NATURE AND

FORMS OF
BUSINESS
ORGANIZATIONS
BY

CECILLE S. CARO, MBA

Faculty, TNHS SHS Department
 Factors That Will Be Affected By A
Company’s Form

• Tax treatment
• Legal liability
• Formation costs
• Operational costs
 What is an organization?
It is a group of two or more persons who
work together to attain a common set of
goals.
Examples:
• A sari-sari store owned and managed
by a family
• San Miguel Corporation
• A credit cooperative
 The 4 Major Business Organization
Forms
• Sole Proprietorship
• Partnership
• Corporation
• Cooperative
 SOLE PROPRIETORSHIP
• also known as single proprietorship
• is owned and normally managed by one person
• oldest and simplest form of business ownership, where all the
capital (puhunan) is provided by one person called the
proprietor
• the easiest to start and usually run by someone for their own benefit
• the owner has sole rights to the profit (kita) and to the debts
(utang) that the business might incur.
• business’ existence is entirely dependent on the owner’s decisions, so
when the owner dies, so does the business
 SOLE PROPRIETORSHIP
ADVANTAGES DISADVANTAGES

• Ease and low cost of • Unlimited liability

formation and dissolution
• Lack of stability
• Retention of all profits
• Limited access to credit
• Independence and flexibility
• Limited business skills and
• Tax advantage and less knowledge
government regulation
 PARTNERSHIP
• an
association of two or more persons
who act as co-owners of a company
• each partner contributes money, property
or service to their business
• normally engaged in accounting, law,
advertising, real estate and retailing
 TYPES OF PARTNERSHIP
• both owners invest their money, property,

General labor, etc. to the business and are both 100%

liable for business debts.
• do not require a formal agreement

• require a formal agreement between the

partners

Limited
• must also file a certificate of partnership
with the state
• allow partners to limit their own liability for
business debts according to their portion of
ownership or investment.
Other Forms of Partnership in
the Philippines

• Funds money to the

Capitalist business

• Provides service or
Industrial management
 ARTICLES OF PARTNERSHIP
• a contract that forms an agreement among
business partners to pool labor and capital and
share in profit, loss, and liability (Investopedia)
• This document acts as a rule book for limited
partnerships by outlining all the conditions
under which parties enter into a partnership.
 PARTNERSHIP
ADVANTAGES DISADVANTAGES

• Easy to organize • Unlimited liability

• Availability of more capital and • Lack of stability
credit
• Management disagreement
• Retention of profits
• Idle investment
• Better business skills and
knowledge
 CORPORATION
• an artificial being created by operation of law, having the right
to succession, and the powers, attributes and properties
expressly authorized by law or incident to its existence
• for tax purposes, separate entities and are considered a legal
person
• profits generated by a corporation are taxed as the “personal
income” of the company
• any income distributed to the shareholders as dividends or
profits are taxed again as the personal income of the owners.
 CORPORATION
• organized by not less than five, but not more
than fifteen people called incorporators
• the shares or certificates of ownership of a
corporation are called stocks
• the owners of stocks are called stockholders or
shareholders
 INCORPORATOR
• the person or entity that files the initial articles of
incorporation with the state Corporate Filing Office
• does not need to be a shareholder, director, or officer of the
corporation.
• occasionally, he will be an attorney or other person who is
assisting with the organization of the corporation
• will be one or more of the initial organizers of the business
• Dependent on who the incorporator is, once the initial
paperwork is filed, the incorporator may or may not have any
further involvement with the corporation.
 ARTICLES OF INCORPORATION
The document that states the names and
details of the incorporators, how much is the
subscribed and paid for share capital, and other
relevant information.
 TYPES OF CORPORATION

Private or • owned by a few individuals,

usually relatives and
Close friends

• owned by any individual

who buys shares of stock
Open which are openly traded in
a stock market
 CORPORATION
ADVANTAGES DISADVANTAGES

• Limited liability • Difficult to organize

• Easy to raise capital • Strictly regulated and supervised
by the government
• Perpetual life
• Some corporations are socially
• Specialized management irresponsible
• Formal and impersonal
employer-employee relationship
 COOPERATIVE
The Cooperative Code defines a cooperative as a
duly registered association of persons, with a common
bond of interest, who have voluntarily joined together
to achieve a lawful common social or economic end,
creating equitable contributions to the capital required
and accepting a fair share of the risks and benefits of
the undertaking in accordance with the
universally accepted principles of cooperation
regarded as the best form of business organization for
the poor or underprivileged individuals
 UNIVERSALLY ACCEPTED
PRINCIPLES OF COOPERATION
1. Open and voluntary membership
2. Democratic control
3. Limited interest on capital
4. Division of net surplus
5. Cooperative education
6. Cooperation with other cooperatives
 TYPES OF COOPERATIVES
1. Credit cooperative. Promotes thrift among its
members and create funds in order to grant
loans for productive and provident purposes.
2. Consumers cooperative. Procures and
distributes commodities to its members and
non-members.
3. Producers cooperative. Undertake joint
production in agricultural and industrial
activities.
 TYPES OF COOPERATIVES
(CONTINUATION)
4. Marketing cooperative. Involves in the supply of
production inputs to members and markets their
products.
5. Service cooperative. Takes on medical and dental care,
hospitalization, transportation, insurance, housing,
labor, electric light and power, communication and
other services.
6. Multipurpose cooperative. Combines two or more of
the business activities of the different types of
cooperative.
ORGANIZING A COOPERATIVE
• there should be a minimum of 15 natural
persons (citizens of the Philippines who are
residing or working in the intended area of
operation of the cooperative)
• However, before organizing a cooperative, the
Core Group (leaders) should first study these
factors: felt need, volume and business,
availability of qualified officers, adequacy of
facilities, and opportunities for growth.
 DOCUMENTS FOR SUBMISSION TO
COOPERATIVE DEVELOPMENT AUTHORITY
(CDA)
Four copies of economic survey with a general statement
describing the following (a) structure, (b) purpose, (c) economic
feasibility, (d) area of operation, (e) size of membership, and (f)
other pertinent data
Four copies of Articles of Cooperation, together with bond of
accountable officers
Four copies of Bylaws (a rule adopted by an organization chiefly
for the government of its members and the regulation of its
affairs)
Registration fee payable to Cooperative Development Authority