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Business Organization

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3 views4 pages

Business Organization

Uploaded by

naelthiombiano839
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Here’s a more comprehensive note on Business Organization for

Grade 10:

Business Organization refers to the legal structure of a business,


which affects ownership, management, liability, taxes, and the
ability to raise capital. The main types of business organizations
include Sole Proprietorship, Partnership, Corporation, Cooperative,
and Limited Liability Company (LLC). Each has unique features and
is suited to different business needs.

1. Sole Proprietorship
• Definition: A business owned and managed by one individual.
• Key Features:
• Ownership: Single owner.
• Control: Full control by the owner.
• Liability: Unlimited liability; the owner is personally
responsible for all business debts and obligations.
• Taxation: Profits are taxed as personal income of the owner.
• Advantages:
• Easy to set up and manage.
• Owner retains all profits.
• Disadvantages:
• Personal assets are at risk.
• Limited ability to raise capital.
• Business continuity depends on the owner.

2. Partnership
• Definition: A business owned by two or more individuals who
share the management, profits, and liabilities.
• Types:
• General Partnership: All partners manage the business and
share liabilities equally.
• Limited Partnership: Some partners have limited liability and
do not manage the business.
• Key Features:
• Ownership: Two or more individuals.
• Control: Shared between partners.
• Liability: General partners have unlimited liability, while
limited partners are only liable up to their investment.
• Taxation: Profits are shared and taxed as personal income for
each partner.
• Advantages:
• Shared responsibility and decision-making.
• More capital can be raised than in a sole proprietorship.
• Disadvantages:
• Potential for conflicts between partners.
• General partners have personal liability.

3. Corporation
• Definition: A separate legal entity owned by shareholders,
managed by directors, and run by officers.
• Key Features:
• Ownership: Shareholders own the company.
• Control: Managed by a board of directors and operated by
officers.
• Liability: Limited liability; shareholders are not personally
responsible for the company’s debts.
• Taxation: The corporation pays taxes on profits, and
shareholders pay taxes on dividends (double taxation).
• Advantages:
• Limited liability for shareholders.
• Easier to raise capital by selling shares.
• Perpetual existence (business continues even if owners
change).
• Disadvantages:
• More complex and costly to set up.
• Subject to more regulations and government oversight.
• Double taxation of corporate income and dividends.

4. Limited Liability Company (LLC)


• Definition: A hybrid structure that offers the limited liability of
a corporation with the tax benefits of a partnership.
• Key Features:
• Ownership: Owned by members.
• Control: Flexible management structure, members can
manage or appoint managers.
• Liability: Limited liability; members are not personally
responsible for business debts.
• Taxation: Profits are passed through to members and taxed
as personal income (no corporate tax).
• Advantages:
• Limited liability protection.
• Flexibility in management and taxation.
• Fewer regulations than corporations.
• Disadvantages:
• More expensive to establish than a sole proprietorship or
partnership.
• May have limited life span if a member leaves or dies.

5. Cooperative (Co-op)
• Definition: A business owned and operated by a group of
individuals for their mutual benefit.
• Key Features:
• Ownership: Owned by members, who are also its customers,
employees, or suppliers.
• Control: Managed democratically; each member typically has
one vote, regardless of their investment.
• Liability: Limited liability; members are only liable up to their
investment.
• Taxation: Profits are distributed among members and taxed
as personal income.
• Advantages:
• Focus on member needs rather than profits.
• Shared resources and profits among members.
• Disadvantages:
• Decision-making can be slower due to democratic
process.
• Limited ability to raise capital compared to corporations.

6. Franchise
• Definition: A business model where a franchisor allows a
franchisee to operate a business under its brand and system.
• Key Features:
• Ownership: Franchisee owns the local outlet, but the brand
and system are owned by the franchisor.
• Control: Franchisees follow the franchisor’s established
business model and guidelines.
• Liability: Franchisees are responsible for their own outlet, but
benefit from brand recognition.
• Taxation: Franchisees are taxed like independent business
owners.
• Advantages:
• Access to established brand and business model.
• Support and training from the franchisor.
• Disadvantages:
• High start-up costs (franchise fees and royalties).
• Limited flexibility in decision-making.

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