Session 2: Nature and Forms of Business Organizations Flashcards
an organization or economic system where goods and services are exchanged for one another or for money
Business
also known as an enterprise, agency, or a firm, is an entity involved in the provision of goods and/or services to consumers
Business
can refer to an organization or to an entire market sector
Business
an entity formed for the purpose of carrying on commercial enterprise
Business Organization
The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands. (1987 Philippine Constitution, Art. XII)
Section 6
renders to its clients in exchange for a fee
Services
engaged in the purchase and sale of goods and earns profit by adding a mark up to the cost of goods it is selling
Merchandising
raw materials are transformed to finished goods that are sold at a price
Manufacturing
owned by one person and operates for their benefit. The owner may operate the business alone or with other people
Sole Proprietorship
simplest organization to form
Sole Proprietorship
no legal distinction between the owner and the business
Sole Proprietorship
decision-making is centralized
Sole Proprietorship
life of the business ends when owner dies
Sole Proprietorship
can provide protection and peace of mind while allowing you to remain a sole proprietor
Business Insurance Policy
Single/sole proprietorships are registered with the __________ __ _____ ___ ________
Department of Trade and Industry
owned by two or more people
Partnership
has unlimited liability for the debts incurred by the business
Partnership
main purpose is the pooling of resources
Partnership
no legal distinction between the business and the owner
Partnership
based on legal agreement or is a valid contract (a partnership agreement)
Partnership
delectus personae
Partnership
time should invest in developing the partnership agreement
Advantage of a Partnership
there is more money available
Advantage of a Partnership
more “heads” contribute to the success of the business
Advantage of a Partnership
losses are shared among the partners and risk are also shared
Advantage of a Partnership
planning and problem-solving are participatory
Advantage of a Partnership
prospective employees may be attracted to the business. If given the incentive to become a partner
Advantage of a Partnership
control of the business is shared and is thus limited
Disadvantage of a Partnership
profits are shared and are thus reduced
Disadvantage of a Partnership
consequences of a poor decision made by a partner affect the other partners
Disadvantage of a Partnership
liability for debts is unlimited
Disadvantage of a Partnership
property invested becomes join property of all
Disadvantage of a Partnership
As many as __ people can join together in a partnership
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The Articles of Partnership is registered with the __________ ___ ________ which exercises regulatory power over partnerships.
Securities and Exchange Commission
have limited liability and the business has a separate legal personality from its owners
Corporation
can be either government-owned or privately owned
Corporation
can organize either for profit or as non-profit organizations
Corporation
Corporations are governed by _____ _________ ______ __ known as the Corporation Code of the Philippines.
Batas Pambansa Bilang 68
A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence
Sec. 2. Corporation Defined
corporation exists as an artificial person It is called artificial because it is created by virtue of law, BP 68, unlike natural
persons who come into existence by birth. As a person, it has a personality that is separate and distinct from that of the stockholders or owners. Also as a person, it has rights that are given it also by the corporation code
Corporate Personality
a stockholder may sell his/her share of stocks and all the rights pertaining to the shares are transferred to the buyer of those shares. When the stockholder dies, the shares are transferred to his/her heirs
Power of Succession
a corporation may file a case by itself. By the same vein, a case may be filed against it in its own name. Since it is an artificial being, it will be represented by its officers
The Right to Sue and be Sued in the Corporate Name
since the corporation has a separate personality from that of its stockholders, it also has a separate liability from them. Meaning, if the corporation suffers loss and liability, only the properties of the corporation will be used to pay its debts and creditors.
Separate Liability that of Stockholders
capital is divided into shares and is authorized to distribute surplus profit to its owners called stockholders. A stockholder is entitled to votes equivalent to the number of his shares
Stock Corporation
capital is not divided into shares; are prohibited from distributing any surplus profit to its owners
Non-stock Corporation
Where to register stock or non-stock?
Securities and Exchange Commission
Requirements of Corporation Registration
- at least 5 incorporators who are natural persons
- legal of age
- have the capacity to contract
capital is easily raised
Advantages of a Corporation
liability for debts of the business is limited to your share capital
Advantages of a Corporation
tasks need to be done by the owners but by hired employees
Advantages of a Corporation
owners, without approval of the board of directors, can’t do major decisions
Disadvantages of a Corporation
corporate and individual profits, int he form of dividends, are separately taxed
Disadvantages of a Corporation
more rules and regulations to comply with
Disadvantages of a Corporation
more expenses are involved
Disadvantages of a Corporation
a group of individuals, elected to represent shareholders
Board of Directors
establish policies for corporate management and oversight, making decisions on major company issues
Board of Directors
a business or organization owned by and operated for the benefit of those using its services
Cooperative
to provide goods and services to its members and thus enable them to attain increased income and savings, investments, productivity, and purchasing power and promote among them equitable distribution of net surplus through maximum utilization of economies of scale, cost-sharing and risk-sharing without, however, conducting the affairs of the cooperative for eleemosynary or charitable purposes
Cooperative
shall provide maximum economic benefits to its members, teach them efficient ways of doing things in a cooperative manner, and propagate cooperative practices and new ideas in business and management and allow the lower income groups to increase their ownership in the wealth of this nation
Cooperative
The Articles of Cooperation is filed with the ____________ ____________ _________ which exercises regulatory power over cooperatives
Cooperative Development Authority
capital is easily raised
Advantages of a Cooperative
liability is limited
Advantages of a Cooperative
more people benefit from profits earned
Advantages of a Cooperative
owners may employ managers with relevant qualifications
Advantages of a Cooperative
it may be tax-exempted
Advantages of a Cooperative
control of the business is shared
Disadvantages of a Cooperative
ideas and decisions made by the board have to be accepted by the general membership
Disadvantages of a Cooperative
