Forms and Kinds of Business Organization

BUSINESS ETHICS and
SOCIAL RESPONSIBILITY
Arlene Jornadal - Solivio, LPT
THE NATURES AND FORMS
OF BUSINESS
ORGANIZATIONS
2nd Semester : Week 1 (Module 1)
What I need to Know?
• define business
• explain why people engage in business
• give the advantages and disadvantages of each form of
business organization create their own business and logo;
and
• classify the given characteristics of organizations.
Arrange the following jumbled letters to form the
correct words described by the given clues.
1. You engage into this if you want profits.
S U S B I S E N
Answer
BUSINESS
This refers to two or more people who work
together or do business together.
A N R S P E R T
Answer
PARTNERS
It is an organization enjoying the rights and
duties as that of an individual.
P O A T R O C O N I R
Answer
CORPORATION
This is what most business aim for:
T O F P I R
Answer
PROFIT
Question No. 1
You are all aware of online selling, right?
What/Who are the most popular online selling
platforms/individuals? Do you think they earn big
amount of money from online transactions?
Question No. 2
Have you experienced being a seller? What
item/product/service did you sell? Can you still
recall that experience?
What is a business?
A business is an active process which is an integral
part of human society. It is an organization where
economic resources or inputs, such as materials and
services, are brought together and distributed to
deliver or to give consumers goods, products or
ouputs. It involves significant operations such as
buying, assembling, distributing, advertising, selling
and accounting.
Three Types of
Business Organization
SERVICE BUSINESS
provide services to customers rather than products.
Example: Salon, Auto Repair Shop, Laundry Services, Computer Repair Services, Health Care, Transportation
Services, Rehabilitation, tutoring, delivery services, Wellness (such as gym or spa)
MERCHANDISING BUSINESS
sell to customers products they buy from other business.
Example: grocery store, sari-sari store, department store, bookstore, supermarkets

MANUFACTURING BUSINESS
turn basic inputs into products which are sold to consumers.
Example: Furniture Service, Candle Making, Baked goods, Automotive Industry, Jewellery manufacturing, apparel
and textiles, plastic manufacturer, pharmaceutical, food and beverages, wine production, cosmetics manufacturing
FORMS OF
BUSINESS ORGANIZATIONS
SOLE PROPRIETORSHIP
it is a one-person business. The owner has full control over the
finances and operations and decides alone.
ADVANTAGES
a) tax preparation is faster. Simply file an individual income tax
return including losses and profits to your business. Your
personal and business income is considered the same and the
tax implications fro self-employed individuals would apply.
b) has low start-up costs.
c) handling money for the business is easier.
d) have the least government rules and regulations that affect
them.
e) can own the business for as long as he/she wants, and when
he/she wants to move out, he/she can cash in and sell the
business.
f) even in common practice, the sole proprietor can pass the
business down to his/her heir.
DISADVANTAGES
a) is personally liable for all debts and actions of the enterprise.
b) there is lack of financial control because of looser structure of
sole proprietorship
c) there could be difficulty in raising capital
PARTNERSHIP
it is a business relationship between two or more people. It refers to an

arrangement where individuals share a business venture’s profits and
liabilities. The partners give feedback on how to use the capital and
other critical strategic decisions that may provide different perspectives.
ADVANTAGES
a) lacks formality as compared with managing a limited
company or corporation
b) it is easy to start. This maybe created either verbally or in
writing.
c) you share the burden. You have companion and support.
d) Every partner would add his/her own expertise, skills,
experience, and connections to the business, thus giving it a
greater chance of success.
e) there is better decision-making . Two heads are better than one.
f) there is privacy. The business deals may be kept confidential by
the partners.
g) the partners own and control the business.
h) the more partners there are, the more funds are available in the
company, which can be used for possible expansion. Its
borrowing capacity is also likely to be higher.
i) there is an easy access to profits in a business partnership
DISADVANTAGES
a) the business does not have any independent legal status.
b) the business has no separate legal personality, so the partners
are personally liable for the debts and losses incurred.
c) the partnership business often seems to lack the sense of
prestige more closely associated with a corporation.
d) a partnership will often find it more difficult to raise money
than a corporation
e) there is a potential of differences and conflicts.
f) decision-making can be slower because there is a need for
consultation among partners.
g) the profit must be shared among the partners.
h) it may require a lot of time and energy thus may affect life-
work balance.
i) the profits earned by the partnership will be translated to
income on the individual partners. Thus, they are subject to
income tax in the financial year in which they are made.
j) there are limits on business development like unlimited
liability, lack of funding opportunities, and a lack of commercial
status,etc.
CORPORATION
It is an entity created by law that is independent and distinct from its owners and
relies on the corporate laws of the state in which it is incorporated to continue to
continue its existence. Corporations have an advantage in generating money for the
company. It can raise funds by selling shares of stocks. It files taxes separately from
its owners.
ADVANTAGES
a) the liability of the shareholders of a corporation is limited up
to the amount of their investments.
b) a publicly held corporation may sell shares or issue bonds to
raise substantial amounts.
c) it is easy for a shareholder to sell shares in a corporation.
d) a corporation’s life has no limit, ownership can pass through
many generations.
DISADVANTAGES
a) the corporation pays taxes on its income, depending on its type
and the shareholders pay dividend taxes, so income gets taxed
twice.
b) the management team of a corporation can operate the
business without any real oversight from the owners.
ACTIVITY
Directions: On the distibuted papers, are sentences that
characterize the forms of business. Classify them by writing
each sentence to the proper column. Write your answers on a
separate sheet of paper.
ASSIGNMENT: Answer the following questions in a 1
whole sheet of paper. (Strictly NO SINGLE ERASURE)
1. Define business and its forms using your own words.

2. In your own words, differentiate sole proprietorship ,
corporation, and partnership.
3. Why do people engage in business? You may explain
your answer by providing an example.
Take note: 5 points each number

INTERACTIVE ACTIVITY: Share your IDEA
A rich relative of yours tells you that he/she is

willing to lend you one million pesos without any
interest and ask you to start a business. What kind of
enterprise do you prefer?
PERFORMANCE TASK (50 points)
Think of your own business name and create your own business
logo. Indicate if your business is a service business,
manufacturing business, or merchandising business. Print it in
a short bond paper with your name.
Note: Make it NEAT, ELIGIBLE and CREATIVE.

RUBRICS: Criteria for Scoring
Creativity/aesthetic value 30
Excellent - 30
Very Good - 25
Good - 20
Fair - 15
Somewhat fair - 10
Needs Improvement - 5
Explicit/implied message of the logo 10
Relevance of the logo to the business 10
TOTAL 50
END OF LESSON 1
Great Job!!!

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BUSINESS ETHICS and

Example: grocery store, sari-sari store, department store, bookstore, supermarkets

it is a business relationship between two or more people. It refers to an

1. Define business and its forms using your own words.

Take note: 5 points each number

A rich relative of yours tells you that he/she is

Note: Make it NEAT, ELIGIBLE and CREATIVE.

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