Andaya, Antonio Miguel Luis R.

4 types of Business Organizations:

1.) Sole Proprietorship – A business owned by someone for their own benefit. The business’ existence is
entirely dependent on the owner’s decisions, so when the dies, so does the business.

Advantages:

- All profits are subject to the owner.

- There is very little regulation for proprietorship
- Owners have total flexibility when running the business

Disadvantages:

- Owner is 100% liable for business debts

- Equity is limited to the owner’s personal resources
- Ownership of proprietorship is difficult to transfer

Examples:

- A Ramen restaurant owned by one Japanese. He is the one who cooks and at the same time
manages his own restaurant.
- A person who owns his own Photography Company. He or she is the one who does the service
and at the same time manages his own business.
- A person who owns a watch repair shop. This person is the one fixing the watches and at the
same time manages his own business.

2.) Partnership - A legal form of business operation between two or more individuals who share
management and profits. In a general partnership, the partners manage the company and assume
responsibility for the partnership's debts and other obligations.

Advantages:

- Business is easy to establish and start-up costs are low

- More capital is available for the business
- There is opportunity for income splitting, an advantage of particular importance due to resultant
tax savings

Disadvantages:

- Each partner is an agent of the partnership and is liable for actions by other partners
- There is a risk of disagreements and friction among partners and management
- The liability of the partners for the debts of the business is unlimited

Examples:

- Apple & IBM

- Spotify & Uber
- Alexander Wang & H&M
Andaya, Antonio Miguel Luis R.

3.) Corporation - A corporation is a legal entity that is separate and distinct from its owners.
Corporations enjoy most of the rights and responsibilities that an individual possesses; that is, a
corporation has the right to enter into contracts, loan and borrow money, sue and be sued, hire
employees, own assets and pay taxes. It is often referred to as a "legal person."

Advantages:

- Limited liability. The shareholders of a corporation are only liable up to the amount of their
investments. The corporate entity shields them from any further liability.
- Source of capital. A publicly-held corporation in particular can raise substantial amounts by
selling shares or issuing bonds.
- Ownership transfers. It is not especially difficult for a shareholder to sell shares in a
corporation, though this is more difficult when the entity is privately-held.
- Perpetual life. There is no limit to the life of a corporation, since ownership of it can pass
through many generations of investors.

Disadvantages:

- Double taxation. Depending on the type of corporation, it may pay taxes on its income,
after which shareholders pay taxes on any dividends received, so income can be taxed
twice.
- Excessive tax filings. Depending on the kind of corporation, the various types of income and
other taxes that must be paid can require a substantial amount of paperwork.
- Independent management. If there are many investors having no clear majority interest,
the management team of a corporation can operate the business without any real
oversight from the owners.

Examples:

- Jollibee Food Corporation – Owned by Tony Tan Caktiong

- United Laboratories Incorporated
- SM Group of Companies

4. Cooperative - A cooperative (also known as co-operative, co-op, or coop) is

"an autonomous association of persons united voluntarily to meet their common economic, social, and
cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise".
Andaya, Antonio Miguel Luis R.

Advantages:

- Purchasing Power. A cooperative offers its members purchasing power. By pooling resources at
purchasing time, the cooperative can receive volume discounts.
- Marketing Power. A cooperative can purchase advertising and pay for other marketing at
advantageous rates.

Disadvantages:

- Sharing price with competition. The disadvantage of purchasing through a co-operative is that
you and your competitors share the same pricing and products.
- Generic Marketing. The disadvantage of marketing through a cooperative is you may lose
control of your unique branding for your business.

Examples:

- Binuklod ng Sipag at Galing (BISIG) Labor Service Cooperative

- Hygiene Partner Service Cooperative
- TOCS Community Multi-Purpose Cooperative