FORMS AND ECONOMIC

ROLES OF BUSINESS
ORGANIZATIONS
 Here are words that can help you understand thoroughly the
lesson:

Business – is an organization or economic system where goods and

services are exchanged for one another or for money.

Hybrid Business – refers to companies that may be classified with more

than one type of business.

Merchandising Business – refers to businesses which buy product at

wholesale price and sell the same at retail price.
Manufacturing Business – refers to businesses which buy
productions with the intention of using them as materials in making
a new product.

Sole Proprietor – a business is owned and managed by only one

person

Partnership – a business owned by two or more persons who

contribute resources into the entity.
Corporation – is a business organization that has a separate legal
personality from its owners.

Cooperative – is a business organization owned and managed by a

group of individuals for their mutual benefits.
 Business is an entity or enterprise that provides goods and
services in exchange for some form of money or another. It can be a
privately owned, non-profit organization or state-owned business.
These entities consider the three basic problems in economy in
establishing their business:

a.) What to produce?

b.) How to produce?
c.) For whom to produce?
There are four major types of businesses:
Service Business
• a type of business which provides intangible products. Service type
firms offer professional skills, expertise, advice, and other similar
products.

• Examples of service businesses are schools, repair shops, hair salons,

banks, accounting firms and law firms.
Merchandising Business
• is a business which buys products at wholesale price and sells the
same at retail price. They are known as “buy and sell” businesses.
They make profit by selling the products at prices higher than their
purchase costs.

• Examples are grocery stores, convenient stores, distributors and other

resellers.
 Manufacturing Business
• unlike a merchandising business, buys products with the intention of using
them as materials in making a new product. A manufacturing business
combines raw materials, labor, and factory overhead in its production
process. The manufactured goods will then be sold to customers.

• Examples are baked good, shoe manufacturing, grape wine production,

cosmetic manufacturing, processed food, canned goods, and others.
Hybrid Business
• is a company that may be classified in more than one type business.

