Learning Objectives: To be able to;

•- define and analyze business organization.

•- understand, distinguish and enumerate the
forms of business organization.
•- understand functions of business
organization.
•- familiarize with the importance and scope of
business organization.
Introduction
If you don’t drive
your business, you will be
driven out of business (BC
Forbes). Even your car
has enough fuel If you
don’t know how to drive,
you won’t get anywhere.
In business, if capital is
the fuel, the organization
is the driver. In business,
Organization makes the business a
organization is like a
business. Thus, having effective
driver that controls
organization means having good
where to go or even how
productivity in the business.
to go.
✓Business:
– Business is a human activity,
which is undertaken to provide
goods and services to the
people with a view to earn
profit.
 ✓Organization:
• Material Organization: is the
determining and provision of
necessary raw materials, tools,
capitals etc. to enterprises for their
smooth running and functioning.
• Human Organization: is the
appointment of qualified staff and
assigning them in different duties
and responsibilities for the sake of
business organization interest.
According to Merriam-Webster
dictionary, organization is a
company, business, club, etc.
that is formed for a particular
purpose.
Business organization is the process
of establishing effective cooperation
among different people to achieve
certain goals to earn profit.

Business organization can be formed to

serve people and known as non-profit
organization.
 Business Organization:
A business organization is an
entity aimed at carrying on
commercial enterprise by
providing goods or services, to
meet needs of the customers.
 All business organizations:
have the common features
such as formal structure; aim
to achieve objectives, use of
resources, requirement of
direction, and legal regulations
controlling them.
Describes how businesses are
structured and how their
structure helps them meet
their goals. When a business
focuses on generating profits,
it is known as a for-profit
organization.
When an organization focuses on
improving the social good through
the arts, education, health care, or
some other area, it is known as a
nonprofit (or not-for-profit)
organization and is not typically
referred to as a business.
 Forms of Business Organization

1.Sole Proprietorship
2.Partnership
3.Corporation
4.Limited Liability Company
5.Cooperative
6.Government corporation
Sole
Proprietorship
“A sole proprietorship is a
business owned by only
one person.”
 It is easy to set-up and is the
least costly among all forms of
ownership.
The owner faces unlimited
liability; meaning, the creditors of
the business may go after the
personal assets of the owner if the
business cannot pay them.
 Under this form of organization,
the individual assumes the
management of the business. He
usually owns the capital. He
supplies and direct the business
and is in charge of its details.
 Individual Proprietorship is best
suited to enterprises that are
simple in nature, and require, in
most cases, small capital and
minimum risks. This form of
organization is the most common in
economic society. It is also common
in trade, especially in the retail
trade
Advantages
 It is easy to organize. With a small
capital, one can start a business
without undergoing all kinds of
formalities and requirements.
 He is his own boss. He is responsible
to himself alone. He is stimulated to
do his best. He knows that the
success of his business depends upon
himself.
 The entrepreneur may make a
large or small profit, depending
upon his industry and ability.
 The business can be easily closed.
Any time the owner decides to
quit, he can go out of business.
Disadvantages
 The size of the business is necessarily
limited by the amount of capital that
the owner can put up.
 The owner has to depend upon his
own skill and knowledge. He cannot
turn to anyone or advise. He must
solve and meet any problem himself.
 If the owner dies, the business stops.
The life of the business is generally
limited by the life-span of the
founder.
 Since the owner gets all the profits,
he must also assume all the debts. If
the debts are big, his entire property
may be needed to satisfy the claims
of creditors.
Partnership
“A business organization owned and
manage by two or more persons under a
partnership agreement.”
 A partnership is a business
owned by two or more persons
who contribute resources into
the entity. The partners divide
the profits of the business
among themselves.
 General Limited
partnerships partnerships

