The Nature and Form

of Business Organizat
• A business is an activity that is part and parcel of
human society: it is an entity in which economic
resources or inputs, such as materials and labor,
are put together and processed to provide goods
and services or outputs to customers.

• The objective of most businesses is to earn profit

• The fundamental reason for examining the

activities of business from a moral perspective is
that business organizations, in principle, should
help in the promotion of the common good and in
the protection of persons’ rights and interest.
three types of business organizatio
Service businesses provide
services rather than products
to customers.

Merchandising businesses sell

products they purchase from
other businesses to
customers.

Manufacturing businesses
change basic inputs into
products that are sold to
customers.
The Various Forms
of Business Organizati
Sole Proprietorship
– a business owned by one person.
Advantages of a sole proprietorship: (a)
total undivided authority; (b) low
organizational cost and licenses fees; (c) tax
savings; and (d) no resttrictions on type of
business (as long as it is legal).

Disadvantages of a sole proprietorship: (a)

unlimited liability; (b) limitation on size (and
thus on fund-raising power); and (c) limited
by management’s ability to be jack-of-all-
trades.
Partnership
– an association of two or more
people as partners;

it refers to an arrangement in
which the individuals share the
profits and liabilities of a business
venture. Its chief characteristics
are: (a) association of
indiciduals , (b) mutual agency;
(c) limited life; (d) unlimited
liability; and (e) co-ownership of
property.
Corporation
- an entity created by law that is
separate and distinct from its owners
and its continued existence is
dependent upon the corporate statues
of the state in which it is incorporated.
The characteristics that distinguish a corporation from
proprietorships and partnerships are:

a. The corporation has seperate legal existence from its owners.

b. The stockholders have limited liability.
c. Transferable ownership rights (ownership is in shares of stock).
d. Ability to obtain capital (relative ease).
e. The corporation can have a continuous life.
f. The corporation is subject to numerous government
regulations.
g. The corporation must pay an income tax on its earnings, and
the stockholders are required to pay taxes on the dividends they
receive: the result is double taxation of distributed earnings.
h. An artificial/juridical “person” endowed with ability for self-
management, that is, the management structure is at the
discretion of the board of directors.
 Comparison and Contrast Among the Various
Forms of Business Organization
Form of Business Entity
Proprietorship is owned by one individual.
Partnership is owned by two or more individuals.
Corporation is organized under state or federal
statues as a separate legal taxable entity.
Limited liability company (LLC)
Combines the attributes of a partnership and a
corporation.
Characteristics
 70% of the business entities in the United
States.
 Easy and cheap to organize.
 Resources are limited to those of the
owner.
 Used by small businesses.
 10% of business organizations in the
United States (combined with limited
liability companies)
 Combines the skills and resources of more
than one person.
 Generates 90% of business revenues.
 20% of the business organizations in the
United States.
 Ownership is divided into shares called
stock.
 Can obtained large amounts of resources
by issuing stock.
 Used by large businesses.
 10% of business organizations in the
United States (combined with partnerships).
 Often used as an alternative to a
partnership.
 Has tax and legal liability advantages for
owners.
The Role of Small businesses owned by sole proprietors are well
recognized worldwide as vital and significant
Each Form of contributors to economic development, job creation,
and the general health and welfare of economies.
Business
On the other hand, the industrial Revolution brought
Organization with it new forms of machine production that enabled
businesses to make massive quantities of goods to ship
in the and sell in national markets.
Economy
This wave of large corporations has brought with it a
host of new ethical issues, including the possibilities of
exploiting the workers who labor at the new machines,
manipulating the new financial markets that finance
these large enterprises, and producing massive
damage to the environment.