CHAPTER 4.
FORMS OF BUSINESS ORGANIZATIONS  In a lawsuit, the personal properties of the partners can be held
A business organization is an entity aimed at carrying on commercial
enterprise by providing goods or services, to meet needs of the customers.
1. SOLE/SINGLE PROPRIETORSHIP
A form of business is owned by one person; the simplest, and the most
common form of business organization. It is not separate from the owner.
The business and the owner are inseparable
“Suppose you want to open your own sari-sari store that will need PHP10,
000 to start and you used your PHP10,000 savings to start the said business.
You are the sole owner of the said sari-sari store. This type of business is
called sole/single proprietorship.”
THE ADVANTAGES OF SOLE/SINGLE PROPRIETORSHIP.
 The owner keeps all the profits.
 The owner makes all the decisions.
 It is easy to form and operate.
THE DISADVANTAGES OF SOLE/SINGLE PROPRIETORSHIP.
 The life of the business is limited to the life of the owner. Once the
owner dies, the business will cease to operate under the name of
the proprietor.
 The amount of capital is limited only by the wealth of the proprietor.
2. THE CONCEPT OF PARTNERSHIP
A form of business owned by two or more persons. The details of the
arrangement between the partners are outlined in a written document called
articles of partnership.
“What if the needed amount to start your dream sari-sari store is PHP50,
000 and you only have PHP25, 000 cash savings. You ask Juan, your friend
if he is willing to invest his PHP25, 000 and become part owner of the sari-
sari store. Assuming he agrees, what form of business organization was
created?”
Profits are divided among partners based on their agreed sharing.
The owner is called a partner.
THE ADVANTAGES OF PARTNERSHIP
 Higher capital because two or more persons will contribute to the
common fund.
 It is easy to operate like a sole/single proprietorship
THE DISADVANTAGES OF A PARTNERSHIP
 The profits are divided among the partners.
 A partner can be held liable for the acts of the other partners.
FUNDAMENTALS OF ABM 1 – FORMS OF BUSINESS ORGANIZATIONS
beyond their contributions and may be used to answer for any
liability of the partnership.
3. THE CONCEPT OF A CORPORATION
“Assuming your dream is to open a grocery store and not just a sari-sari
store but you will need PHP1, 000,000 to start the said business. You have
only PHP25, 000, your friend Juan has PHP25, 000, and your mother is
willing to invest her PHP50, 000, but still these are not enough to start your
dream grocery store. Where will you get the money to raise the PHP1
million? You may consider setting up a corporation?”
A corporation is a business organized as a separate legal entity (artificial
person) under the corporation law with ownership divided into
transferable shares of stocks
Emphasize that it is the law (Corporation Code of the Philippines) that
creates a corporation.
The corporation begins its existence from the date the Articles of
Incorporation is approved by the Securities and Exchange Commission
(SEC).
The SEC (Securities and Exchange Commission) is the government
agency primarily tasked to regulate private corporations in the
Philippines.
The owners are called stockholders or shareholders.
The word ‘Corporation/Incorporation/Corp./Inc.’ appears in the name of
the entity.
The voting rights of a shareholder is generally based on the percentage
of ownership.
The management of the business is delegated by the shareholders to
the Board of Directors
The ownership is divided into shares and the value of one share may
be denominated at a smaller amount, for example at PHP10 per share.
The proof of ownership is evidenced by a stock certificate.
THE ADVANTAGES OF A CORPORATION
 Can easily raise additional funds by selling shares of stocks to the
public.
 Shareholders are not personally liable for the debts of the
corporation. The extent of their liability is limited to their equity
(ownership) in the corporation.
THE DISADVANTAGES OF A CORPORATION
 It is relatively complicated to set up.
 Subject to several legal restrictions as listed in the Corporation Code
of the Philippines
ecbmalana
4. THE NATURE OF COOPERATIVES • For every business, you will identify the business activities, products or
“Assuming all the mothers in your barangay decided to open a sari-sari services offered by each business.
store where all the members can buy in cash or in credit. Some mothers • The group may identify the owners of every businesses listed.
were also taught how to sew dresses and bags as part of the project of the 4. The group leader or reporter to present the output of each group.
group. These bags are then sold to a certain company. Aside from that, the
organization provides seminars to the members on various topics involving ENRICHMENT
mothers and their roles. At the end of the year, the profits are distributed Fill-out the blank matrix.
among the members based on their capital contribution. The amount of their
purchases in the sari-sari store during the year is also computed and they ITEM Sole
Partnership Corporations Cooperatives
receive something out of the profit/surplus based on their purchases. This Proprietorship
form of business organization is called a cooperative. 1. Number of
Possible
 A cooperative is a duly registered association of persons with a common Owners
bond of interest, voluntarily joining together to achieve their social, 2. Management
(who
economic and cultural needs.
manages the
 The owners are called members who contribute equitably to the capital business)
of the cooperative. 3. Termination of
 The members are expected to patronize their products and services. the
 The word ‘cooperative’ appears in the name of the entity. Business
 This form of business organization is regulated by the Cooperative 4. Government
Development Authority (CDA). agency
assigned primarily
THE ADVANTAGES OF A COOPERATIVE to regulate
 Enjoys certain tax exemption privilege 5. Transfer of
 Promotes the concept of sharing resources Ownership

THE DISADVANTAGES OF A COOPERATIVE 6. Liability of

 Limited distribution of surplus
 Continuous education programs for members.
 The members have active and direct participation in the business of
the cooperative.
Sole / Single proprietorship – owned by one person
Partnership – owned by partners (two or more persons)
Corporation – owned by shareholders
Task:
1. Give a brief description of each form of business organizations and the
advantage of creating such forms.
2. “Your PHP10 daily allowance may be used to buy shares of stocks, thus
making you an owner of a Corporation.”
Owners
EVALUATION
1. Enumerate all the forms of business organizations by nature of
ownership.
2. Differentiate a corporation from a partnership according to number of
owners and their liabilities.
3. Differentiate a corporation from cooperative.
4. Give two example of corporations in the Philippines.
5. Give two examples of cooperatives in the Philippines.

PRACTICE
Divide the class into four groups.
1. Assign each group a form of business organization.
2. Assign a group leader/reporter for every group.
3. Each group should list down at least three businesses in their locality or
in the country

FUNDAMENTALS OF ABM 1 – FORMS OF BUSINESS ORGANIZATIONS ecbmalana