all partners creditors cannot

have go after the
unlimited personal assets
liability of the limited
partners
 The partnership represents a joint
undertaking of two or more persons. In
this form of business organization, the
agreement usually state's that the
individuals jointly own and operate the
business. In this kind of business
organization there may be "silent
partners ".
 Advantages
 The partnership can have more
capital than individual
proprietorship, since there are
more persons who furnish the
capital needed.
 The different partners may be specialists
in different lines of business, and each
partner may take charge of a department
of the business which he knows best.
 The amount of money that the
partnership can borrow is greater than
what the individual proprietorship can,
because every partner can be held
responsible for the payment of the debt.
 Disadvantages
 The partnership is dissolved when one of
the partners dies or retires. Like the
individual proprietorship the life of the
partnerships limited by the natural lifespan
of any partners.
 Every partner is responsible for the debts
of partnership. The entire property of any
one of them will have to answer for the
debts of the business if the other partners
have no property.
 The partners may disagree as to
methods of running the business, and
disagreement is not conducive to the
efficiency of the management.
 Any one of the partners may be
dishonest and betray the trust of the
firm, or commit serious mistakes
which may involve the partnership in
heavy losses.
Corporation
“A corporation is a
business organization that
has a separate legal
personality from its
owners.”
 Ownership in a stock corporation is
represented by shares of stock.
The owners (stockholders) enjoy
limited liability but have limited
involvement in the company's
operations. The board of directors, an
elected group from the stockholders,
controls the activities of the
corporation.
 Corporation is an association of
individuals authorize by law in legal
instrument called a charter, to
engage in a particular kind of
business.
The corporation is an important
form of business organization in
highly developed countries.
The Charter of Corporation
The instrument given by the government
that specifies its rights and functions. The
corporation exercise only such powers are
provided in its charter. If the corporation
violates the provision of its charter, the state
may revoke it. The charter provides for the
length of the life of corporation, say 25 years
or more.
The Capital of Corporation
The corporation gets its capital
by selling its stocks to investors or
by borrowing through the sale of
bonds. The corporation has two
important classes of securities in
the form of stocks and bonds.
Advantages
 The corporation, unlike the individual
proprietorship or partnership, can
attract and induce the capital and
savings of many individuals who may
want to invest in a business
enterprise. Investment in the
corporation is shown by shares of
stock which represent the part
ownership of the stockholders in the
business.
 The corporation has perpetual life.
The death of a stockholder has no
effect upon the life of the
corporation. The corporate
charter is granted for a limited
number of years, but in can be
easily renewed.
 The stockholders have limited liability.
This means that the stockholders are
liable only to the extent of their
investment in the share of stock the
hold. They cannot be made to pay any
debt of the corporation beyond their
investment, unlike individual properties
and partner whose private funds and
entire fortune are answerable for the
debts of the business.
 The share of stock that a stockholder
owns can be easily transferred. Share of
stock are freely traded in the stock
exchanges. If a stockholder wants to get
back what he has invested, the share can
be sold for cash. This facilitates the
change of ownership and control. One
requires no permission from the
corporation to sell one's share.
 Disadvantages

