UNIT I

THE ROLE OF BUSINESS IN

SOCIAL AND ECONOMIC
DEVELOPMENT
Prepared by: Zerlin S. Morareng
Chapter 1 – Nature and Forms of
Business Organizations
A. What is a Business?
B. Basic Forms of Business Organizations
C. Basic Classifications of Business
Diagnostic Test for Chapter 1
PART 1 – ALTERNATE RESPONSE
TRUE or FALSE?
1. Countries have the same laws that may ascribe different
rights to the various business entities.
2. The goal of business is for sales to be more than
expenditures resulting in a profit.
3. A grocery store is an example of a service business.
4. A cooperative is a business organization owned by a
group of individuals and is operated for their mutual
benefit.
5. Every business requires some form of investment and
enough customers to whom its output can be sold on a
consistent basis in order to make a profit.
Diagnostic Test for Chapter 1
PART 1 – ALTERNATE RESPONSE
TRUE or FALSE?
6. Sole proprietorships are not ideal for high-risk businesses
because they put your personal assets at risk.
7. The owners of a corporation have limited liability and
the business has a separate legal personality from its
owners.
8. In most forms of partnerships, each partner has limited
liability for the debts incurred by the business.
9. The corporation has a life of its own and does not
dissolve when ownership changes.
10. Limited liability companies (LLCs) are hybrid forms of
business that have characteristics of both a corporation
and a partnership.
Diagnostic Test for Chapter 1
PART 2 – MULTIPLE CHOICE
1. Another term for business is …
a. Enterprise
b. Firm
c. Agency
d. All of these
Diagnostic Test for Chapter 1
2. These are companies that may be classified in more
than one type of business.
a. Manufacturing Businesses
b. Real Estate
c. Hybrid Businesses
d. Financial Businesses
Diagnostic Test for Chapter 1
3. This is an entity formed for the purpose of carrying
on commercial enterprise.
a. Business
b. Merchandising Businesses
c. Hybrid Businesses
d. Business Organization
4. This is a type of business which provides intangible
products.
a. Hybrid Business
b. Real Estate Business
c. Service Business
d. Merchandising Business
5. This is an organization or economic system where
goods and services are exchanged for one another
or for money.
a.Business

b.Business Organization

c.Profit

d.Business Profit
Diagnostic Test for Chapter 1
6. These are companies that generate profits through
investment and management of capital .
a. Information Businesses
b. Hybrid Businesses
c. Financial Businesses
d. Utilities
Diagnostic Test for Chapter 1
7. They produce public services such as electricity or
sewage treatment, usually under a government
a. Service Businesses
b. Utilities
c. Information Businesses
d. Merchandising Businesses
Diagnostic Test for Chapter 1
8. They act as middlemen and get goods produced by
manufacturers to the intended consumers; they make
profits by marking up their prices.
a. Hybrid Businesses
b. Information Businesses
c. Utilities
d. Retailers and Distributors
Diagnostic Test for Chapter 1
9. They produce products, either from raw materials
or from component parts, then sell their products at
a profit.
a. Transportation Businesses
b. Agriculture and Mining Businesses
c. Manufacturers
d. Financial Businesses
Diagnostic Test for Chapter 1
10. They generate profits primarily from the sale of
intellectual property.
a. Information Businesses
b. Service Businesses
c. Utilities
d. Financial Businesses
What is a Business?
 An organization or economic system where goods and
services are exchanged for one another or for money
 Requires some form of investment and enough
customers to whom its output can be sold on a
consistent basis in order to make a profit.
 Also known as an enterprise, agency or a firm
 An entity involved in the provision of goods and/or
services to consumers

Note: Countries have different laws that may ascribe

different rights to the various business entities.
Basic Forms of Business Organizations

1. Sole Proprietorship
2. Partnership
3. Corporation
4. Cooperative
Sole Proprietorship
 Owned by one person, called proprietor, who has full
control and authority in running the business, owns all the
assets, enjoys all the profits and solely responsible for all
the liabilities of the company
 Not ideal for high-risk businesses because they put
proprietor’s personal assets at risk
 Must apply for a business trade name and be registered
with the Department of Trade and Industry.
Note: The proprietor is one in the same with the business. The
proprietor and his proprietorship business/businesses is
considered as one taxpayer sharing a single TIN for tax
purposes.
Partnership
 Owned by two or more individuals, called partners
 Under the Civil Code of the Philippines, it is considered as
juridical person, having a separate legal personality from that
of its owners (partners).
 Partnerships may either be general partnerships, where the
partners have unlimited liability for the debts and obligation of
the partnership, or limited a juridical, where one or more
general partners have unlimited liability and the limited
partners have liability only up to the amount of their capital
contributions.
 A partnership with more than three thousand pesos (P3,000.00)
capital must register with Securities and Exchange Commission
(SEC).
 Partnerships are generally treated like corporations for income
tax computation purposes.
Corporation
 This is a business that is owned by its shareholders
(natural or juridical persons).
 It is composed of juridical persons established under
the Corporation Code and regulated by the SEC
with a personality separate and distinct from that
of its stockholders.
 The liability of the shareholders of a corporation is
limited only to the amount of their share capital.
 It consists of at least five to 15 incorporators, each
of whom must hold at least one share and must be
registered with the SEC.
 The minimum paid up capital is P5,000.
Cooperative
 A cooperative is a duly registered association of
persons with a common bond of interest, who have
voluntarily joined together to achieve a lawful
common social or economic end, making equitable
contribution to the capital required and accepting a
fair share of the risks and benefits of the
undertaking in accordance with universally
accepted cooperative principles.
Basic Classifications of Business
1. Service Business
2. Merchandising Business
3. Manufacturing Business
4. Hybrid Business
Service Business
 This provides intangible goods or services to
customers. It usually generates profit by charging
for labor or other services rendered to consumers,
government or other companies.
Merchandising Business
 This type of business purchases products from other
businesses or manufacturers and sell them to
customers.
Manufacturing Business
 This business type converts raw materials, labors
and overhead into finished products that are
available for sale to customers.
Hybrid Business
 Hybrid businesses are companies that may be
classified in more than one type of business.
References
Jerusalem, V.L., Palencia, M.M., & Palencia, J.M.
(2017). Business Ethics and Social Responsibility:
Concepts, Principles, & Practices of Ethical
Standards. Manila, Philippines: Published and
distributed by Fastbooks Educational Supply,
Inc.