Lesson 1: Business Ownership and Organization

Lesson 1
BUSINESS
OWNERSHIP AND
ORGANIZATION
Ownership
- it means the legal title to a thing or controls over the thing owned, the
right possession, and disposal.
- title to and possession of the assets of the enterprise, the power to

determine the policies of the operation, and the right to receive and dispose
of the proceeds.
The most common forms of business ownership are sole proprietorship,

partnership, limited liability partnership, limited liability company (LLC),
series LLC, and corporations.
When you’re forming your new business, you will want to take into
account the following:
1. Your (practical) vision regarding the size and nature of your business.
2. The level of control you wish to have.
3. The level of “structure” you are willing to deal with.
4. The business’s vulnerability to lawsuits.
5. Tax implications of the different organizational structures.
6. Expected profit (or loss) of the business.

Type of Business Ownership
1. Private Ownership
- it means the legal title to a thing or

controls over the thing owned, the right
possession, and disposal.
- title to and possession of the assets

of the enterprise, the power to determine
the policies of the operation, and the
right to receive and dispose of the
proceeds.
2. Public Ownership
- controlled by political bodies as a

municipal, provincial, or national
government or by any instrumentality
created by them
3. Mixed Ownership
- It exists when the elements of

ownership are divided such that private
persons and public bodies share in the
operation of the same enterprise
Factors involved in Business Forms
• The nature and size of the • The types of products to be

business manufactured
• The capital required and the • The method and volume of
means of procuring it production
• The length of time the • The kind of markets to be
enterprise is expected to supplied and methods of
operate marketing
• The technical conditions • The competitive nature of
affecting the enterprise the chosen industry.
• Individual or single or
sole proprietorship
• Partnership
• Cooperative
Organization
• Corporation
Forms or types of
Business Organization • Corporate
combination
1. Single Proprietorship
- the ownership is vested in one person.
- this form of ownership is small, requires but little amount of capital and
is readily established under the control of one man.
Single Proprietorship
PROS CONS
- It is easy to start and - unstable business life

terminate
- Control and management lie - a limited amount of capital
entirely in the hands of the owner
- Only a small amount of - unlimited liability
capital is required to starting
- Profits belong entirely to the - difficulties of management
owner
- There is no limit to the
number of people you can hire
2. Partnership
- is a business relationship between two or more persons competent to

make contracts for the purpose of engaging in business activity.
Partnerhsi
p
PROS CONS
- Partners can pool their labor, - Partners may bring additional

capital, and expertise. debts or liabilities.
- Partners can share tasks, - There is a greater chance of

allowing greater work-life balance. disagreement or mismanagement.
- More partners can bring their - It may become harder to sell

experience and new perspectives the business.
to the firm.
Types of Partnership
1. General Partnership
- all parties share legal and financial liability equally.
2. Limited Partnership
- a hybrid of general partnerships and limited liability
partnerships.
3. Limited Liability partnership

- this arrangement limits partners' personal liability so that, for
example, if one partner is sued for malpractice, the assets of other partners
are not at risk.
Kinds of Partnership
1. Active/Managing Partner
- takes part in the day-to-day running of the business and
also takes active participation in the conduct and management of
the business firm.
2. Sleeping Partner
- this partner does not participate in the day-to-day

functioning activities of the partnership firm.
3. Nominal Partner
- does not have any real or significant interest in the

partnership firm.
4. Partner by Estoppel
- this partner does not participate in the day-to-day

functioning activities of the partnership firm.
5. Partner in Profits only
- this partner of a firm will only share the profits of the

firm and won’t be liable for any losses of the firm.
6. Minor Partner
- is a person who is yet to attain the age of majority in the
law of the land.
7. Secret Partner
- the position of secret partner lies between the active

and sleeping partner.
8. Outgoing partner
- is a partner who voluntarily retires without dissolving
the firm. He leaves the existing firm, therefore he is called an
outgoing or retiring partner.
9. Limited partner
- is a partner whose liability is only up to the extent of his
contributions to the capital of the partnership firm.
10. Sub-Partner
- is a partner who associates someone else in his

share of the firm.
3. Cooperative Organization
- it draws its members from the general public. This cooperative

carries on retail trade operations.
4.
Corporation
- is 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.
Nature and Characteristic of Corporation
1. Owned by shareholders.
2. Limited Liability
3. Consider Double Taxation
4. Have Their Own Lifespan
5. Have Professional Management

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Lesson 1

- title to and possession of the assets of the enterprise, the power to

The most common forms of business ownership are sole proprietorship,

2. The level of control you wish to have.

3. The level of “structure” you are willing to deal with.

4. The business’s vulnerability to lawsuits.

5. Tax implications of the different organizational structures.

6. Expected profit (or loss) of the business.

- it means the legal title to a thing or

- title to and possession of the assets

- controlled by political bodies as a

- It exists when the elements of

• The nature and size of the • The types of products to be

- the ownership is vested in one person.

- It is easy to start and - unstable business life

- is a business relationship between two or more persons competent to

- Partners can pool their labor, - Partners may bring additional

- Partners can share tasks, - There is a greater chance of

- More partners can bring their - It may become harder to sell

3. Limited Liability partnership

- this partner does not participate in the day-to-day

- does not have any real or significant interest in the

- this partner does not participate in the day-to-day

5. Partner in Profits only

- this partner of a firm will only share the profits of the

- the position of secret partner lies between the active

- is a partner who associates someone else in his

- it draws its members from the general public. This cooperative

3. Consider Double Taxation

4. Have Their Own Lifespan

5. Have Professional Management

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