BUSINESS ETHICS AND SOCIAL

RESPONSIBILITY

The Nature and Forms of Business

Organizations
 After going through this LESSON, you are
expected to:

• Differentiate the forms of business

organizations in terms of their
purpose and role in socio-economic
development.
 Analyze each sentence below and write
whether it is True or False.
1. Tax preparation is more difficult
in a sole proprietorship than in a
corporation.

FALSE
 Analyze each sentence below and write
whether it is True or False.
2. Merchandising businesses turn
basic inputs into products which
are sold to consumers.

FALSE
 Analyze each sentence below and write
whether it is True or False.

3. Manufacturing businesses include

baked goods and cosmetics.

TRUE
 Analyze each sentence below and write
whether it is True or False.
4. Book stores and sari-sari stores fall
under the service businesses category.

TRUE
 Analyze each sentence below and write
whether it is True or False.

5.The sole proprietor can pass the

business down to his/her heir.

TRUE
 Business
- Is an active process
which is an integral part
of human society.
 - It is an organization where
economic resources or inputs,
such as materials and services,
are brought together and
distributed to deliver or to give
consumers goods, products, or
outputs.
 -It involves significant
operations such as buying,
assembling, distributing,
advertising, selling, and
accounting.
 Profit
- Refers to the difference
between the amount received and
the amount spent on something
purchased, produced, or
manufactured.
 - The fundamental reason for
examining business activities from
a moral point of view is that
business organizations should,
in principle, help promote the
common good and protect the rights
and interests of individuals, as well
 Three types of business organizations are
generally operated for profit

1. Service businesses provide

services to customers rather than
products.
Examples:
computer repair, laundry services,
tutoring, delivery services, wellness
(such as gym or spa), etc.
2. Merchandising businesses
sell to customers products they
buy from other businesses.
Examples:
sari-sari stores, bookstores,
department stores, groceries,
supermarkets, etc.
3. Manufacturing businesses
turn basic inputs into products
which are sold to consumers.
Examples:
shoe manufacturing, baked
goods, candle manufacturing,
cosmetics manufacturing, wine
production, etc.
 Forms of Business Organizations
1. Sole Proprietorship- It is a
one-person business. The
owner has full control over the
finances and operations and
decides alone.
 ADVANTAGES OF SOLE
PROPRIETORSHIP
A.Tax preparation is faster.
Simply file an individual
income tax return including
losses and profits to your
business.
 ADVANTAGES OF SOLE
PROPRIETORSHIP
Your personal and business
income is considered the same
and the tax implications for
self-employed individuals
would apply.
 ADVANTAGES OF SOLE
PROPRIETORSHIP
B. Sole proprietorship
has lower start-up costs.
C. Handling money for
the business is easier.
 ADVANTAGES OF SOLE
PROPRIETORSHIP
D. Sole proprietorships
have the least government
rules and regulations that
affect them.
 ADVANTAGES OF SOLE
PROPRIETORSHIP
E. The sole proprietor can
own the business for as long
as he/she wants, and when
he/she wants to move out,
he/she can cash in and sell
the business.
 ADVANTAGES OF SOLE
PROPRIETORSHIP
F. Even in common
practice, the sole
proprietor can pass the
business down to
his/her heir.
 DISADVANTAGES OF SOLE
PROPRIETORSHIP
A. The sole proprietor
is personally liable for
all debts and actions
of the enterprise.
 DISADVANTAGES OF SOLE
PROPRIETORSHIP
B. There is lack of
financial control because
of looser structure of sole
proprietorship.
 DISADVANTAGES OF SOLE
PROPRIETORSHIP

C. There could
be difficulty in
raising capital.
 Forms of Business Organizations
2. Partnership-
It is a business relationship
between two or more people. It refers
to an arrangement where individuals
share a business venture's profits and
liabilities.
 Forms of Business Organizations
The partners give feedback
on how to use the capital and
other critical strategic
decisions that may provide
different perspectives.
 ADVANTAGES OF
PARTNERSHIP
A. Partnership business lacks
formality as compared with
managing a limited company or
corporation.
B. It is easy to start. The partnership
may be created either verbally or in
writing.
 ADVANTAGES OF
PARTNERSHIP
C. You share the burden. You have
companion and support.
D. Every partner would add
his/her own expertise, skills,
experience, and connections to the
business, thus giving it a greater
chance of success.
 ADVANTAGES OF
PARTNERSHIP
E. There is better decision-making.
Two heads are better than one.
F. There is privacy. The business
deals may be kept confidential by the
partners.
G. The partners own and control the
business.
 ADVANTAGES OF
PARTNERSHIP
H. The more partners there are,
the more funds are available in
the company, which can be
used for possible expansion. Its
borrowing capacity is also
likely to be higher.
 ADVANTAGES OF
PARTNERSHIP
I. There is an easy access
to profits in a business
partnership. The
partners just have to
divide the profits.
DISADVANTAGES OF PARTNERSHIP

A. The business does not have

any independent legal status.
B. The business has no separate
legal personality, so the
partners are personally liable for
the debts and losses incurred.
DISADVANTAGES OF PARTNERSHIP

C. The partnership business often

seems to lack the sense of prestige
more closely associated with a
corporation.
D. A partnership will often find it
more difficult to raise money than
a corporation.
DISADVANTAGES OF PARNERSHIP

E. There is a potential of
differences and conflicts.
F. Decision-making can be
slower because there is a
need for consultation among
partners.
DISADVANTAGES PARTNERSHIP

G. The profit must be shared

among the partners.
H. It may require a lot of
time and energy thus may
affect life-work balance.
DISADVANTAGES OF PARTNERSHIP

I. The profits earned by the

partnership will be translated to
income on the individual
partners. Thus, they are subject
to income tax in the financial
year in which they are made.
DISADVANTAGES OF PARTNERSHIP

J. There are limits on

business development like
unlimited liability, lack of
funding opportunities, and a
lack of commercial status, etc.
 Forms of Business Organizations
3. Corporation. It is an entity created
by law that is independent and
distinct from its owners and relies on
the corporate laws of the state in
which it is incorporated to continue its
 Forms of Business Organizations
Corporations have an advantage in
generating money for the company. It
can raise funds by selling shares of
stocks. It files taxes separately from
its owners.
 ADVANTAGES OF
CORPORATION
A. The liability of the
shareholders of a corporation is
limited up to the amount of their
investments.
B. A publicly held corporation
may sell shares or issue bonds
to raise substantial amounts.
 ADVANTAGES OF
CORPORATION
C. It is easy for a shareholder
to sell shares in a corporation.
D. A corporation’s life has no
limit, ownership can pass
through many generations.
 DISADVANTAGES OF
CORPORATION
A. The corporation pays taxes
on its income depending on
its type and the shareholders
pay dividend taxes, so income
gets taxed twice.
 DISADVANTAGES OF
CORPORATION
B. The management team
of a corporation can
operate the business
without any real oversight
from the owners.