Besr Mod 1

BUSINESS ETHICS AND SOCIAL
RESPONSIBILITY
The Nature and Forms of Business Organizations

Q3 Module 1
Prepared by: Ms. Rosalina T. Valdeavilla, LPT

LEARNING TARGET
1. define business;
2. explain why people engage in business;
3. give the advantages and disadvantages of each
form of business organizations;
4. create their own business and logo; and
5. classify the given characteristics of organizations.
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 outputs.
Most businesses aim to earn profit. The term
profit refers to the difference between the amount
received and the amount spent on something
purchased, produced, or manufactured.
Three types of business organizations
are generally operated for profit -
service, merchandising, and
manufacturing businesses.
Service businesses provide
services to customers rather
than products.
Examples: computer repair,
laundry services, tutoring,
delivery services,
wellness (such as gym or spa),
Merchandising businesses sell to customers
products they buy from other businesses.
Examples: sari-sari stores, bookstores,

department stores, groceries,
supermarkets, etc.
Manufacturing businesses turn basic inputs into
products which are sold to consumers.
Examples: shoe manufacturing, baked goods,

candle manufacturing,
cosmetics manufacturing, wine production, etc.
Forms of Business
Organizations
1. 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 for self-
employed individuals would apply.
b. Sole proprietorship has lower start-up costs
c. Handling money for the business is easier.
d. Sole proprietorships have the least government rules
and regulations that affect them.
e. The sole proprietor 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. The sole proprietor 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
2. 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.
Advantages:
a. Partnership business lacks formality as compared with
managing a limited company or corporation.
b. It is easy to start. The partnership may be 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. The
partners just have to divide the profits.
Disadvantages:
a. The business does not have any independent legal status.
b. The business has no separate legal personality, so the partners are
personallyliable for the debts and losses incurred.
c. The partnership business often seems to lack the sense of prestige
moreclosely 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
3. 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 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.
LEARNING TASK
Directions: Below are sentences that characterize the forms of business.
Classify them by writing each sentence to the proper column. Number one
was given as an example. Write your answers from numbers 2-10 on a
separate sheet of paper.
1. It is a business relationship between two or more people.
2. It is operated and owned by one person.
3. It is an independent entity.
4. The individuals agree to share profits and liabilities.
5. It can sell shares of stocks.
6. There is sharing of burden.
7. There could be difficulty in raising capital.
8. The decisions are made by a person alone.
9. It files taxes separately from its owners.
10. The owner controls fully the financial and operational matters.
ANSWER IN LEARNING TASK
Assessm
ent
A. Directions: Analyze each sentence below and write whether it is
True or False.
Write your answers on a separate sheet of paper.
1. A corporation is a separate entity distinct from all the owners.
2. Tax preparation is more difficult in sole proprietorship.
3. Business is a passive process.
4. A partnership may generate funds through selling shares of stocks.
5. The liability of a shareholder is only limited to the amount of
his/her
investment.
Answers in Assessment
1. True
2. False
3. False
4. False
5. True
6. C
7. A
8. D
9. E
10. B

Besr Mod 1

Uploaded by

Copyright:

Available Formats

Besr Mod 1

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Besr Mod 1

Uploaded by

Copyright:

Available Formats

BUSINESS ETHICS AND SOCIAL

The Nature and Forms of Business Organizations

Prepared by: Ms. Rosalina T. Valdeavilla, LPT

Examples: sari-sari stores, bookstores,

Examples: shoe manufacturing, baked goods,

You might also like