TYPES OF BUSINESS ORGANIZATION

ACCORDING TO OWNERSHIP
CHAPTER 4
MEANING OF BUSINESS
IS AN ORGANIZATION THAT UTILIZES RESOURCES AND
INFORMATION, SUPPLYING THE WANTS AND NEEDS OF CUSTOMERS
THROUGH GOODS OR SERVICES IN EXCHANGE FOR MONEY OR
GIVING BACK A DIFFERENT KIND OF GOODS OR SERVICES.
TYPES OF BUSINESS ACCORDING TO OWNERSHIP

1. SOLE PROPRIETORSHIP - is a business that is owned by only one individual for

the practice of trade or profession. It is the simplest and least costly form of
ownership among other forms of business.

This forms of business is common to small business entity like grocery store, repair
shop, and beauty parlor
ADVANTAGES AND DISADVANTAGES OF SOLE PROPRIETORSHIP
Advantages Disadvantages

Full control of operations Unlimited liability - the owner is

legally obliged to pay all business
debts

Easy to start, easy to dissolve Limited life - the business ceases to

operate if the owner dies, becomes
physically or mentally incapacitated,
or is imprisoned

All profits go directly to the owner Difficulty in raising capital

Less regulations

The government taxes the owner and

not the business
STEPS USED IN REGISTERING SOLE PROPRIETORSHIP

● Register the preferred business name with the Department of Trade and Industry (DTI).
The approved registration should be renewed every five years.
● Secure a barangay permit in the barangay where the business will be located. This permit
should be renewed every year.
● Apply for a business permit in the LGU where the business is situated. This permit is
renewable every year.
● Register the business with the Bureau of Internal Revenue (BIR). BIR requires a sole
proprietorship business to pay its registration fee every year.
● Register the business with Social Security System (SSS), Philippine Health Insurance
Corporation (PhilHealth) and Home Development Mutual Fund (HDMF) or Pag-ibig.
2. PARTNERSHIP
IS A BUSINESS THAT IS OWNED BY TWO OR MORE INDIVIDUALS POOLING THEIR RESOURCES
TOGETHER AS COMMON FUND. THE PARTNERS NORMALLY INVOLVED IN THE MANAGEMENT AND
OPERATION OF THE BUSINESS. THE PROFIT OF THE BUSINESS IS DIVIDED AMONG THE PARTNERS AS
PER PARTNER’S AGREEMENT.

THE WRITTEN AGREEMENT BETWEEN OR AMONG PARTNERS IS CALLED ARTICLES OF CO-

PARTNERSHIP.

THE ARTICLES OF CO-PARTNERSHIP IS CONTAIN THE FOLLOWING

● Names of Partners
● Place of business
● Partnership effectivity date
● Nature of Business
● Investments of each partners
● Corresponding capital credit
● Rights, power, and duties of the partners
● Profit and Loss sharing
● Compensation for services offered by partners
● Dissolution procedures
 1. GENERAL PARTNERSHIP -
TYPES OF PARTNERSHIP
all partners have unrestricted
liability for the debts and
obligation of partnership,
practically resembling a sole
proprietorship
2. LIMITED PARTNERSHIP -

one or more general partners have

unlimited liability so creditors
cannot target their personal assets.
The limited partners have liability
only up to the amount of their
capital contributions.
Advantages and Disadvantages of Partnership

Advantages Disadvantages

Increase potentials from two or more Unlimited Liability of one or all owners
different strength

Easy to form with proper agreement on Limited Life - the business ceases to
its formation operate if one of the partners dies,
becomes physically or mentally
incapacitated, or is imprisoned

