The business organizations
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Transcript of The business organizations
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The Business
OrganizationsECONOMICS IV
By MLJT
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WHAT IS BUSINESS/ BUSINESS
ORGANIZATION?
• Are a major component in the economy
• Their main goal is to attract customers, and to consequently earn profit
• Provide needs, wants and demands of the economy
• It is also the largest contributor of revenue to an economy
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BUSINESSES…
• Have important partnership with the government
• Serve as provider of goods and services to the consumers and provide
investments, employment and social responsibility to the economy (for the
economy)
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Forms of Business Enterprises
• Single or Sole/Individual Proprietorship
• Owned by a single person known as proprietor
• Easiest enterprise to set up
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Organizing a Sole Proprietorship
• Register the business name with the Department of Trade and Industry
• Pay the municipal licenses to the local government
• Apply for VAT or non-Vat number with the Bureau of Internal Revenue
(BIR)
• Register with the BIR the books of accounts (simplified bookkeeping
records or journals and ledger) and the business forms to be used (sales
invoices, cash sales invoices, official receipts, etc.)
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Advantages
• Once the business starts, it no longer requires many contracts, documents or
agreements.
• The owner can decide on his own what the best course for the firm is.
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Disadvantages
• The sole owner will bear all of the debt burden and the losses
• The death of the owner means the end of the business.
• Limited financial capital
• The success of the business is very dependent on the ability and judgment
of a single person.
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Forms of Business Enterprises
• Partnership
• Is a business organization that is an association of at least two
or more persons who agree to place money, property or
industry in a common fund with the aim of sharing the profits
among themselves
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Organizing a Partnership
• Register the business name with the Department of Trade and Industry
• Have the partnership agreement (Articles of Co-partnership) notarized and registered with the Securities and Exchange Commission (SEC)
• Obtain a tax identification number for the partnership from BIR
• Obtain pertinent municipal licenses from the local government
• Obtain the VAT or non-Vat number from the BIR
• Register books of accounts and the business forms to be used with the BIR
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Types of Partners
• Based on their contribution
• A CAPITALIST PARTNER – one that provides assests, such as money and property,
to be utilized as the starting capital of the business
• An INDUSTRIAL PARTNER – one that swears to give services or labor to the
operation of the business. He is usually the “hands-on” partner in the business
• A CAPITALIST-INDUSTRIAL PARTNER – one that pledges money and property as
the starting capital as well as services
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Types of Partners
• Based on their liability for partnership debts
• A GENERAL PARTNER – one who is liable for partnership
problems, particularly debts of the business
• A LIMITED PARTNER – is one whose liability for partnership
problems is limited. His liability is only limited to the extent of his
capital contribution
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Advantages
• Easy to establish
• All profits go directly to the owners
• Each partner has his own strengths and weaknesses, and the
partners can support each other.
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Disadvantages
• The death or departure of an important partner could mean the
end of the business.
• Disagreements and misunderstanding
• Partnership agreements are not flexible.
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Forms of Business Enterprises
• Corporation
• “ is an artificial being created by operation of law having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence”
• Is a form of business organization in which the owners (known as stakeholders) have an undivided ownership share in the assets of the corporation upon its dissolution; share in its profits corresponding to the amount of shares of stock which they own
• It has specific objectives in carrying out the business, in accordance with a charter or articles of incorporation
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Organizing a Corporation
• Verification of corporate name with SEC
• Drafting and execution of the Articles of Incorporation
• Deposit of cash received for subscribed shares of stocks in a banking
institutions in the name of the temporary treasurer, in trust for and to the
credit of the corporation
• Filing of the Articles of Incorporation together with the:
• Treasurer’s Affidavit
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Advantages
• Limited liability
• Shareholders can resell their shares for cash
• Can raise a large amount of money by selling more certificates.
• The death or departure of an owner would not mean end of the business.
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Disadvantages
• Requires substantial amount of money needed for registration, licenses, etc.
• Government regulation of business is focused on corporations
• Corporate income is taxed twice
• The management has to provide both the government and the shareholders
a report on its operations and performance.
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Dividends
• Distributed profits of the corporation
• Represents the corporation’s profits which are distributed to
stockholders according to the proportionate interest of their
shareholding
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Kinds of Dividends
• Cash – paid in cash to the stockholder
• Property – in the form of non-cash assets of corporation
• Stock – the dividend in the form of stocks of issuing corporation
• Scrip – dividend in the form of promissory notes indicating the benefits
• Bond – in the form of bonds of the company
• Liquidating – refers to return of capital by a corporation
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Forms of Business Enterprises
• Cooperatives
• “only organizations composed primarily of small producers and consumers who
voluntarily join together to form business enterprises which they themselves own,
control and patronize”
• Providing benefits to members is given more importance than earning profit.
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Advantages
• Member will be interested to take part in the activities of the
cooperative
• Profits are shared equally among the members.
• All members have equal voting power
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Disadvantages
• The profit share of each member is not substantial.
• Only government agencies are interested in assisting cooperatives.
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Similarities bet. Cooperative and Corporation
• Privately owned and managed
• Both depend on business efficiency to survive in a competitive market
• Regulated and supervised by the government
• Both enjoy a reasonable degree of economic freedom
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Differences
• Cooperative
• Primarily organized for service
• Open and voluntary ……while CORPORATION is mainly for profit, restricted