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SENIOR HIGH SCHOOL

FUNDAMENTALS OF ACCOUNTANCY,
BUSINESS & MANAGEMENT 1

Quarter 1 – Module 4

FORMS OF BUSINESS ORGANIZATIONS

ASIAN TECHNOLOGICAL SKILLS INSTITUTE, INC

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Module 4 Forms of Business Organizations
 FUNDAMENTALS OF ACCOUNTANCY, BUSINESS, & MANAGEMENT 1
SENIOR HIGH SCHOOL (SPECIALIZED)
2nd Semester Quarter 3

Module 4: Forms of Business Organizations

Welcome to this self-learning module: Forms of Business Organizations. In accomplishing this learning
material, you have to take first the pre-test, and you are tasked to study the learning activities and perform
the various practice tasks 1, 2 and 3. After doing so, you may take the post- test to determine the
knowledge and skills you gained from this lesson. To enhance your competence, you have also to
accomplish your assignment found in this module. Thank you and Goodluck!

CONTENT STANDARDS

The learners demonstrate an understanding of the various forms of business organizations, as follows:

 Sole /Single Proprietorship

PERFORMANCE STANDARDS

The learners shall be able to:

 Differentiate the forms of business organizations in terms of nature of ownership.

OBJECTIVES

After completing the module, the learners shall be able to:

• Differentiate the forms of business organizations. (ABM_FABM11-IIIb-11)

• Identify the advantages and disadvantages of each form. (ABM_FABM11-IIIb-12)

VOCABULARY LIST

To have a better understanding of the lesson presented in this module, you should be familiar with
the following terms/topics:

 Sole / Single Proprietorship

LEARNING ACTIVITIES

To study:

Forms of Business Organizations

1. Discuss Sole/Single Proprietorship.

“Suppose you want to open your own sari-sari store that will need PHP10,000 to start and you used
your PHP10,000 savings to start the said business. You are the sole owner of the said sari-sari store. This type
of business is called sole/single proprietorship.”
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Module 4 Forms of Business Organizations
a. Ask what their idea of a sole/single proprietorship is.

Possible responses:

• A form of business is owned by one person; the simplest, and the most common form of business
organization

• It is not separate from the owner. The business and the owner are inseparable

b. Discuss the advantages of sole/single proprietorship.

Possible responses:

• The owner keeps all the profits.

• The owner makes all the decisions.

• It is easy to form and operate.

c. Discuss the disadvantages of sole/single proprietorship.

• The life of the business is limited to the life of the owner. Once the owner dies, the business will cease to
operate under the name of the proprietor.

• The amount of capital is limited only by the wealth of the proprietor.

Teacher tip:

Inform the class how the Department of Trade and Industry is the government agency that regulates
the trade names of sole/single proprietorship businesses.

Misconception:

Some learners may ask that in their community, once a person dies the business is continued by his
relatives. Emphasize that upon death of the old owner, the business legally ceases. The one taking over is
considered as the new owner.

Ask learners to use actual names of their friends. Other types of businesses other than a sari-sari store
may be used by asking the learners. Read the Civil Code of the Philippines Articles 1767 to 1867 to
supplement your readings.

2. Introduce the concept of Partnership by asking the following suggested questions:

“What if the needed amount to start your dream sari-sari store is PHP50,000 and you only have
PHP25,000 cash savings. You ask Juan, your friend if he is willing to invest his PHP25,000 and become part
owner of the sari-sari store. Assuming he agrees, what form of business organization was created?”

a. Discuss partnerships

• A form of business owned by two or more persons. The details of the arrangement between the partners
are outlined in a written document called articles of partnership.

• Profits are divided among partners based on their agreed sharing.

• The owner is called a partner.

b. Discuss the advantages of a partnership

• Higher capital because two or more persons will contribute to the common fund.

• It is easy to operate like a sole/single proprietorship

c. Discuss the disadvantages of a partnership

• The profits are divided among the partners.

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• A partner can be held liable for the acts of the other partners.

• In a lawsuit, the personal properties of the partners can be held beyond their contributions and may be
used to answer for any liability of the partnership.

