3. FORMS and ECONOMIC ROLES of
BUSINESS ORGANIZATIONS
• OBJECTIVES: At the end of the lesson, the students are expected to:
1. Enumerate the forms and economic roles of business organizations.
2. Explain the forms and economic roles of business organizations; and
3. Appreciate the importance of analyzing the forms and economic roles of
business organizations in relation to the company.
4. FORMS OF BUSINESS ORGANIZATIONS
• AN ORGANIZATION IS A SOCIAL UNIT OF PEOPLE THAT IS
STRUCTURED AND MANAGED TO MEET A NEED OR TO
PURSUE COLLECTIVE GOALS. A BUSINESS ORGANIZATION
MAY ASSUME ANY OF THE FOLLOWING FORMS :
SOLE PROPRIETORSHIP
PARTNERSHIP
CORPORATION
COOPERATIVE
5. SOLE PROPRIETORSHIP
• A BUSINESS THAT IS OWNED BY ONLY ONE INDIVIDUAL FOR
THE PRACTICE OF TRADE OR PROFESSION.
• ALSO REFERRED TO AS "SINGLE PROPRIETORSHIP"
• SIMPLE AND LEAST COSTLY FORM OF OWNERSHIP AMONG OTHER FORMS
OF BUSINESS. IT IS REGISTERED THROUGH THE BUREAU OF TRADE
REGULATION AND CONSUMER PROTECTION (BTRCP) OF THE DEPARTMENT
OF TRADE AND INDUSTRY (DTI).
• COMMON TO SMALL BUSINESS ENTITIES LIKE BEAUTY SALON,
COMPUTER SHOP, REPAIR SHOP, AND GROCERY STORE.
6. ADVANTAGES AND DISADVANTAGES OF
SOLE PROPRIETORSHIP
ADVANTAGES DISADVANTAGES
• Easy to start, easy to dissolve; with
less government requirements
• Limited source of capital
• Fast decision making; only one
person decides
• Limited Life – the business ceases to
operate if the owners dies, becomes
physically or mentally incapacitated
• Full control of operations • The owner is legally obliged to pall all the
debts
• Flexcibility of operations • Management may be limited to the owner's
capabilities
7. PARTNERSHIP
• BUSINESS THAT IS OWNED BY TWO OR MORE PERSONS
POOLING THEIR RESOURCES TOGETHER AS COMMON FUND.
• JUST LIKE CORPORATION, IT IS REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION (SEC).
• THE PARTNERS ARE NORMALLY INVOLVED IN THE
MANAGEMENT AND OPERATION OF THE BUSINESS.
• PROFITS ARE DIVIDED AMONG PARTNERS BASED ON THEIR
AGREED SHARING. THE OWNER IS CALLED PARTNER.
8. ADVANTAGES AND DISADVANTAGES
OF PARTNERSHIP
ADVANTAGES DISADVANTAGES
• Easy to form; with proper agreements
on its formation.
• Limited Life – the business ceases to operate if
the owners dies, becomes physically or
mentally incapacitated
• Suited to the practice of a profession • A partner can be held liable for the acts of
other partners
• Higher capital because two or more
persons will contribute to the common
fund
• Unlimited liability of one or all owners for
the debts of the partnership
• Less regulations compared to
corporation
• High possibility of dispute and conflicts
between partners
9. CORPORATION
• IT IS A BUSINESS REQUIRED TO HAVE FIVE TO FIFTEEN CORPORATORS.
• THE EXISTENCE OF THE CORPORATION IS EVIDENCED BY ARTICLES OF
INCORPORATION AND BY-LAWS THAT ARE DULY APPROVED BY
SECURITIES AND EXCHANGE COMMISSION (SEC).
• IT HAS A LEGAL PERSONALITY THAT IS SEPARATE AND DISTINCT FROM
THE OWNERS. THE OWNERS ARE CALLED STOCKHOLDERS AND
SHAREHOLDERS.
• MANAGEMENT OF THE BUSINESS IS DELEGATED BY THE
SHAREHOLDERS TO THE BOARD OF DIRECTORS.
10. ADVANTAGES AND DISADVANTAGES
OF CORPORATION
ADVANTAGES DISADVANTAGES
• Capacity as a legal entity • Activities limited by the articles of incorporation
and corporate by laws
• More sources of funds • More regulations to be followed
• Easy to transfer ownership through selling
of stocks
• Profit is taxed at the corporate tax rate and
stockholders are taxed again when profits are
distributed to them
• Liability of stockholders/shareholders is
limited
• Costly to incorporate
• Unlimited life (50 years subject of renewal) • Possibility of abuse of powers by officers
11. COOPERATIVE
• DULY REGISTERED ASSOCIATION OF PERSONS WITH A COMMON BOND
OF INTEREST, VOLUNTARILY JOINING TOGETHER TO ACHIEVE THEIR
SOCIAL, ECONOMIC AND CULTURAL NEEDS.
• THE WORD "COOPERATIVE" APPEARS IN THE NAME OF THE
ENTITY.
• THE OWNERS ARE CALLED MEMBERS WHO CONTRIBUTE
EQUITABLE TO THE CAPITAL OF THE COOPERATIVE.
• THIS FORM OF BUSINESS ORGANIZATION IS REGULATED BY THE
COOPERATIVE DEVELOPMENT AUTHORITY (CDA).
12. ADVANTAGES AND DISADVANTAGES
OF COOPERATIVE
ADVANTAGES DISADVANTAGES
• Unlimited life. The change of members
does not dissolve the business
• 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.
• Democratic organization. Social equality
of members is the most important
component or cooperatives. It ensures
that it serves its members' needs.
• Lack of membership and participation. The
cooperative may not fully function if members do
not involve themselves in the routine business
operation.
13. ROLES OF BUSINESS
ORGANIZATIONS IN
RELATION TO THE ECONOMY
• Business plays an important role in the economy
of the country. the success of business translates to
the economic well-being of a company and offers
improved quality of life of the citizens of the
country hence, as a whole affect directly to the
world's economy. Here, we will delve the several
aspects that relate the importance of business in
today's economic environment and society.
14. Provide Employment - New employment opportunities provide chances for
previously unemployed or underemployed workers to increase take-home
pay and meet their financial obligations.
Drives the Economy through Investment - Businesses encourage investment
by keeping their profit margins large and their cost of doing business low.
Production of Goods and Services - Businesses are designed to serve a
particular need that people have. and to provide trusted goods and services
related to that need.
Increase Government's Revenue - Businesses help increase governments
revenue through the payment of taxes hence, without business, there would
not be much tax which will on the other hand affect the government's revenue
generation.