Less regulations compared to High possibility of disputes and

corporations conflicts between partners
 STEPS USED IN REGISTERING PARTNERSHIP

❏ Verify business name with the Securities and Exchange

Commission (SEC)
❏ File articles of incorporation with SEC
❏ Register business name with DTI
❏ Secure a barangay permit in the place where business is located
(renewable every year)
❏ Appy business permit in the municipality where the business is
located (renewable every year)
❏ Register the business with the BIR
❏ Register the business with SSS, PhilHealth and HDMF
 APPLE - (Founded in 1976 by Steve Jobs and Steve Wozniak in Cupertino, California - In
the early 1970s Steve Jobs and Steve Wozniak who were college dropouts met when Jobs was
attending lectures at Hewlett-Packard. Incidentally, Wozniak was an employee in Hewlett-
Packard. The two made experiments with hardware and software in Homebrew Computer
Club . In order to fund their new venture, they sold off some of their belongings like a
Volkswagen minibus and programmable HP calculator. With the combination of
Wozniak’s computer and software expertise and Job’s marketing brillance they assembled
the first Apple computer in Job’s family garage in 1976 in Los altos, California.
CORPORATION
It has a legal personality that is separate and distinct from the owners. The owners is called
shareholder or stockholders. The owners have limited liability and limited involvement from
the operations.

A corporation is a business required to have five to fifteen incorporators. Incorporators refers to

those originally formed the corporation.

According to Section 2 of the Corporation Code of the Philippines, define Corporation as an

artificial created by operation of law, having the right of succession and the powers, attributes
and properties expressly authorized by law or incident to its existence.
The board of directors, who are elected by the owners themselves, will take control of the
corporation’s activities. A profit corporation issues to its owners or shareholders shares of stock
which are evidenced by a stock certificates. A non-profit corporation on the other hand, does
not issue shares of stocks. Its owner’s are called members.

The existence of the corporation is evidenced by the articles of incorporation and by-laws that
are duly approved by SEC. The articles of incorporation detail the powers and limitation
bestowed by the government. It includes name of corporation; purpose of corporation,
location of principal office of business; term of existence of the corporation; name, nationalities
and addressed of incorporators; names of board of directors; authorized share capital; types of
shares to be issued, and par value per share; subscription amount, subscriber’s names, and
their corresponding subscriptions and the total paid of subscriptions of each subscriber.
ADVANTAGES AND DISADVANTAGES OF CORPORATION

Advantages Disadvantages

More sources of funds More regulations to be followed

Easy to transfer ownership Profit is taxed at the corporate tax rate

Liability of owners is limited Costly to incorporate

Unlimited commercial life Stockholders are taxed again when profits are
distributed to them
STEPS USED IN REGISTERING CORPORATION
➢ Verify business name with SEC
➢ Draft and execute the articles of incorporation and by-laws by incorporators
➢ Deposit the cash collected from subscription
➢ File articles of incorporation and by-laws with SEC
➢ Register the business name with DTI
➢ Secure a barangay permit in the place where business is located (renewable)
➢ Apply business permit in the LGU where the business is located (renewable)
➢ Register the business with the BIR (requires an annual registration fee)
➢ Register the business with the SSS, PHILHEALTH AND HDMF.
SOME BUSINESS TYPE UNDER CORPORATION

1. UNITED LABORATORIES - began as a

small drugstore after the war in
Philippines back in 1945. It gradually
became the top pharmaceutical company
in the country, providing medicine of
finest quality yet affordable price to every
filipino. The company’s product has also
entered adjacent Asian countries like
Indonesia, Thailand, Malaysia, Singapore,
Hong Kong, Vietnam and Myanmar.
SOME BUSINESS TYPE UNDER CORPORATION

 JOLLIBEE FOODS CORPORATION - is

the popular filipino owned fast-food chain
in the Philippines. Tony Tan Caktiong
and his family started the first Jollibee
join in cubao in 1975. In 2007, the
company opened its 600th Philippine
store in Aparri, Cagayan and also a new
branch in Las Vegas, Nevada in Usa. In
2009, Jollibee celebrated its 31st year as
fast-food chain most loved by Filipinos.
SOME BUSINESS TYPE UNDER CORPORATION

 SM GROUP OF COMPANIES-
Considered as the Philippines biggest retail
company, was initiated by Filipino-
Chinese business mogul Henry Sy. It is
comprised of retail outlets, shopping malls,
banking and finance institutions, and
property developments. Back in the 1950s
SM was just a small store in Carriedo.
SOME BUSINESS TYPE UNDER CORPORATION

