The Nature and Forms of Business Organization

These flashcards cover the definitions, types, advantages, disadvantages, and legal characteristics of various business organizations, as well as their roles and ethical implications in the economy.

What is a business?

An entity in which economic resources or inputs, such as materials and labor, are put together and processed to provide goods or services or outputs to customers.

What is the primary objective of most businesses?

To earn a profit.

How is profit defined in a business context?

The difference between the amount received and the amount spent in buying, operating, or producing goods or services.

What are the three types of business organizations operated for profit?

Service businesses, merchandising businesses, and manufacturing businesses.

What characterizes a service business?

It provides services rather than products to customers.

What is the business model of a merchandising business?

It sells products purchased from other businesses to customers.

How does a manufacturing business operate?

It converts basic inputs into products that are sold to customers.

What is a Sole Proprietorship?

A business owned by one person.

What are the disadvantages of a Sole Proprietorship?

Unlimited liability, limitation on size and fund-raising capability, and limitation by management's ability to be a jack-of-all-trades.

What is a Partnership?

A voluntary association of two or more people as partners where individuals share the profits and losses of a business entity.

What are the five main characteristics of a partnership?

(a) association of individuals, (b) mutual agency, (c) limited life, (d) unlimited liability, and (e) co-ownership of property.

What does 'mutual agency' mean in a partnership?

An act of any partner is binding on all other partners, so long as the act appears to be appropriate for the partnership.

When does partnership dissolution occur?

Whenever a partner withdraws or a new partner is admitted.

What is a Corporation?

An entity created by law that is separate and distinct from its owners.

According to the Revised Corporation Code of the Philippines (February $2019$), what is the default duration of a corporation's existence?

A corporation shall have perpetual existence unless its articles of incorporation provides otherwise.

What entity is the chief governing authority of a corporation?

The Board of Directors.

Which government agency in the Philippines is responsible for filing applications of incorporation?

The Securities and Exchange Commission ($SEC$).

What are corporate bylaws?

The rules and procedures for conducting the corporation's affairs, prepared by the corporate management and board of directors.

In terms of taxation, how do corporations differ from their owners?

Corporations file taxes separately from their owners; owners only pay taxes on corporate profits paid to them as salaries, bonuses, and dividends.

What is the definition of a micro business based on employment?

A firm that employs fewer than $10$ people.

What role did the Industrial Revolution play in the evolution of business organizations?

It brought machine production that enabled massive quantities of goods to be made, requiring large organizations (corporations) to manage the enormous number of people needed for assembly lines.

What are some ethical issues identified with the rise of large corporations?

Exploiting workers, manipulating financial markets, and producing massive damage to the environment.