FORMS OF

BUSINESS
ORGANIZATION
CONTENT
01 PRE-TEST

02 LESSON 4

03 PARTNERSHIP

04 SOLE PROPRIETORSHIP

05 SOLE CORPORATION

06 CORPORATION

07 COOPERATIVE

08 ADVANTAGES &DISADVANTAGES
PRE-TEST ACTIVITY 1.
Directions: Match the column A to column B. Write your answer in the space
provided before the number
Aft e r de c i din g to st a rt a bu sin e ss (a n d th e
bu sin e ss t o pu rsu e ), on e o f t he i mport a nt i ssu e s is
t he form o f bu sin e ss e n t it y t ha t wi l l se rv e a s t he
ve h i c le i n pu rsu in g t he busi ne ss. You ma y sa y
t ha t th e ne xt i mp ort a nt issue i s th e so urc e of
fund ing, wh ic h i s c orre c t , bu t t ha t i ssu e wi l l b e
di sc u sse d lat e r. R i gh t no w, l e t ’s foc u s on t h e
forms o f bu sin e ss.
The choice of the form of business or business
organization depends on various factors. In certain
business, like banks, the law requires that the business
entity must be a corporation. A small business, like
your friendly sari-sari store, is better off as a sole
proprietorship, although it could also be converted to
another form of business if the circumstances require
that shift.
PARTNERSHIP
Partnership consists of two or more persons
who bind themselves to contribute money or
industry to a common fund, with the
intention of dividing the profits among
themselves. The most common example of
partnerships are professional partnerships,
like in the case of law firms and accounting
firms.Just like a corporation, it is registered
with the Securities and Exchange
Commission (SEC).
 ADVANTAGES
• Partnerships are relatively easy to establish; however, time should
be invested in developing the partnership agreement.
• With more than one owner, the ability to raise funds may be
increased.
• The profits from the business flow directly through to the partners’
personal tax return.
• Prospective employees may be attracted to the business if given the
incentive to become a partner.
• The business usually will benefit from partners who have
complementary skills.
 DISADVANTAGES
• Partners are jointly and individually liable for the actions
of the other partners.
• Profits must be shared with others.
• Since decisions are shared, disagreements can occur.
• Some employee benefits are not deductible from business
income on tax returns.
• The partnership may have a limited life; it may end upon
the withdrawal or death of a partner.
TYPES OF PARTNERSHIP
1. General Partnership Partners divide responsibility for
management and liability, as well as the shares of profit or loss
according to their internal agreement. Equal shares are
assumed unless there is a written agreement that states
differently.

2 . Limited Partn ersh ip and Partnership with limited

3. Joint Venture liab ility “Limited” means that most of the partners
h av e limited liab ility (to the extent of their
A cts like a general partner ship but is clear ly f or
in vestmen t) as w ell as limited input regarding
a limited per iod of time or a single p r oject. I f managemen t d ecisio n, which generally encourages
th e par tner s in a joint venture r epeat the in vesto rs fo r sh or t term projects, or for investing in
activity, they w ill be r ecognized as an ong oing cap ital assets. Th is f o rm of ownership is not often
par tner ship and w ill have to file as such and u sed f or o p eratin g retail or service businesses.
Fo rming a limited p ar tnership is more complex and
distr ibute accumulated partner ship assets u pon
fo r mal th an th at of a general partnership.
dissolution of the entity.
SOLE
Also referred to as “single proprietorship,” a
PROPRIETORSHIP
sole proprietorship is the simplest form of
business and the easiest to register, through the
Bureau of Trade Regulation and Consumer
Protection (BTRCP) of the Department of
Trade and Industry (DTI). It is owned by an
individual who has full control/authority of its
own and owns all the assets, as well as
personally answers all liabilities or losses. The
fact that it is run by the individual means that
it is highly flexible and the owner retains
absolute control over it.
 ADVANTAGES

• Easiest and least expensive form of ownership to

organize.
• Sole proprietors are in complete control, and within the
parameters of the law, may make decisions as they see
fit.
• Profits from the business flow-through directly to the
owner’s personal tax return.
• The business is easy to dissolve, if desired.
 DISADVANTAGES
• Sole proprietors have unlimited liability and are legally responsible for
all debts against the business. Their business and personal assets are at
risk.
• May be at a disadvantage in raising funds and are often limited to
using funds from personal savings or consumer loans.
• May have a hard time attracting high-calibre employees, or those that
are motivated by the opportunity to own a part of the business.
• Some employee benefits such as medical insurance premiums are not
directly deductible from business income (only partially as an
adjustment to income).
CORPORATION
A corpo ration i s a jurid ic al ent i ty est ab li she d
under th e Co rporation Code a nd regi st ere d
with the SEC. It must be cre ate d b y o r
composed of at l east 5 nat ura l persons up t o a
maximu m of 15, tech nic al ly cal l ed
“incorporators” (the 5-person mi ni mu m has
been removed un der t he Re vi sed Corp orat i on
Code). Ju rid ical person s, li ke ot her
corporation s o r p artnershi ps, c anno t be
incorpora to rs, althoug h t hey may sub sequ ent ly
purchase shares and be come c orp orat e
sharehold ers/stoc khol ders.
 ADVANTAGES
• Shareholders have limited liability for the corporation’s debts or judgments
against the corporation.
• Generally, shareholders can only be held accountable for their investment in
stock of the company. (Note however, that officers can be held personally
liable for their actions, such as the failure to withhold and pay employment
taxes.
• Corporations can raise additional funds through the sale of stock.
• A Corporation may deduct the cost of benefits it provides to officers and
employees.
• Can elect S Corporation status if certain requirements are met. This election enables
company to be taxed similar to a partnership.
 DISADVANTAGES
• The process of incorporation requires more time and money
than other forms of organization.
• Corporations are monitored by federal, state and some local
agencies, and as a result may have more
• Paperwork to comply with regulations.
• Incorporating may result in higher overall taxes. Dividends
paid to shareholders are not deductible from business income;
thus, this income can be taxed twice.
COOPERATIVE
A cooperative is an organization
established for the purpose of
purchasing and marketing the products
of its members, i.e., shareholders,
and/or procuring supplies for resale to
the members, whose profits are
distributed to the members (in the
form of patronage dividends), not on
the basis of the members' equity
According to REPUBLIC ACT 9520 also
known as "Philippine Cooperative Code of
2008". The primary objective of every
cooperative is to help improve the quality of
life of its members. Towards this end, the
cooperative shall aim to
• Provide goods and services to its members to enable them to
attain increased income, savings, investments, productivity,
and purchasing power, and promote among themselves
equitable distribution of net surplus through maximum
utilization of economies of scale, cost-sharing and risk-
sharing;
• Provide optimum social and economic benefits to its
members;
• Teach them efficient ways of doing things in a cooperative
manner;
• Propagate cooperative practices and new ideas in
business and management;
• Allow the lower income and less privileged groups to
increase their ownership in the wealth of the nation;
and
• Cooperate with the government, other cooperatives
and people-oriented organizations to further the
attainment of any of the foregoing objectives.
ASSIGNMENT

Reflective Question: If you have an existing sari-sari

store, what are the possible things you will consider in
terms of business registration based on the topic
discussed to respond to the COVID-19 pandemic? Cite
at least two and explain. Write your answer in the space
provided.
 BORCELLE

THANK YOU