 SAN MIGUEL CORPORATION - Is the

Philippines largest food, beverage, and
packaging company. It started in 1890 as a
brewery. Presently it has 100 facilities in the
Philippines, Southeast Asia, China and
Australia. Its division and subsidiaries include
San Miguel Beer, Ginebra San Miguel
Incorporated, Coca-Cola Bottlers Philippines
Inc., Purefoods-Hormer Company, San Miguel
Packaging Products, and other businesses.
SOME BUSINESS TYPE UNDER CORPORATION

 PHILIPPINE LONG DISTANCE

TELEPHONE COMPANY - Is the biggest
telecommunications provider in the country.
It was incorporated in 1928 after the merger of
four telephone companies under US ownership.
Presently, the company has developed to
include fixed lines subsidiaries, wireless
companies such as Smart Communications,
Inc, and companies engaged in information
and communications technology.
SOME BUSINESS TYPE UNDER CORPORATION

 LOPEZ GROUP OF COMPANIES - Is the

business conglomerate owned by the Lopez
family of Iloilo. Its flagship company is
Benpres Holdings Corporation which was first
listed in the Philippine Stock Exchange in
1993. Among the businesses listed under its
name are ABS-CBN, Maynilad Water Services,
Inc. Meralco, Rockwell Land Corporation,
Bayan Telecommunication, SKYCABLE, and
the Medical City
 4. COOPERATIVE

IS A BUSINESS THAT IS OWNED BY A GROUP OF INDIVIDUALS WHO ALSO SERVE AS

BENEFACTORS TO THE BUSINESS ENDEAVOR. A COOPERATIVE USUALLY
REQUIRES AT LEAST FIFTEEN MEMBERS TO FUNCTIONS. USUALLY, A BOARD OF
DIRECTORS AND OFFICER ARE ELECTED TO MANAGE THE BUSINESS OPERATION.

MEMBERS CAN BECOME PART OF THE COOPERATIVE BY PURCHASING SHARES. A

COOPERATIVE CAN BE EITHER INCORPORATED OR UNINCORPORATED.
Similar to corporation, a cooperative usually have a set of
by-laws and articles of incorporation. The by-laws
contain rules and regulations governing the operation of
cooperative. The articles of incorporations includes
provides the details about the following: name of
cooperative; purpose and term of existence; amount of
share of capital; names and residences of its contributors;
and the type of cooperative.
ADVANTAGES AND DISADVANTAGES OF COOPERATIVES
Advantages
Unlimited life. The change of members does not
dissolve the business
Democratic organization. Social equality of
members is the most important component of
cooperatives. It ensures that is serves its members
needs
Disadvantages
Obtaining the capital through investors.
Cooperative has a “one-member-one-vote”
philosophy. Big investors may choose to invest
their money to other firms where their voting
power is equal to their ownership interest.
Lack of membership and participation. The
cooperative may not fully function if members do
not involve themselves in the routine business
operation.
STEPS USED IN REGISTERING COOPERATIVE