• A restaurant, for example combines ingredients in making a fine meal

(manufacturing), sells a cold bottle of wine (merchandising), and fills
customer orders (service).
• There are basic forms of business ownership:
A. Sole proprietorship
• Also referred to as “single proprietorship”.
• A business that is owned by only one individual for the practice oftrade or
profession.
• Simple and least costly form of ownership among other forms of business. It
is registered through the Bureau of Trade Regulation and Consumer Protection
(BTRCP) of the Department of Trade and Industry (DTI).
• Common to small business entities like beauty salon, computer shop, repair
shop, and grocery store.
By considering the advantages and disadvantages of the different business
ownership, best practices will then be recognized in choosing a business to be
established.
SOLE PROPRIETORSHIP
Advantages Disadvantages
• Easiest and least expensive form of • Sole proprietors have unlimited liability
ownership and are legally responsible for all debts
• Sole proprietors are in complete against the business. Their business and
control, and within the parameter of the personal assets are at risk.
law, may make decisions as they see fit.
• May be at a disadvantage in raising
funds
and are often limited to using funds from
personal savings or consumer loans.
By considering the advantages and disadvantages of the different business
ownership, best practices will then be recognized in choosing a business to be
established.
SOLE PROPRIETORSHIP
Advantages Disadvantages
• May have a hard time attracting high-
• Profit from the business flow-through caliber employees, or those that are
directly to the owner’s personal tax motivated by the opportunity to own a
return. part of the business.
• The business is easy to dissolve, if
desired. • Some employees’ benefits such as
Trasfer of ownership-Sell the business owner’s medical insurance premiums are
(it’s new entity under a new not directly deductible from business
owner) income.
Examples: sari-sari store, flower shop, vulcanizing shop, car wash, etc.
 Partnership
• Business that is owned by two or more persons pooling their resources
together as common fund. (The details of the arrangement between the
partners are outlined in a written document called Articles of Partnership).
• Just like corporation, it is registered with the Securities and Exchange
Commission (SEC).
• The partners are normally involved in the management and operation of the
business.
• Profits are divided among partners based on their agreed sharing. The owner
is called partner.
By considering the advantages and disadvantages of the different business
ownership, best practices will then be recognized in choosing a business to be
established.
PARTNERSHIP
Advantages Disadvantages
• Partners are jointly and individually liable
Partnerships are relatively easy to establish; for the actions of other partners.
however, time should be invested in
developing the partnership. • Profits must be shared with others.
• With more than one owner, the ability to
raise funds may be increased. • Since decisions are shared, disagreement
• The profits from the business flow directly can occur.
through to the partners’ personal tax
return.
By considering the advantages and disadvantages of the different business
ownership, best practices will then be recognized in choosing a business to be
established.
PARTNERSHIP
Advantages Disadvantages
• Some employee benefits are not
• Prospective employees may be attracted deductible from the business income on
to the business if given the incentive to tax returns
become a partner.
• The partnership may have a limited life; it
• The business usually will benefit from may end upon the withdrawal o death of a
partners who have complementary skills. partner.
Transfer of ownership -Sell the business of
interest of the partner
(consent of other partner is necessary
• Examples: Law firms, medical clinics, and Travel and
Tours
• Types of Partnerships that you should consider:
 General Partnership.
• Partners divide responsibility for management and liability as well as
the shares of profit or loss according to their internal agreement.
Equal shares are assumed unless there is a written agreement that
states differently.
Limited Partnership and Partnership with
limited liability
• “Limited” means that most of the partners have limited liability as
well as limited input regarding management decision, which generally
encourages investors for short term projects, or for investing in capital
assets.
Joint Venture
• is like a general partnership, but is clearly for a limited period of time
or a single project. If the partners in as joint venture repeat the
activity, they will be recognized as an ongoing partnership and will
have to file as such, and distribute accumulated partnership assets
upon dissolution of the entity.
 C. Corporation
• A business organized as a separate legal entity (artificial person)
under the corporation law with ownership divided into transferable
shares of stocks. It is a business required to have five to fifteen
incorporators. Incorporators refer to those who originally formed the
corporation. The existence of the corporation is evidenced by Articles
of Incorporation and by-laws that are duly approved by Securities and
Exchange Commission (SEC).
 • It has a legal personality that is separate and distinct from the
owners. The owners are called stockholders or shareholders. The
voting rights of a shareholder is generally based on the percentage of
ownership.
• Management of the business is delegated by the shareholders
to the Board of Directors.
• Example includes : ✓ General Motors Corporations - an icon
for craftsmanship,
• ✓ Apple Corporations - one of the famous tech
companies and Amazon Corporation as the world’s
leading ecommerce and innovation company.
By considering the advantages and disadvantages of the different business
ownership, best practices will then be recognized in choosing a business to be
established.
CORPORATION
Advantages Disadvantages
• • The process of incorporation requires
• Shareholders have limited liability for the more time and money that other forms
corporation’s debts or judgements against the of organization.
corporation.

• Generally, shareholders can only be held • Corporations are monitored by federal,

accountable for their investment in stock of state and some local agencies, and as a
the company. (Note however, that officers result may have more paperwork to comply
can be held personally liable for their actions, such with regulations.
as the failure to withhold and pay employment
taxes.
By considering the advantages and disadvantages of the different business
ownership, best practices will then be recognized in choosing a business to be
established.
CORPORATION
Advantages Disadvantages
• Corporations may result in higher overall
• Corporations can raise additional funds taxes. Dividends paid to shareholders are
through the sale of stock. not deductible from business income; thus
• A corporation may deduct the cost of benefits this income can be taxed twice.
it provides to officers and employees. • Can elect
Corporation status if certain Transfer of ownership - Sell stocks
requirements are met. This election enables
company to taxed similar to a partnership.
Examples: Smart Communications, Inc, SM Development
Corporation, Medical Doctors, Inc. (Makati Medical Center),
Avida Land Corporation
D. Cooperative
• Duly registered association of persons with a common
bond of interest, voluntarily joining together to achieve their
social, economic and cultural needs.
 • Usually requires at least fifteen members to function.
✓ Usually a board of directors and officers are elected to manage the
business operation.
✓ The owners are called members who contribute equitable to the
capital of the cooperative.
✓ The members are expected to patronize their products and
services.
• The word “cooperative” appears in the name of the entity.

