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What is Business?
A business is an organization or economic system where goods and services are exchanged for
one another or for money. Every business requires some form of investment and enough
customers to whom its output can be sold on a consistent basis to make a profit. Business can be
privately owned, not-for-profit, or state-owned.
Advantages of a Partnership
• Partnership are relatively easy to establish; however, time should be invested in
developing the partnership agreement.
• With more than one owner, the ability to raise funds may be increased.
• The profits from the business flow directly through to the partners’ personal tax
return.
• Prospective employees may be attracted to the business if given the incentive to
become a partner.
• The business usually will benefit from partners who have complementary skills.
Disadvantages of a Partnership
• Partners are jointly and individually liable for the actions of the other partners.
• Profits must be shared with others.
• Since decisions are shared, disagreements can occur.
• Some employee benefits are not deductible from business income on tax returns.
• The partnership may have a limited life; it may end upon the withdrawal or death
of a partner.
3. Corporation – The owners of a corporation have limited liability and the business has a
separate legal personality from its owners. Corporations can be either government-owned
or privately owned. They can organize either for profit or as not-for-profit organizations.
A privately owned, for-profit corporation is owned by its shareholders, who elect a board
of directors to direct the corporation and hire its managerial staff. A privately owned, for-
profit corporation can be either privately held by a small group of individuals, or publicly
held, with publicly traded shares listed on a stock exchange.
Advantages of a Corporation
• Shareholders have limited liability for the corporation’s debts or judgments
against the corporation.
• Generally, shareholders can only be held accountable for their investment in the
stock of the company.
• Corporations can raise additional funds through the sale of stock.
• A corporation may deduct the cost of benefits it provides to officers and
employees.
Disadvantages of a Partnership
• The process of incorporation requires more time and money than other forms of
organizations.
• Corporations are monitored by the government and some local agencies, and as a
result, may have more paperwork to comply with regulations.
• Incorporating may result in higher overall taxes. Dividends paid to shareholders
are not deductible from business income; thus, this income can be taxed twice.
4. Cooperative – Often referred to as a “co-op”, a cooperative is a limited liability business
that can organize for-profit or non-profit. A cooperative differs from a corporation in that
it has members, not shareholders, and they share decision-making authority.
business sells a product without changing its form. Examples are grocery stores,
convenience stores, distributors, and other resellers.
a. Retailers and distributors – act as middleman and get goods produced by
manufacturers to the intended consumers; they make their profits by marking up their
prices. Most stores and catalog companies are distributors or retailers.
3. Manufacturing businesses – Unlike a merchandising business, a manufacturing business
buys products with the intention of using them as materials in making a new product.
Thus, there is a transformation of the products purchased. A manufacturing business
combines raw materials, labor, and factory overhead in its production process. The
manufactured goods will then be sold to customers.
a. Agriculture and mining business – produce raw material, such as plants or minerals.
b. Manufacturers – produce products, either from raw materials or from component
parts, then sell their products at a profit, for example cars, clothing or pipes.
c. Real-estate business – sell, rent and develop properties including land, residential
homes and other buildings.
Justice usually has been used regarding a standard of rightness, fairness often has been
used with regard to an ability to judge without reference to one’s feelings or interest;
fairness has also been used to refer to the ability to make judgments that are not overly
general but that are concrete and specific to a particular case.
a. Principles of Justice
“Individuals should be treated the same, unless they differ in ways that are relevant to
the situation in which they are involved.”
b. Different Kinds of Justice
• Distributive Justice – refers to the extent to which society’s institutions ensure
that benefits and burdens are distributed among society’s members in ways that
are fair and just.
• Retributive or Corrective Justice – refers to the extent to which punishments
are fair and just.
• Compensatory Justice – refers to the extent to which people are fairly
compensated for their injuries by those who have injured them; just compensation
is proportional to the loss inflicted on a person.
2. Accountability – is the obligation of an individual or organization to account for its
activities, accept responsibility for them, and to disclose the results in a transparent
manner.
Corporate Accountability refers to the act of being accountable to the stakeholders of
an organization, which may include shareholders, employees, suppliers, customers, the
local community, and even the particular country that the firm operates in.
Accountability is often used synonymously with responsibility, blameworthiness, and
liability. As an aspect of governance, accountability has been central to discussions
related to problems in the public, non-profit, and corporate sectors.
3. Transparency – refers to the lack of hidden agendas ad conditions, accompanied by the
availability of full information required for collaboration, cooperation, collective decision
making. Transparency is the essential condition for a free and open exchange whereby
the rules and reasons behind regulatory measures are fair and clear to all participants.
Corporate transparency describes the extent to which a corporation’s actions are
observable by outsiders. This is consequence of regulation, local norms, and the set of
information, privacy, and business policies concerning corporate decision-making and
operations openness to employees, stakeholders, shareholders, and the general public.
Transparency, in a business or governance context, is honesty and openness.
Transparency and accountability are generally considered the two (2) main pillars of
good corporate governance.
4. Stewardship – was originally made up of the tasks of a domestic steward, from stig
(house, hall) and weard, (ward, guard, guardian, keeper). Stewardship, in the beginning,
referred to the household servant’s duties for bringing food and drink to the castle’s
dining hall. Steward is a person employed to manage another’s property.
In business, it has been used by the CEOs to denote the concept that “as a steward, you
try to leave the company in better shape for your successor than it was handed over to
you by your predecessor.”
F. Bookkeeping – accounting, simply put, is keeping track of money. The most basic activity in
accounting is bookkeeping. Bookkeeping is the process of recording all financial transactions
to keep track of the cash flow.
G. Reportorial Requirements – business reporting or enterprise reporting is the public
reporting of operating and financial data by a business enterprise. There are so many kinds of
reports, but what are usually required by governments and regulating agencies are the
Annual Report and Financial Statement.
• Annual Report – is a comprehensive report on a company’s activities throughout the
preceding year. Annual reports are intended to give shareholders and other interested
people information about the company’s activities and financial performance. Annual
report usually includes:
General Corporate Notes to the Financial Statements
Information Chairperson’s Statements
Accounting Policies Director’s Report
Balance Sheet Operating and Financial Review
Cash Flow Statement Other Features
Non-audited Information Auditor’s report
Profit and Loss Account
• Financial Statement – or financial report is a formal record of the financial
activities and position of a business, person, or other entity. Relevant financial
information is presented in a structured manner and in a form easy to understand.
They typically include basic financial statements, accompanied by a management
discussion and analysis: A balance sheet, an income statement and statement of
changes in equity.
H. Documentation – refers to the process and items which serve as evidence for the validity or
truth of a certain claim or statement. It is necessary for the conduct of any business,
transaction, or project. It serves as a record of every official action taken and may come in
very handy in the future, should a chronological account of events be necessary for legal or
business purposes.
Reference:
Jerusalem, V., Palencia M, & Palencia J. (2017). Business ethics and social responsibility:
concepts, principles, & practices of ethical standards. Manila, Philippines:
FASTBOOKS Educational Supply, Inc.
Orjalo, V. & Frias S. (2016). Business ethics and social responsibility: Principles, policies,
programs and practices. Quezon City, Philippines: The Phoenix Publishing House, Inc.
Cortez, F. (2016). Business ethics and social responsibility. Quezon City, Philippines: Vibal
Group, Inc.