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29 views2 pages

Document

Uploaded by

cyrelljanenasis
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© © All Rights Reserved
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Test and Apply your Knowledge

1. Differentiate the four (4) business forms discussed in the module.


There are four different types of business forms that are based on how many people are
leading. First, the sole proprietorship is when the organization is led, managed, and
operated by one person. It can be created without formalities and is easy to terminated,
however it has limitations as the owner's assets are the only source of the capital, which
can hinder the growth and expansion of the business. Second, the partnership is the
business wherein there are two or more co-owners. There are many types of partners
depending on what role the person play in their business. There is the ‘General Partner’
who shares ownership and management of the business, then the ‘Limited Partner’ who
have limited financial liability to the business as they don’t take active role in the
management, and many more. Third, the corporation is a business form that is
considered as an artificial being that is created only in contemplation of law. It is
invisible and intangible and may own its own property, which is not affected by death or
withdrawal of its stockholders but is entitled to due process. However, corporations
consume considerate time, effort, and money because of the process of legal
formalities and documents needed to create one. It is also subject to taxation as a legal
entity in business. Lastly, cooperative is created under the Republic Act 6938, also
known as Cooperative Code of the Philippines, which stated that Cooperative is
registered as association of persons with same interest and voluntary joined together to
achieve a lawful common social or economic end. Meaning, it is like corporation
because it is manage by a group of people but also different as it is not considered as
an entity. The members of cooperative shares the same contribution to the capital,
hence they earned the same risks and benefits.
2. What do you think is the best form of ownership? Explain.
I think the best form of ownership is Corporation but not necessarily for every business.
The optimal choice depends on various factors, including the nature of the business, its
size, risk tolerance, and long-term goals. It has many advantages as it omits limited
liability because shareholders’ personal assets are generally protected from the
company’s debts and liabilities. It is also perpetual existence as it acknowledge as an
artificial entity separated to the owner and can continue to exist even if ownership
changes, ensuring business continuity. Corporations can also raise capital through the
issuance of stocks and bonds, making it easier to finance growth, so it is easy to raise
capital. It often have professional management teams, which can lead to more efficient
operations so there is only little possibility of liability compared to the other types of
ownership. In some cases, corporations may benefit from certain tax advantages, such
as incentives, deductions, and credits.
Despite this advantages, there are also disadvantages especially in terms of control to
the company as it has potential to be taken over from the founders. However, this can
be overcome maintaining that the absolute power of the founder by appointing trusted
people on the right position they deserve and keeping the management clean and away
from corruption.
3. Why is Cooperative advantageous over a Corporation?
Corporations offer advantages like limited liability and ease of raising capital,
cooperatives present unique benefits. Cooperatives prioritize democratic member
control, ensuring equal voting rights for all members. This community-driven approach
leads to decisions that benefit the entire membership, not just a select few.
Cooperatives also promote economic participation by allowing members to own the
business and share in its profits.
Additionally, cooperatives often focus on social responsibility and ethical business
practices. They are known for their long-term sustainability and resilience, making them
less vulnerable to economic downturns. By distributing profits among members,
cooperatives can help reduce income inequality and foster a more equitable economic
system. However, the suitability of a cooperative over a corporation depends on various
factors, including the business's nature, goals, and regulatory environment.
4. Discuss the advantage of a corporation in terms of capital generation.
A corporation's primary advantage in terms of capital generation lies in its ability to
attract a wide range of investors through the issuance of stocks and bonds. By selling
shares of ownership, corporations can tap into a vast pool of capital from individual
investors, institutional investors, and even the public market. This flexibility allows
corporations to raise significant funds for expansion, research and development,
acquisitions, and other strategic initiatives.
Furthermore, corporations can issue bonds, which are essentially loans from investors
to the company. This provides another avenue for raising capital, especially for large-
scale projects or long-term investments. The ability to access diverse sources of capital
gives corporations a significant advantage over other business structures, such as sole
proprietorships or partnerships, which typically rely on personal savings or loans from
banks.

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