business ethics

1. Forms and Purpose of Business
Organizations
Lesson 2

2.  A business owned by a single individual
 The owner supplies his/her own capital and
manages the business himself/herself.
 It is subject to minimum legal requirements
and capital.
Sole Proprietorship

3.  Financing expansion projects requires the
owner to source the money himself/herself.
Sole proprietors have no protection from
their creditors.
 The owner needs to account for income and
expenses.

4. Creditor
 A person, bank, or other business that
has lent money to another party.

5.  When two or more individuals come together,
contribute resources to form a business, and
agree to divide the profit among them.
 It can also hold assets (properties) and incur
debts in its name.
Partnership

6.  Advantage
 Organization lies in the ease of forming the
organization and the additional capital and
collective resources available to the
business.
 Burden of work is shared among partners.

7.  A partner’s interest cannot be transferred to
another without the consent of the other
partners.
 The death of general partner cause the
dissolution of the partnership.

8.  An entity that is legally recognized as separate
and distinct from its owners.
 It can enter into a contract, sue other persons
or businesses, and be sued by them.
 It can also outlive its owners when its
ownership is transferred through a sale or gift
of share.
Corporation

9.  The group of founders, the management, or
group of private investors owns privately held
corporation.
 Public corporations are companies that have
sold a portion of itself to the public through
an initial public offering of its stocks.
Two main types of Corporations:

10.  Corporations are required to disclose
their financial information to the public
by reporting their financial statements
to the government.

11.  Under the supervision of the Securities and
Exchange Commission (SEC), a corporation is
required to file Articles of Incorporation and
By-laws.
 This document defines the ownership,
operating procedures, and conditions of the
business.

12.  Torres (2008) noted the different
advantages and disadvantages of
starting a corporation, and they are as
follows.

13. 1. Capacity to hold property exist as a legal unit or
distinct entity
2. Exemptions of shareholders from individual liability
3. Continuity of existence despite death or changes in
shareholders
4. Transferability of shares
5. Centralized management under the Board of
Directors
6. Standardized methods for the protection of
shareholders and creditors
Advantages

14. 1. Costly to incorporate
2. Possibility of takeovers by oppositions
3. Minority stockholders have little power over the
majority stockholders
4. Subject to government restrictions and controls
Disadvantages