BnESR 1 for ABM 12

BUSINESS ETHICS AND SOCIAL

RESPONSIBILITY
1. THE NATURE AND FORMS OF BUSINESS

• Learning Objectives:
At the end of this lesson, the student is
expected to:
1) identify the forms of business organizations
and their characteristics; and
2) give examples of the forms of business
organizations.
1. THE NATURE AND FORMS OF BUSINESS

• WHAT IS A BUSINESS?
1. THE NATURE AND FORMS OF BUSINESS

• BUSINESS/enterprise/agency/firm
– Organization where g/s are exchanged for
money/profit.
– Formed to carry on commercial enterprise – to
provide g/s to customers – capitalist economies
– Founded on systems of law governing contract
and exchange, property rights, and incorporation.
– Can be an organization or entire market
1. THE NATURE AND FORMS OF BUSINESS

• BASIC FORMS OF BUSINESS ORGANIZATIONS

1. THE NATURE AND FORMS OF BUSINESS

A) SOLE PROPRIETORSHIP
– Owned by one person.
1. THE NATURE AND FORMS OF BUSINESS

• ADVANTAGES:
– Easiest and least expensive to organize
– In complete control , and within the parameters of
the law, may make decisions as they see fit.
– Profits flow directly to the owner.
– Easy to dissolve.
1. THE NATURE AND FORMS OF BUSINESS

• DISADVANTAGES:
– Unlimited liability – legally responsible for all
debts – assets are at risk
– Limited funds
– Not so attractive to work with
– Some employee benefits not deductible from
business income
1. THE NATURE AND FORMS OF BUSINESS

B) PARTNERSHIP
– owned by two or more persons.
1. THE NATURE AND FORMS OF BUSINESS

• ADVANTAGES:
– Easy to establish – but developing partnership
agreement requires more time
– More funds
– Profit – flow directly to partner
– Employee – attracted with incentive to become a
partner
– Partners with complementary skills – benefit the
business
1. THE NATURE AND FORMS OF BUSINESS

• DISADVANTAGES:
– Partners – jointly and individually liable for actions
of other partners
– Profit sharing
– Disagreements can exist
– Some employee benefits – not deductible from
business income
– Limited life
1. THE NATURE AND FORMS OF BUSINESS

• TYPES OF PARTNERSHIPS
– General –
• divides responsibilities for management and liability, shares of
profit or loss.
– Limited Partnership and Partnership with Limited Liability
–
• limited liability (extent of investment), limited input
• Not used for retail or service businesses
• More complex and too formal
– Joint Venture –
• Like general partnership – for limited period
• If the activity continues – recognized as an ongoing partnership
1. THE NATURE AND FORMS OF BUSINESS

C) CORPORATION
- separate legal personality from its owners.
- government-owned or privately owned.
- for profit or not-for-profit
- taxed, sued or enter into contracts
- owners: shareholders
1. THE NATURE AND FORMS OF BUSINESS

• ADVANTAGES
– Limited liability
– Shareholders – accountable for investments
– Raise funds – sale of stocks
– Deduction of cost and benefits
– Elect S Corporation status
1. THE NATURE AND FORMS OF BUSINESS

• DISADVANTAGES
– Requires more time and resources
– Monitored by the government
– Higher overall taxes
1. THE NATURE AND FORMS OF BUSINESS

• TYPES OF CORPORATIONS
– C Corp – separate tax-paying entity; lower tax than
personal income tax – double taxation
– S Corp – pass-through entities (income, losses,
deductions and credits pass through the company
– responsibility of shareholders); tax paid by
shareholders
1. THE NATURE AND FORMS OF BUSINESS

• COOPERATIVES
– Limited liability business
– For profit or not-for-profit
– Members not shareholders
– Share in decision-making
– Provide members g/s at reasonable rates
– Safeguards the economic interests of members
1. THE NATURE AND FORMS OF BUSINESS

• TYPES OF COOPERATIVES
– Marketing
– Credit
– Consumer
– Producer
– Multi-purpose
1. THE NATURE AND FORMS OF BUSINESS

• ADVANTAGES
– Inexpensive to register
– Owned and controlled by members
– Equal vote: one member, one vote
– Active membership
– Limited liability
– Proportionate profit distribution
1. THE NATURE AND FORMS OF BUSINESS

• DISADVANTAGES
– Longer decision-making process
– Active members’ participation
– Less incentive; conflict between members
– Focuses on service rather than incentives
– Limited distribution of profits
– One vote even with greater involvement and investment
– Necessary extensive record keeping
– Non-stop education program
1. THE NATURE AND FORMS OF BUSINESS

• BASIC CLASSIFICATIONS OF BUSINESS

1. SERVICE – provide intangible products. Ex:
financial, transport, utilities
2. MERCHANDISING – buys wholesale and sell at
retail price. Ex: Retailers and distributors
3. MANUFACTURING – transforms materials into
finished g/s. Ex: agriculture, mining,
manufacturing, real-estate
4. INFORMATION – selling of intellectual property
1. THE NATURE AND FORMS OF BUSINESS

• HYBRID
– More than one type of business
– Ex: Restaurant: combines ingredients
(manufacturing); sells a cold bottle of wine
(merchandising); fills customer orders (service)