The management of a corporation is in

the hands of hired individuals who may
not be interested in the business. Hired
men may be reckless in their method of
running the affairs of the corporation.
 Control over the majority of the stock
would mean the control of the affairs of the
corporation. This concentration of control
may lead to the abuse of power, to the
disadvantage of the minority stockholder.
 The corporation is closely watch by the
government, and it has to submit periodic
reports of its activities. No such reports are
required from individual proprietorship or
partnership.
 the relation between the stockholders
and corporation is not often very close.
So long as the stockholders get their
dividends or the earning of their stocks,
they leave the management to the board
of directors which may abuse the
employees or promote the interest of
individual members of the board at the
expense of the corporation as a whole.
 ABUSES AND DANGERS OF CORPORATION
 Dishonesty of Promoters
 Stock
 Dishonesty of Management
 Payment of High Salaries and Bonuses
 Absentee Ownership
 The security and exchange commission
 Limited
liability
company
“Limited liability companies (LLCs) in the
USA, are hybrid forms of business that have
characteristics of both a corporation and a
partnership.”
 An LLC is not incorporated; hence,
it is not considered a corporation.
Nonetheless, the owners enjoy
limited liability like in a corporation.
An LLC may elect to be taxed as a
sole proprietorship, a partnership, or
a corporation.
Cooperative
“A cooperative is a business
organization owned by a group of
individuals and is operated for their
mutual benefit.”
 The persons making up the group are
called members. Cooperatives may be
incorporated or unincorporated.
Some examples of cooperatives are:
water and electricity (utility) cooperatives,
cooperative banking, credit unions, and
housing cooperatives.
 A cooperative is an association of
individuals organized for the purpose
of performing or supplying essential
economic goods and services for the
group.
The cooperative system this is an enterprise
that the main motive of which is to secure
cooperation in business. The cooperative is
any association organized to buy or sell
goods in the most advantageous manner
possible by the elimination of the middle
men’s profits. The two most common types
of cooperatives are the consumers’ and the
producers’ cooperative.
The producers’ The consumers’
cooperative is a cooperative is a
form of a form of cooperation
which aims to
cooperative
secure, for the
enterprise
consumers,
financed by the commodities at
members who lower prices.
have putted their
capital together.
Government
corporation
“Our economic planning resulted
in the establishment of new
corporations and in the
revitalization of those in existence
the national development
company”
Before the inauguration of the commonwealth
of the Philippines, the Philippine government
had already adopted the policy of going into
business. Upon the inauguration of the
commonwealth government, this economic
policy received greater stimulus. Our economic
planning resulted in the establishment of new
corporations and in the revitalization of those in
existence the national development company
was reorganized and expanded, and its capital
was increased.
Other organizations like:
national rice and corn corporation,
 the insular refining corporation,
 the national food products corporation,
 the national abaca and fibers
corporation,
 the national coconut corporation,
 the national tobacco corporation,
 and the national footwear corporation
were established.
Scope of Business Organization
The scope of business organization has
considerably expanded after the Industrial
Revolution. The process of production is
now quite complicated. An organization is
needed to determine what each person
will do and how much authority each will
have.
1) In Sole Proprietorship
Form of business, the organization
structure is very simply. The entrepreneur
generally introduces his own capital. He
alone is the sole organizer, financier, decision
taker, operator, and controller and above all
responsible for air the success and failures of
business, there is generally rule sub-division
of main work into small groups.
(2) In a Partnership Form of Business
Ownership, each partner provides capital, labor
and management according to an agreement the
partners determine among themselves the extent to
which each partner shall take part in the
management. The pattern of division of activities,
determine responsibilities. Delegation of authority
etc. depends upon the nature and size of business. As
the partnership business is generally run on small
scale, the business organization structure is relatively
simple, temporary and informal.
(3) In a Company Form of Business
There is a formal pattern of organization. The work
of organization begins even before its
incorporation by the promoters. This work of
organization continues after incorporation. An
organization chart of responsibilities is prepared.
The duties and responsibilities of the personnel
employed are defined, procedures are aid down.
Methods are evolved discussed and put before the
personnel in clear terms. The scope of business
organization in corporate business is quite wide
and complicated.
 A business organization is one or more
businesses controlled in common by a person
or group of people. An organization may
have one or more businesses. A business
may not have more than one organization.
Even in the case of franchises, the franchisor
is a different business model than the
franchisee, even though they exist
symbiotically in the same value system.
 Therefore, business and organization are melded
together into business organization as the subject of
strategy and strategic management.
Organizations are a vehicle for collective learning,
providing a collective storehouse of wisdom,
capabilities, and business model designs. (Beinhocker,
2006)
An organization exists for a purpose. Hopefully
for a moral purpose, or ideal, that is never fully
achieved. The organization's pursuit of its
purpose requires a structure for cooperation
to endure for long periods of time, beyond the
people's tenure in the organization. Enduring
beyond the tenure of individuals enables more
effective pursuit of purpose, with more
complex business models, than could be
attained if all people were freelance
contractors.
•Products Growth. All business
activities directed towards the
production of goods and services in
betterment of business organization.
•Efficient Use of Resources.
Organizations play a vital role in the
efficient use of factors of productions
and other resources and thus reduced
the cost of production of goods.
•Technological Improvements. A good
organization provides for the optimum
use of technologies improvements.
•Creative thinking. It stimulates
independence creative thinking in
various departments of production.
•Quick decisions. The business
organization makes easy to take quick
decisions.
•Recognition of the problem. The
recognition of the problem, selection
of the solution, issuing of the
necessary orders can be taken in the
right time.
•Fixing of responsibility. One of the
most important things of business
organization is that fixing of
responsibility can easily be pin pointed.
•Feedback. An organization makes it
possible to take decisions in the right
time about production and thus may
take feedback. Before making any
decision organization always research
the market and combine the facts.
•Minimum cost. The organizations
always try to attain the goals and
objectives of the business at the
minimum cost.
 Five Functions
of
business Organization
1. Organizing Function:
One of the main functions of a
business is organizing function. Man,
machine, materials, and money are
essential factors for any business.
organizing function collects and
coordinates all the necessary factors of the
business. Proper organizing function is
helpful in the smooth running of the
business and helps to achieve its objectives.
2. Financing Function:
Finance is the life-blood and back bone of
any business. The availability of factors of
production depends upon the availability of
finance. So every business needs finance for its
success. Therefore, under this function of
business required capital is estimated,
accumulated and properly utilized. A proper
capital structure according to the size and
nature of the business is essential for the
success of the business.
3. Production Function:
The production function is another
important function of the business. Converting
raw materials into finished products to satisfy
human wants by creating utility is known as
production. Under this function, raw materials
and semi-finished products are processed and
assembled to create utility. Hence the next
important function of business is to create utility
for the satisfaction of the consumers by the
production of goods.
4. Marketing Function:
The function of business is not complete
with the production of goods and services only.
The main goal of production is to satisfy human
wants through the consumption of goods and
services. Therefore, marketing function helps to
transfer goods and services from the producer to
the ultimate consumer. Marketing functions can
be divided into concentrating and dispersing
which include buying, selling, transportation,
storage, risk taking, market information, etc.
5. Employment Function:
The next important function of business is
to provide employment opportunities in the
country. Every business requires a large number
of manpower to perform their activities. So they
are helpful in solving employment problem of
the country by providing maximum
employment opportunities.
 “Organize Your Business:
Whether it’s getting involved
with business associations
socially and civilly, or it’s
hiring a lawyer and tax expert
to help you structure a
business, getting organized
should be a priority for every
business owner”