FORMS OF BUSINESS

ORGANIZATION
1. SOLE PROPRIETORSHIP
1. SOLE PROPRIETORSHIP

this business was formed by a single individual.

the simplest form
Do not have separate legal existence from the
owner.
Can operate under their OWN names or use
fictitious names such as “ALING NENE SARI-SARI
STORE”
Enters to a contract under the owners name.
ADVANTAGES
SOLE PROPRIETORSHIP
1. Ease of formation

2. The owner has full control of the business.

3. Owners can mix personal and business assests.

4. Owners have all the profits for themselves

5. Simple taxation
DISADVANTAGES
SOLE PROPRIETORSHIP

1. Unlimited liability

2. Difficult of raising additional capital

3. Owner’s bias
Review Questions
SOLE PROPRIETORSHIP

1. What is a Sole Proprietorship?

2. What are the advantages of a Sole
Proprietorship?
3. What are the disadvantages of a Sole
Proprietorship?
4. Based on your understanding of the topic,
what types of business are most likely
organized as a Sole Proprietorship?
2. PARTNERSHIP
2. PARTNERSHIP

(According to the partnership code of the

Philippines, Title IX of the Civil Code of the
Philippines.) A partnership - is a contract whereby
two or more persons bind themselves to contribute
money, property, or industry to a common fund,
with the intention of dividing the profits among
themselves.
From this definition of partnership given by the law,
we can take note of the following.

1. Two or more persons are needed to form a partnership.

2. Money is not the only resource that a person can contribute in a
partnership.
 PROPERTY refers to other assets owned by a person. (Ex. land, buildings,
vehicles, etc.)
 INDUSTRY refers to the skills and expertise of a person.
1. Partnership must be established for the purpose of obtaining profit. If
an organization is created for purposes other than the generation of
profit (Ex. Charitable institutions, public hospitals,) it cannot take the
form of partnership.
2. Partnership are the common form of business organizations used by
companies who generate profits by the practice of a profession (Ex. law
firms, auditing firms)
General Features of a Partnership

1. Separate legal existence

2. Mutual agency
3. Unlimited liability
4. Limited life

5. Co-ownership of partnership property

6. Partnership agreement
4. Limited life
PARTNERSHIP DISSOLUTION – occurs when one of the
partners withdraws from the partnership or if a new partner is
admitted.
PARTNERSHIP LIQUIDATION – ends of the operation.
5. Co-ownership of partnership property
In ACB PARTNERSHIP, assume that Bart contributed a delivery
van valued at 5000,000. Bart cannot subsequently claim that
he is the owner of the van. From the moment he contributed
the delivery van to the partnership, he only has a
proportionate share of the asset. ANDRE, BART, & CHARLES
become CO-OWNERS of the van.
6. Partnership agreement

CONTRACTS – are perfected through oral or written.

Articles of Partnership
a. Names of the partnership
b. Location of the principal office of the
partnership
c. The names, citizenship, and residence of
the partners.
d. Term for which the partnership is to
exist.
e. The purpose for which the partnership is
formed.
f. Original capital contributions of the
partners.
g. Profits and loss sharing agreement
among the partners.
ADVANTAGES

 Easier to create than a corporation

 Better ability to acquire additional capital

than a sole proprietorship.

 Large pool of human capital than a

sole proprietorship.
DISADVANTAGES
SOLE PROPRIETORSHIP

1. Unlimited liability

2. Mutual agency

3. Limited life
Other Forms of a partnership

 Limited Partnership  Limited Liability Company

 is another form of an organization having
General Partnership - having partnership characteristics.
unlimited liability  Features both partnership & corporation.
Limited Partnership – having  The owners are called members & they
limited liability enjoy limited liability.

 Limited Liability Partnership

 is a type of partnership that aims to protect innocent
 EX. Lawyers, accountants, medical
partners from the malpractice and wrongdoings of other
professionals, & auditors.
partners.
Review Questions:
SOLE PROPRIETORSHIP

1. What is a Partbership?
2. What are the general features of a
partnership?
3. Explain the advantages and disadvantages of
a partnership.
4. What are articles of partnership? What is
its purpose? Give examples of stipulations
usually found in articles of partnership.
CORPORATION
CORPORATION
These definitions emphasize four things about a
An artificial being created corporation.
1. A corporation is an artificial being. It means that
by operation of law, having it is an entity separate and distinct from its
the right of succession and owners.
the powers, attributes, and 2. A corporation is created by operations.
3. A corporation has the right of succession.
properties expressly Ownership rights can be passed to other persons
authorized by law or through sale, donation, or any other mode of
incident to its existence. transfer.
4. The law is the source of the powers and
attributes of a corporation. Being the source, the
law can likewise restrict the authority of
corporations in performing acts.
General Features of a Corporation
1. Separate legal existence 2. Limited liability

3. Transferable ownership rights

4. Virtually unlimited life
5. Corporation management
6. Government Regulations
7. Double Taxation
8. Dividends
1. Separate legal existence

 the acts of the owners or

stockholders generally do not bind
the corporation.
 owners or stockholders are often
involved in decision-making
through voting but this does not
give them the right to perform
acts for the corporation.
2. Limited liability

 Advantage of the corporation.

