Forms of Business

Organization

..
Acronyms

• DTI-Department of Trade and

Industries
• SEC-Securities and Exchange
Commission
• CDA- Cooperative Development
Authority
• BOD- Board of Director
What is business?

• It is an activity where goods or

services are exchange for money. A
person who is engaged in business
is called an entrepreneur or
businessman.
Forms of business organizations

• Sole or single proprietorship

• Partnership
• Corporation
• Cooperative
Forms of busines Ownership Formation/ registration
organization
1. Sole proprietorship  One individual  Register with the DTI
( i.e., sole proprietor)

2. Partnership  More than one (i.e.,  Formed by contractual

partners) agreement.
 Registered with the
SEC

3. Corporation  More than one (i.e.,  Formed by operation of

stockholders) law
 Registered with the
SEC

4. Cooperative  More than one (i.e.,  Format in accordance

members) with the Cooperative
Code.
 Registered with CDA
Sole proprietorship

Advantage Disadvantage
 You are the boss and you keep all  You assume all the risk of loss
the profits

 Decision making is simple  You take all the responsibility and

rely mostly in yourself

 Relatively easier and less costly  It is more difficult to raise capital

 Lower extent of government  You are personally liable for

regulations and relatively lower debts and obligat
taxes
Partnership
Advantage
 Better decisions can be made
 You share the business risk and
the responsibility
 Is easier to form than
cooperatives and corporations
 Greater capital than some
proprietorship
 Lower extent of government
regulations
Disadvantage
 Making business decisions may
give rise to conflict among the
partners.
 You don't keep all of her profits
 Limited life
 Lesser capital than corporations
 Taxed like a corporations
 Unlimited liability
Corporation
Advantage
 A stockholder who is not a
member of the corporation's
BODs relieved from managerial
responsibility
 Limited liability of the owners
 Greater capital and ease in
raising additional funds
 Can easily transfer your shares
to other investors
 Unlimited life
Disadvantage
 Those who own more shares are
the bosses and enjoy a larger
share of the corporation's profit
 More difficult and more costly
 Greater extent of government
regulation and higher taxes
 You have to wait for the BODs to
declare dividends before you can
get your share
Cooperative
Advantage Disadvantage
 Each member is entitled only one  It is prone to poor management
vote
 It is generally exempt from paying  Susceptible to corruption
taxes
 Easier and less costly than  Cooperative Code places some
cooperative restrictions on the distribution of
cooperative's profit to its member
 Limited liability  More difficult for a cooperative to
sustain growth
 Unlimited life  There are restrictions on the
transfer of member's shares.
Reference:
• Millan, Z.V.(2018).Financial Accounting and
Reporting. Baguio City:Bandolin enterprise.