module 6

Business

An organization or entity involved in commercial, industrial, or professional activities.

Purpose of Business

To produce goods or services for profit or public benefit.

Types of Business

For-profit or non-profit.

Range of Business

Can be small local operations or large global corporations.

Main Types of Business Organization

Sole Proprietorship, Partnership, Corporation, Cooperative.

Sole Proprietorship

A business owned and managed by one person.

Sole Proprietorship Features

1. Single Ownership

2. No Separate Entity

3. Easy Formation and Closure

4. Unlimited Liability

5. One-Person Management

6. Profit or Loss Belongs to Owner

7. Continuity Depends on Owner

Single Ownership

One person owns and controls the entire business.

No Separate Entity

The owner and business are legally the same.

Easy Formation and Closure

Simple registration with DTI and local permits.

Unlimited Liability

Owner’s personal assets can be used to pay debts.

One-Person Management

Owner makes all decisions alone.

Profit or Loss Belongs to Owner

All earnings or losses go to the owner.

Continuity Depends on Owner

Business ends if the owner retires, dies, or quits.

Partnership

A business owned by two or more people who share profits and losses.

Partnership Features

1. Two or More Members

2. Agreement

3. Lawful Business

4. Competence of Partners

5. Sharing of Profit

6. Unlimited Liability

7. Voluntary Registration

8. Separate Legal Existence

9. Principal-Agent Relationship

10. Restriction on Transfer of Interest

11. Continuity of Business

Two or More Members

At least two owners are required to form a partnership.

Agreement

A written or verbal contract defining roles, capital, and profit share.

Lawful Business

Must operate legally and not engage in illegal activities.

Competence of Partners

Partners must be legally capable of entering contracts.

Sharing of Profit

Partners share income and losses based on their agreement.

Unlimited Liability

General partners are personally responsible for debts.

Voluntary Registration

Not required but registering with SEC adds protection.

Separate Legal Existence

A registered partnership is treated as separate from its owners.

Principal-Agent Relationship

Each partner’s actions affect the whole partnership.

Restriction on Transfer of Interest

Partners cannot sell their share without consent.

Continuity of Business

Ends if a partner leaves or dies unless renewed.

Corporation

A business where a group of people acts as one entity owned by shareholders.

Advantages of Corporation

1. Separate Legal Existence

2. Limited Liability

3. Transferable Ownership

4. Ability to Acquire Capital

5. Continuous Life

Separate Legal Existence

Independent from its owners and can own property, sue, or be sued.

Limited Liability

Shareholders only lose the amount they invested.

Transferable Ownership

Shares can be sold or transferred easily.

Ability to Acquire Capital

Can raise funds by selling stocks or loans.

Continuous Life

Continues even if owners or managers leave or die.

Disadvantages of Corporation

Government Regulations, Additional Taxes, Complex Management.

Government Regulations

Must comply with SEC, BIR, and other government agencies.

Additional Taxes

Pays more taxes such as corporate income tax and VAT.

Complex Management

Decision-making is slower due to hierarchy.

Cooperative

An organization owned and operated by a group of people for their mutual benefit.

Cooperative Characteristics

Joint Ownership, Mutual Benefit, Profit Sharing, Equal Voting Rights, Limited Liability.

Joint Ownership

Members jointly own and manage the cooperative.

Mutual Benefit

Aims to help all members instead of maximizing profit.

Profit Sharing

Surplus income is shared among members.

Equal Voting Rights

Each member has one vote regardless of investment.

Limited Liability

Members are only responsible for debts up to their investment.

Advantages of Cooperative

Easy to Form, Limited Liability, Stability, Equality in Voting Rights.

Easy to Form

At least 15 people can register with CDA.

Limited Liability

Members’ personal properties are safe from business debts.

Stability

Members are committed, making it less likely to close.

Equality in Voting Rights

All members have one equal vote.

Disadvantages of Cooperative

Conflict, Lack of Privacy, Lack of Efficiency, Lack of Government Control.

Conflict

Members may disagree on management decisions.

Lack of Privacy

Financial records are open to all members.

Lack of Efficiency

Decision-making is slow due to member consultation.

Lack of Government Control

Less regulation can cause mismanagement.

Types of Cooperatives

Consumers’ Cooperative, Farmers’ Cooperative, Marketing Cooperative, Cooperative Housing Society, Credit Cooperative, Producers’ Cooperative.

Consumers’ Cooperative

Sells goods to members at fair prices.

Farmers’ Cooperative

Helps farmers buy supplies cheaply and sell crops together.

Marketing Cooperative

Helps members sell products in bulk for better prices.

Cooperative Housing Society

Provides affordable homes to members.

Credit Cooperative

Offers low-interest loans and promotes savings.

Producers’ Cooperative

Owned by producers or artisans who make and sell goods together.