• This form of business organization is regulated by the

Cooperative Development Authority (CDA).

• Shall exist for a period not exceeding fifty (50) years from
date of registration sooner dissolved or unless said period is
extended.
• Types of cooperatives:
✓ credit cooperative,
✓ consumer cooperative
✓ multi-purpose cooperative
✓ electric cooperative
✓ water service cooperative
✓ fishermen cooperative
By considering the advantages and disadvantages of the different business
ownership, best practices will then be recognized in choosing a business to be
established.
COOPERATIVE
Advantages Disadvantages
• Less Operational Control
• Less Taxation • Fixed Pricing
• Funding opportunities • Cooperative may suffer from slow cash
• Further marketing reach
• Reduce costs and improve product and flow since a member’s incentive to
services contribute depends on how much they use
the cooperative’s services and products
By considering the advantages and disadvantages of the different business
ownership, best practices will then be recognized in choosing a business to be
established.
COOPERATIVE
Advantages Disadvantages
• Perpetual existence, members can join or
leave the business without causing
dissolution.
• Lack of membership and participation
• Democratic organization, monetary may cause risk of losing members.
investment does not affect the weight of
each vote, so no member owner can Cannot transfer nor sell its membership
dominate the decision-making process.
Example: water and electricity (utility) cooperatives, Cooperative
banking, Credit Unions, and Housing Cooperatives
ROLES OF BUSINESS ORGANIZATIONS IN
RELATION TO THE ECONOMY
 Business plays an important role in the economy of the
country. The success of business translates to the economic
well-being of a company and offers improved quality of life
of the citizens of the country hence, as a whole affect
directly to the world’s economy.
A. Provide Employment
• New employment opportunities provide chances for previously
unemployed or underemployed workers to increase take-home pay
and meet their financial obligations.

• Increased employee’s earnings lead to a higher rate of consumer

spending, which benefits other businesses who depend on consumer
sales to stay open thus, contributes to a healthier economy in the
locality.
• Providing employment opportunities for all is the single
most effective means of tackling poverty and social
exclusion, thus improve an individual’s standard of living.

• Employing people at each local business contributes to

the economy of the country.
B. Drives the Economy through Investment

• Businesses encourage investment by keeping their profit

margins large and their cost of doing business low.
• “Investing money in a business either in the form of technology or in the form
of money definitely helps the economic development. If businesses have
sufficient investment, it will produce more goods and can provide more
employment opportunities to the public (labors or staff members). If
employment opportunity increases in a country, income and standard of
living of the employees also increases. If standard of living increases
automatically the employees (labors or staff members) consumption power
also increases as employees and public consume more goods from the
business consequently, businesses will be benefited so the economic
conditions of the country will also develop” (TS 2018)
C. Production of Goods and Services

• Businesses are designed to serve a particular need that

people have, and to provide trusted goods and services
related to that need.
• In the modern economy, most firms and employees have found that to be
competitive with other firms and employees they must become very good at
producing quality goods and services because, when consumer’s confidence or
trust dips in business, it is not just sales that are affected, this mistrust has a
ripple effect which can result in a decline in a country’s general economy.

• No matter how efficiently you make a product or how special the service is
that you deliver, if you lose consumer confidence as a result of your business
decision, consumers won’t support you by purchasing your goods and services,
and then nobody benefits.
D. Increase Government’s Revenue

• Businesses help increase governments revenue through the

payment of taxes hence, without business, there would not be
much tax which will on the other hand affect the government’s
revenue generation.
• The increased presence of companies in the region translates to
increased tax revenue. Taxes that are collected by the government will be
used to fund government expenditures and programs. It is also used for the
salaries of public employees such as teachers, nurses, doctors, agriculturist,
policemen and many more.

• Additionally, business growth and increased sales contribute to better

national income in the form of higher tax revenue and higher government
spending, which can directly translate to better maintenance and offerings
of local infrastructure and services that benefit the community.
THANK YOU!!!!!