3. Introduce the concept of a Corporation by asking the following suggested questions:

“Assuming your dream is to open a grocery store and not just a sari-sari store but you will need
PHP1,000,000 to start the said business. You have only PHP25,000, your friend Juan has PHP25,000, and your
mother is willing to invest her PHP50,000, but still these are not enough to start your dream grocery store.
Where will you get the money to raise the PHP1 million? You may consider setting up a corporation?”

a. Discuss corporations

• A corporation is a business organized as a separate legal entity (artificial person) under the corporation
law with ownership divided into transferable shares of stocks

• Emphasize that it is the law (Corporation Code of the Philippines) that creates a corporation.

• The corporation begins its existence from the date the Articles of Incorporation is approved by the
Securities and Exchange Commission (SEC).

• The SEC (Securities and Exchange Commission) is the government agency primarily tasked to regulate
private corporations in the Philippines.

• The owners are called stockholders or shareholders.

• The word „Corporation/Incorporation/Corp./Inc.‟ appears in the name of the entity.

• The voting rights of a shareholder is generally based on the percentage of ownership.

• The management of the business is delegated by the shareholders to the Board of Directors

• The ownership is divided into shares and the value of one share may be denominated at a smaller
amount, for example at PHP10 per share.

• The proof of ownership is evidenced by a stock certificate.

At this point, the teacher will share a sample of a stock certificate and articles of incorporation.

b. Discuss the advantages of a corporation

• Can easily raise additional funds by selling shares of stocks to the public.

• Shareholders are not personally liable for the debts of the corporation. The extent of their liability is limited
to their equity (ownership) in the corporation.

c. Discuss the disadvantages of a corporation

• It is relatively complicated to set up.

• Subject to several legal restrictions as listed in the Corporation Code of the Philippines

4. Discuss the nature of Cooperatives by asking the following suggested questions:

“Assuming all the mothers in your barangay decided to open a sari-sari store where all the members
can buy in cash or in credit. Some mothers were also taught how to sew dresses and bags as part of the
project of the group. These bags are then sold to a certain company.

Aside from that, the organization provides seminars to the members on various topics involving
mothers and their roles. At the end of the year, the profits are distributed among the members based on
their capital contribution. The amount of their purchases in the sari-sari store during the year is also
computed and they receive something out of the profit/surplus based on their purchases. This form of
business organization is called a cooperative.

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Module 4 Forms of Business Organizations
a. Discuss cooperatives

• A cooperative is a duly registered association of persons with a common bond of interest, voluntarily
joining together to achieve their social, economic and cultural needs.

• The owners are called members who contribute equitably 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). The
teacher may introduce the role of CDA as a government agency regulating the cooperatives.

b. Discuss the advantages of a cooperative

• Enjoys certain tax exemption privilege

• Promotes the concept of sharing resources

c. Discuss the disadvantages of a Cooperative

• Limited distribution of surplus

• Requires continuous education programs for members.

• The members have active and direct participation in the business of the cooperative.

5. Summarize all the forms of business organizations by asking a learner to write on the board all the forms.

Possible Answers:

1. Sole / Single Proprietorship

2. Partnership

3. Corporation

4. Cooperatives

REFERENCES

Joselito G. Florendo, et. al, (2016). Teaching Guide for Senior High School FUNDAMENTALS OF
ACCOUNTANCY, BUSINESS, AND MANAGEMENT 1. Commission on Higher Education. pp.20-27.

NAME: _____________________________________ GRADE&STRAND: _____________________________________

PRACTICE TASK 1

Direction: Answer the following:

1. Fill-out the blanks.

Item Sole Proprietorship Partnership Corporations Cooperatives

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Module 4 Forms of Business Organizations
agency assigned
primarily to regulate
5. Transfer of
Ownership
6. Liability of Owners

PRACTICE TASK 2

Direction: Answer the following:

1. Differentiate a corporation from a partnership according to number of owners and their liabilities.

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PRACTICE TASK 3

Direction: Answer the following:

1. Give two examples of corporations in the Philippines.

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POST-TEST
Enumerate all the forms of business organizations by nature of ownership.

 _______________________________
 _______________________________
 _______________________________
 _______________________________

ASSIGNMENT

Differentiate a Corporation from Cooperative.

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