANIZATION

• The management of the business is

delegated by the shareholders to the
Board of Directors
• The ownership is divided into
shares and the value of one share
may be denominated at a smaller
amount, for example at PHP10 per
share.
• The proof of ownership is
evidenced by a stock certificate.
STOCK CERTIFICATE
 STOCK CERTIFICATE

A stock certificate is the physical piece

of paper representing ownership in a
company. Stock certificates will include
information such as the number of shares
owned, the date, an identification number,
usually a corporate seal and signatures.
They are a bit bigger than a normal piece
of paper, and most of them have intricate
designs to discourage fraudulent
replication
 I
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ARTICLE OF INCORPORATION
Articles of incorporation is a set
of formal documents filed with a
government body to legally document
the creation of a corporation. 
Articles of incorporation must
contain pertinent information such as
the firm's name, street address, agent
for service of process and the amount
and type of stock to be issued.
FORMS OF BUSINESS ORGANIZATION

 ADVANTAGE OF CORPORATION

• Can easily raise additional funds by

selling shares of stocks to the public.
• Shareholders are not personally
liable for the debts of the
corporation. The extent of their
liability is limited to their equity
(ownership) in the corporation.
FORMS OF BUSINESS ORGANIZATION

 DISADVANTAGE OF CORPORATION

• It is relatively complicated to
set up.
• Subject to several legal
restrictions as listed in the
Corporation Code of the
Philippines
“Assuming all the mothers in your barangay
decided to open a sari-sari store where all the
members can buy in cash or in credit. Some
mothers were also taught how to sew dresses
and bags as part of the project of the group.
These bags are then sold to a certain
company. Aside from that, the organization
provides seminars to the members on various
topics involving mothers and their roles. At the
end of the year, the profits are distributed
among the members based on their capital
contribution. The amount of their purchases in
the sari-sari store during the year is also
computed and they receive something out of
the profit/surplus based on their purchases”
FORMS OF BUSINESS ORGANIZATION

4. COOPERATIVES
• A cooperative is a duly registered
association of persons with a common
bond of interest, voluntarily joining
together to achieve their social,
economic and cultural needs.
• The owners are called members who
contribute equitably to the capital of
the cooperative.
FORMS OF BUSINESS ORGANIZATION

• The members are expected to

patronize their products and
services.
• The word ‘cooperative’ appears in
the name of the entity.
• This form of business organization
is regulated by the Cooperative
Development Authority (CDA).
FORMS OF BUSINESS ORGANIZATION

• The members are expected to

patronize their products and
services.
• The word ‘cooperative’ appears in
the name of the entity.
• This form of business organization
is regulated by the Cooperative
Development Authority (CDA).
 COOPERATIVE DEVELOPMENT AUTHORITY
REPUBLIC ACT NO. 6939
An act creating the cooperative
development authority to promote
the viability and growth of cooperative
as instrument of equity, social justice
and economic development defining its
powers, functions and responsibilities,
rationalizing government policies and
agencies consolidating the same with
the authorities, appropriating funds
therefor, and for other purposes.
FORMS OF BUSINESS ORGANIZATION

ADVANTAGE OF COOPERATIVE

• Enjoys certain tax exemption

privilege
• Promotes the concept of sharing
resources
FORMS OF BUSINESS ORGANIZATION

 DISADVANTAGE OF COOPERATIVE

• Limited distribution of surplus

• Requires continuous education
programs for members.
• The members have active and
direct participation in the business
of the cooperative.
 GROUP ACTIVITY NO. 2
(30 POINTS)
List down at least three businesses in
the country according to the form of
business you pick. For every business,
identify the business activities,
products or services offered. If
possible identify the owners of every
businesses listed. From this you will
choose a reporter as a representative
who will present your output.
-END-