❖ Prepare general statement to help measure the cooperative’s chance of

success
❖ Draft cooperative by-laws
❖ Draft the articles of cooperation
❖ Secure bond for accountable officer(s)
❖ Register with Cooperative Development Authority (CDA)
SOME TYPES OF COOPERATIVE
★ CREDIT COOPERATIVE - it promotes and accepts savings and lending
services among its members. It produces a general collection of funds in
order to grant financial assisstance and other related financial services to its
members for useful and wise purposes.
★ CONSUMER\’S COOPERATIVE - It has the main intention to buy
and allocate commodities to members and non-members
★ PRODUCER’S COOPERATIVE – it understakes a combined production
whether agricultural or industrial. It is created and managed by its
members to assume the production and processing of raw materials or goods
produced by its members into finished or processed products for retailing by
the cooperative to its members and non-members.
SOME TYPES OF COOPERATIVE
★ MARKETING COOPERATIVE - it engages in the supply of production
inputs to members and markets their products.
★ SERVICE COOPERATIVE - It engages in medical and dental care,
hospitalization, transportation, insurance, housing, labor, electric light and
power, communication, professional and other services.
★ MULTI-PURPOSE COOPERATIVE- it combines two or more of the
business activities of these different types of cooperatives.
★ AGRARIAN REFORM COOPERATIVE - It organized by poor farmers
majority of them are agrarian reform beneficiaries with the intention of
developing a suitable system of land tenure, land development, land
consolidation or land management in areas covered by agrarian reform.
SOME TYPES OF COOPERATIVE
★ COOPERATIVE BANK - it is organized for the main idea of offering an
extensiv e range of financial services to cooperatives and their members
★ EDUCATION COOPERATIVE - it is one organized for the prime
intention of owning and operating licensed educational institutions, despite
the provisions of R.A. 9155, as known as the Governance of Basic Education
Act of 2001
★ INSURANCE COOPERATIVE - it is one engaged in the business of
insuring life and property of cooperative and their members
★ TRANSPORT COOPERATIVE - it is one which includes land and sea
transportation, limited to small vessels, as defined or classified under the
Philippine maritime laws, organized under the provisions of this Code
SOME TYPES OF COOPERATIVE
★ WORKERS COOPERATIVE - it is one organized by workers, including
the self-employed who are the same time the members and owners of the
enterprise. Its principal function is to provide employment and business
opportunities to its members and manage it is accordance with cooperative
principles.
★ ELECTRIC COOPERATIVE - it is organized for the principal reason of
understanding power generation, utilizing renewable energy sources, plus
hybrid systems, acquisition and operation of sub-transmission or
distribution to its household members.
★ WATER SERVICE COOPERATIVE – it is organized to own, operate and
manage water systems for the provision and distribution of drinkable water
for its members and their households.
 Distinction SOLE PARTNERSHIP CORPORATION
PROPRIETORSHIP
As to governing Civil code of Corporation Code
law. the of the
Philippines (Civil Philippines or Batas
Code Pambansa
Art 1767) Blg. 68 as amended
by (RA
11232
As to Registration Department of Securities and Securities and
Trade and Industry Exchange Exchange
Commission Commission
As to Owner/s One Person/owner Two or more Not more than 15
persons incorporators.
 Distinction SOLE PARTNERSHIP CORPORATION
PROPRIETORSHIP
As to liability The owner is
In a General Liability of the
personally liable for
partnership, the owners is limited to
all the obligations of
partners are liable their share in the
the sole
to extent of their capital. If a
proprietorship. personal properties. corporation
In a limited becomes insolvent,
partnership, the the shareholders
limited partners are are not liable to pay
liable to the extent for the corporation’s
of their investments outstanding debts.
but the general
partners are liable
up to their personal
properties.
As to manner of Subject to Generally, fixed at Generally, fixed at
taxation graduated income 30% of net income. 30% of net income.
tax table from 0 to
35%.
 Distinction SOLE PARTNERSHIP CORPORATION
PROPRIETORSHIP
As to control and The owner has full Partners are all The Corporation is
management control of the business. managers unless controlled by its Board
specified in the articles of Directors. Members
of partnership. of the Board of Directors
are elected by the
shareholders.

As to raising of Capital Limited by the credit- In a partnership, the Corporations have

worthiness of partners jointly raise various options in
the owner. capital for the business raising capital such as
and agree on equity financing, debt
contribution and sharing. financing, stock-option
Debts may be incurred plan, debt-to-equity
by the partnership and conversion, etc.
the partnership Investors are aware that
leverages the collective their personal assets
creditworthiness of all are insulated from
partners. creditors in case of the
corporation’s insolvency.
OTHERS
● Micro enterprises are those with assets, before
financing, of 3 million or less and employ not
more than nine workers.
Small enterprises are those with assets, before
financing, of above 3 million to 15 million and
employ 10 to 99 workers.
● Medium enterprises have assets, before
financing, of above 15 million to 100 million and
employ 100 to 199 workers.