Fundamentals of Accountancy,

Business and Management 1

Lecture No. 4
Kassandra Kay K. De Roxas, MMT
 Forms of Business Organizations
Content Standards
• The learners demonstrate an understanding of the
various forms of business organizations, as follows:
– Sole /Single Proprietorship
– Partnership
– Corporation
– Cooperatives
 Forms of Business Organizations
Performance Standards
The learners shall be able to:
• differentiate the forms of business organizations in terms of
nature of ownership
• make a list of existing business entities in their community
and identify the form of business organization
 Forms of Business Organizations
Learning Competencies
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)
 Forms of Business Organizations
Preliminary Questions:
– How much is your daily allowance?
– Do you know that with your daily allowance you
can own a company?
DID YOU KNOW THAT!
Your daily allowance can be used to buy shares of
stock of a corporation and that they will become the
owner of such a company
 Forms of Business Organizations
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.
 Users of Accounting Information
SOLE/SINGLE PROPRIETORSHIP
• 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
 Users of Accounting Information
SOLE/SINGLE PROPRIETORSHIP
ADVANTAGES DISADVANTAGES
The owner keeps all the profits. 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 owner makes all the decisions. The amount of capital is limited only
by the wealth of the proprietor.

It is easy to form and operate.

 Forms of Business Organizations
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?”
 Users of Accounting Information
PARTNERSHIP
ADVANTAGES DISADVANTAGES
Higher capital because two or more The profits are divided among the
persons will contribute to the partners.
common fund.
It is easy to operate like a sole/single A partner can be held liable for the
proprietorship 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.
 Users of Accounting Information
PARTNERSHIP
• 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.
 Forms of Business Organizations
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?
 Forms of Business Organizations
CORPORATION
•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).
 Forms of Business Organizations
CORPORATION
•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.
 Forms of Business Organizations
CORPORATION
•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.
 Forms of Business Organizations
CORPORATION
ADVANTAGES DISADVANTAGES
Can easily raise additional funds It is relatively complicated to set
by selling shares of stocks to the up.
public.
Shareholders are not personally Subject to several legal
liable for the debts of the restrictions as listed in the
corporation. The extent of their Corporation Code of the
liability is limited to their equity Philippines
(ownership) in the corporation.
 Forms of Business Organizations
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.
 Forms of Business Organizations
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.
 Forms of Business Organizations
COOPERATIVES
• 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).
 Forms of Business Organizations
COOPERATIVES
ADVANTAGES DISADVANTAGES
Enjoys certain tax exemption Limited distribution of surplus
privilege
Promotes the concept of Requires continuous education
sharing resources programs for members.
The members have active and
direct participation in the
business of the cooperative.
Fill-out the matrix.