 The personal assets of the
stockholders of a corporation are
protected from the claims of creditors
and other outside parties.
 Even the corporation is bankrupt or
has unpaid claims due to accidents
and lawsuits, the stockholders cannot
be obligated to pay any deficiency.
3. Transferable ownership rights
 Ownership rights in a corporation are presented by stocks.
 STOCKS
 is an intangible (no physical form) asset evidencing a
proportionate share in the properties of a corporation.
 are presented by a stock certificate.
 he or she is an owner of the company.
 Can be transferrable to other persons, through sale,
donation, or other modes of transfer.
 Can be transferred even without the consent of the other
stockholders unless the corporation is privately held.
 Transfers of stocks do not result in the dissolution or
liquidation.
4. Virtually unlimited life

 shall exist for a period not

existing 50 years.
There is no limit to the number
of the extension.
Not affected by the withdrawal,
death, and admission of
stockholders.
5. Corporation management

Stockholders are the owner of a corporation.

Stockholders may elect a board of directors to manage a
corporation.
board of directors represents the interest of the
stockholders and is responsible for creating operating
policies.
Stockholders can also be a member of the board of
directors
Stockholders

Chairman & Board of Directors

President & Chief Executive Officer

General VP for Finance/ VP for

VP for VP for
Counsel & Chief Financial Human
Marketing Operations
Secretary Officer Resources

Treasurer Controller
6. Government Regulations

 Large corporations provide

employment opportunities to the
public & stimulate the growth of the
company.
 The bankruptcy can cause the whole
economy to spiral downwards.
 government regulations also protect
stockholders.
7. Double Taxation

 The income of a corporation

 is taxed on the corporate level &
the individual level.
 already taxed before being
distributed to the stockholders
receives his or her share of the
income, it is included in his or her
tax return & will be taxed for the
second time.
8. Dividends
 the stockholders will only be entitled to receive a share of the
income once the board of directors approves the distribution to
stockholders is called Dividends.
 cash, stock, or property.
 cash dividends are the distribution of income in the form
of cash.
 Stock dividends are the distribution of income in the form
of additional stocks. (stated in percentage term.)
 Property dividends enable stockholders to receive a
certain value of a property of the company for every share
of stock.
ADVANTAGES
 Ability to acquire additional capital

 Transferable ownership rights

 Limited liability of stockholders.

 Large pool of human capital

 Virtually unlimited life

DISADVANTAGES

 Heavily regulated by the government

 Not easy to form

 Double taxation

 More expensive to form than sole

proprietorships and partnerships.
Review Questions:
SOLE PROPRIETORSHIP

1. What is a Corporation?
2. Explain general features of a Corporation?
3. What are the the advantages and
disadvantages of a Corporation.
4. Illustrate & explain the general structure of
the management of a corporation.
5. What are dividends? What are the coomon
types of dividends?
COOPERATIVE
According to the Cooperative Case of the Philippines,
“a cooperative is 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, making equitable contributions to the
capital required and accepting a fair share of the risks and
benefits of the undertaking in accordance with universally
accepted cooperative principles.”
 Cooperative may be
formed by at least 15
persons
1. To encourage thrift and savings mobilization among the
members.
2. To generate funds and extend credit to the members for
productivity and provident.
3. To encourage among members systematic production and
marketing.
4. To provide goods and services and other requirements to the
member.
5. To develop expertise and skills among its members.
6. To acquire lands and provide housing benefits for the
members.
7. To insure against losses of the members.
8. To promote and advance the economic, social, and
educational status of the members.
Other characteristics of a cooperative include the
following:
1. It can sue and be used under its own name.
2. It has the right of succession.
3. members of a cooperative are subjects to limited
liability.
4. It shall exist for a period not exceeding 50 years from
the date of formation. The cooperative term may be
extended for periods not exceeding 5o years.
5. A cooperative has its set of board of directors.
6. Income of a cooperative (called net surplus) belongs to
its members.
SUMMATIVE ASSESSMENT:
Identify what is being
described in the
following statements.
____1. Established mainly for the welfare of its members.
____2. Partners lose their limited liability protection when they take
part in the management of the partnership.
____3. A type of dividend that is normally expressed in percentage
terms.
____4. The most common type of dividend.
____5. Type of business organization that can only be formed for the
purpose of generating profit.
____6. Evidence of ownership of a corporation.
____7. In charge of creating operating policies for a corporation.
____8. Acts of a partner are binding on the partnership even if its is
beyond the partner’s authority as long as the acts are related to the
operations of the partnership.
____9.The length of the term of a corporation should not exceed.
____10.Type of partnership commonly used by individuals in the practice
of a profession.
____11. Source of the powers and attributes of a corporation.
____12. Relationship among partners regarding the properties of the
partnership.
____13. Another term for fictitious names of a sole proprietorship.
____14. A document representing that you own shares of a company.
____15. An artificial being created by operation of law that is separate
and distinct from its owners.
____16. The easiest form of business organization to establish.
____17. The basis of the distribution of profits or losses among the
partners.
____18. The minimum number of persons required to create a
cooperative.
____19. An intangible asset evidencing ownership in a proportionate
share of the properties of a corporation.
____20. Occurs when there is a change in the relationship among the
partners.