Forms Of Business Organizations PDF

PREPARED BY: MA’AM DIANE D. BUGNE FORMS OF BUSINESS ORGANIZATI Module 4 ONS OBJECTIVES 1. differentiate the forms of business organizations 2. identify the advantages and disadvantages of each form 3. make a list of existing business entities in their community and identi...

PREPARED BY: MA’AM DIANE D. BUGNE FORMS OF BUSINESS ORGANIZATI Module 4 ONS OBJECTIVES 1. differentiate the forms of business organizations 2. identify the advantages and disadvantages of each form 3. make a list of existing business entities in their community and identify the form of business organizations  INTRODUCTI ON Business organizations commonly made to earn profit. Throughout its life, a company deals with multiple groups of individuals to achieve its end goal of profit generation. There are four forms of business organizations available to aspiring businessmen- sole proprietorship, partnership, corporation, and  SOLE PROPRIETORSHIP Sole means "one and only." A sole proprietorship, therefore, pertains to a business organization whose ownership is by one and only one person.  SOLE PROPRIETORSHIP simplest form under which a business can operate do not have separate legal existence from the owner the owner usually transacts with other parties under his/her own name owners can opt to operate the business under their own names or use fictitious name such as Aling Nene Sari-Sari Store  Advantages Disadvantages Easy to start, easy to Unlimited liability – the dissolve owner is legally obliged The owner has full to pay debts all business control of the business Difficulty of raising operations additional capital The owner can freely mix Limited life-the business personal assets with ceases to operate if the business assets owner dies, becomes Owner has all the profits physically or mentally for himself or herself incapacitated Simple taxation; the  PARTNERSHIP 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. May also be formed for the exercise of a profession The written agreement between or among partners is called articles of co-partnership  PARTNERSHIP The articles of co-partnership contains the following: name of partnership, names of partners; place of business; partnership's effectivity date; nature of business; investments of each partner and the corresponding capital credit; rights, power, and duties of the partners; accounting period; profit and loss sharing compensation for services offered by partners; and dissolution procedures.  TWO TYPSE OF The PARTNERSHIP first type is a general partnership where each partner is a general partner with unlimited liability. The second type is a limited partnership with limited partners and at least one general partner. The general partner has unlimited liability while the limited partners enjoy limited liability to the extent only of their capital contribution.  FEATURES OF A PARTNERSHIP 1.Separate legal existence 2.Mutual agency 3.Unlimited liability 4.Limited life 5.Co-ownership 6.Partnership agreement  Advantages and disadvantages of Form of DIFFERENT Advantages FORMS Disadvantages OF PARTNERSHIP Partnership General Partnership Simple and Owners (partners) inexpensive to create personally liable for and operate business debts Limited Liability Limited partners General partners Partnership have limited personally liable for personal liability for business debts business debts as More expensive to long as they do not create than regular participate in partnership management. Suitable mainly for General partners companies that can raise cash invest in real estate Advantages and disadvantages of DIFFERENT Form of Advantages FORMS OF PARTNERSHIP Disadvantages Partnership Limited Partnership Mostly of interest to Unlike a limited partners in old-line liability company, professions such as owners (partners) law, medicine, and remain personally accounting liable for many types Owners (partners) are of obligations owed to not personally liable business creditors, for the malpractice of lenders, and other partners. landlords. Often limited to a short list of professions Advantages and disadvantages of a general PARTNERSHIP Advantages Disadvantages Easy to form with Unlimited liability proper agreements on High possibility of its formation dispute and con- flicts Better ability to between partners acquire additional Limited life- usiness capital than sole ceases to operate if proprietorships one of the partners Larger pool of human dies, becomes capital than sole physically or mentally  corporation An artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence. The existence of the corporation is evidenced by articles of incorporation and by-laws that are duly approved by SEC. The articles of incorporation detail the powers and limitations bestowed by the  corporation It includes the following: name of corporation; purpose of corporation; location of principal office of business; term of existence of the corporation; name, nationalities, and addresses of incorporators; names of board of directors; authorized share capital, types of shares to be issued, and par value per share; subscription amount, subscribers' names, and their corresponding subscriptions; and the total paid  FEATURES OF A corporation 1.Separate legal existence 2.Limited liability 3.Transferable ownership rights 4.Virtually unlimited life 5.Corporation management 6.Double taxation  Advantages and disadvantages of a corporation Disadvantages Advantages Ability to acquire Heavily regulated by the additional capital government Transferable Double taxation- profit is ownership rights/ easy taxed at the corporate tax rate; *stockholders are to transfer ownership taxed again when profits Limited liability of are distributed to them stockholders Not easy to form Virtually unlimited life More expensive to form Large pool of human than sole proprietorships capital and partnerships  cooperative A duly registered associations 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  cooperative A cooperative usually requires at least fifteen members to function. Usually, a board of directors and officers are elected to manage the business operation. Members can become part of the cooperative by purchasing shares.  Advantages and disadvantages of a COOPERATIVE Advantages Disadvantages Unlimited life. The change of Obtaining capital through members does not dissolve investors Cooperative has a the business. "one-member-one- vote" Democratic organization. philosophy. Big investors may Social equality of members is choose to invest their money the most important to other firms where their component of cooperatives. It voting power is equal to their ensures that it serves its ownership interest. members' needs. Lack of membership and participation. The cooperative may not fully function if members do not involve