FORMS OF BUSINESS ORGANIZATIONS

Group 12

It is important that the business owner seriously considers the different forms of business organization types such as sole proprietorship, partnership, and corporation.

FORMS OF BUSINESS ORGN

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Which organizational form is most appropriate can be influenced by tax issues, legal issues, financial concerns, and personal concerns. For the purpose of this overview, basic information is presented to establish a general impression of business organization.

FORMS OF BUSINESS ORGN

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1. Sole Proprietorship A sole proprietorship is a

business owned and managed by one individual. It refers to an individual who owns the business and is personally responsible for its debts. Since the business is the same legal entity as the proprietor, it ceases to exist upon the proprietor's death.

FORMS OF BUSINESS ORGN

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SOLE PROPRIETORSHIP

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Single Owner (Sole Proprietor)

Receives all profits

Absorbs all losses

Advantages
A. Ease of formation and dissolution. B. Typically, there are low startup costs and low operational overhead. C. Owners have complete control over all the aspects of his business and can take any managerial decisions that he/ she wants to take.
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 C. Ownership of all profits. D. Sole Proprietorships are typically subject to fewer regulations. E. No corporate income taxes. Any income realized by a sole proprietorship is declared on the owner's individual income tax return.

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Disadvantages
A. Unlimited liability - owner's personal assets can be taken away. B. Limited life. C. It may be difficult for an individual to raise capital.
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2. Partnership
A business owned and operated by two or more persons who bind themselves to contribute:
oMoney, oProperty, or oIndustry
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 The profits are divided among themselves. Each partner is personally liable for any debt incurred by the partnership.

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PARTNERSHIP

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Two or more persons (Partners)

Profits are divided

Contribute money, property, or industry

Each Partner is liable for debts

Advantages
Synergy. Partnerships are relatively easy to form, however, considerable thought should be put into developing a partnership agreement at the point of formation. Partnerships may be subject to fewer regulations than corporations.
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 There is stronger potential of access to greater amounts of capital. No corporate income taxes.

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Disadvantages
Unlimited liability. Limited life. A partnership may end upon the withdrawal or death of a partner. There is a real possibility of disputes or conflicts between partners which could lead to dissolving the partnership.
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A. General Partnership
all partners are personally liable for business debts any partner can be held totally responsible for the business and any partner can make decisions that affect the whole business.
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Major Features
1. Created by agreement, proof of existence and estoppel. 2. Formed by two or more persons 3. The owners are all personally liable for any legal actions and debts the company may face.
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 It is a partnership in which partners share equally in both responsibility and liability By default, profits are shared equally amongst the partners. By default, each general partner has an equal right to participate in the management and control of the business.

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B. Limited Partnership
one partner is responsible for decision-making and can be held personally liable for business debts. The other partner merely invests in the business. Although the general structure of limited partnerships can vary, each individual is liable only to the extent of their invested capital.
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C. Limited Liability Partnership

LLPs are most commonly used by professionals such as doctors and lawyers. The LLP structure protects each partner's personal assets and each partner from debts or liability incurred by the other partners.

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3. Corporation
A business owned by its stockholders. It is an artificial being created by operation of law. The stockholders are not personally liable for the corporations debt.
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CORPORATION

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Five or more persons (Stockholders)

Profits are divided (preferred & Common)

Stockholders are not liable for debts Created by Law

Advantages
Unlimited commercial life. The corporation is an entity of its own and does not dissolve when ownership changes. Greater flexibility in raising capital through the sale of stock.
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 Ease of transferring ownership by selling stock. Limited liability. This limited liability is probably the biggest advantage to organizing as a corporation. Individual owners in corporations have limits on their personal liability. Even if a corporation is sued for billions of dollars, individual shareholder's liability is generally limited to the value of their own stock in the corporation.

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Disadvantages
Regulatory restrictions. Corporations are typically more closely monitored by governmental agencies, including federal, state, and local. Complying with regulations can be costly. Higher organizational and operational costs.
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 Double taxation. The possibility of double taxation arises when companies declare and pay taxes on the net income of the corporation, which they pay through their corporate income tax returns.

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4. Cooperative
Often referred to as a "co-op a cooperative is a limited liability business that can organize for-profit or not-forprofit A cooperative differs from a for-profit corporation in that it has members, as opposed to shareholders, who share decision-making authority
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 Cooperatives are typically classified as either consumer cooperatives or worker cooperatives A cooperative is a legal entity owned and democratically controlled by its members Members often have a close association with the enterprise as producers or consumers of its products or services, or as its employees

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Types of cooperative governance

Retailers' cooperative Worker cooperative Volunteer cooperative Social cooperative Consumers' cooperative Business and employment cooperative New generation cooperative

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Other Forms:
holding company limited company limited liability company trust company
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A holding company is a company or firm that owns other companies' outstanding stock. The term usually refers to a company which does not produce goods or services itself; rather, its purpose is to own shares of other companies

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A limited company is a company in which the liability of the members or subscribers of the company is limited to what they have invested or guaranteed to the company. Limited companies may be limited by shares or by guarantee.

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A limited liability company (LLC) is a flexible form of enterprise that blends elements of partnership and corporate structures

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A trust company is a corporation, especially a commercial bank, organized to perform the fiduciary of trusts and agencies

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THE END
Presented by Group 12: Alfon, Alfie Mark S. Tarobago, Joanne U.