Chapter 6 Forms Of Business Enterprise

1. Ownership and Structural Forms of Business Enterprise Chapter 5

2. Ownership It means the legal title to a thing or control over the thing owned, the right possession and disposal. Title to and possession of the assets of the enterprise , the power to determine the policies of the operation and the right to receive and dispose of the proceeds. 17 December 2009 2 Guevarra Institute of Technology

3. Types of business ownership Private Ownership When an enterprise is so organized that private individuals exercise and enjoy the rights and privileges of an owner in their own interest. 17 December 2009 3 Guevarra Institute of Technology

4. Types of business ownership Public Ownership Controlled by political bodies as a municipal , provincial or national government or by any instrumentality created by them 17 December 2009 4 Guevarra Institute of Technology

5. Types of business ownership Mixed Ownership It exists when the elements of ownership are divided such that private persons and public bodies share in the operation of the same enterprise 17 December 2009 5 Guevarra Institute of Technology

6. Forms of private ownership Individual or single or sole proprietorship Partnership Cooperative Organization Corporation Corporate combination 17 December 2009 6 Guevarra Institute of Technology

7. Factors involved in business forms The nature and size of the business The capital required and the means of procuring it The length of time the enterprise is expected to operate The technical conditions affecting the enterprise The types of products to be manufactured The method and volume of production The kind of markets to be supplied and methods of marketing The competitive nature of the chosen industry. 17 December 2009 7 Guevarra Institute of Technology

8. 1. Single Proprietorship The ownership is vested in one person. This form of ownership is small, requires but little amount of capital and is readily established under the control of one man. 17 December 2009 8 Guevarra Institute of Technology

9. Advantages of single proprietorship It is easy to start and to terminate Control and management lies entirely in the hands of the owner Only a small amount of capital is required in starting Profits belong entirely to the owner High Credit Standing 17 December 2009 9 Guevarra Institute of Technology

10. Disadvantages of single proprietorship Limited judgment and wisdom. Limited amount of capital Unlimited liability Difficulties of Management 17 December 2009 10 Guevarra Institute of Technology

11. 2. Partnership The business partnership is a business relationship between two or more persons competent to make contracts for the purpose of engaging in a business activity. 17 December 2009 11 Guevarra Institute of Technology

12. Advantages of partnership It could be as easily formed as the single proprietorship. There are more persons to conduct the business and to handle its problems. A partnership has access to greater or better credit facilities The combined ability and resources of partners are a source of strength. Retention of Valuable Employees 17 December 2009 12 Guevarra Institute of Technology

13. Disadvantages of partnership Unlimited liability of partners Disagreement between partners often lead to delay and difficulties which could endanger the enterprise. Easy dissolution Frozen Investment 17 December 2009 13 Guevarra Institute of Technology

14. Limited partnership One or more of the partners in a limited partnership must be general partners, who have unlimited liability. The limited or special partners have only limited liability, which is up to the extent of their investment. 17 December 2009 14 Guevarra Institute of Technology

15. Advantages of limited partnership There is a single direction of management , thus there is unity and prompt action The limited liability of special or limited partners , serves as good inducement of investments. 17 December 2009 15 Guevarra Institute of Technology

16. Disadvantages of limited partnership The unlimited power given to general partners may result in abuse. Possibility of collusion among partners to defraud the creditors. 17 December 2009 16 Guevarra Institute of Technology

17. Kinds of partners General Partner Limited Partner Capitalist partner Industrial Partner Managing Partner Liquidating Partner Ostensible Partner Secret Partner Silent Partner Dormant Partner Nominal Partner 17 December 2009 17 Guevarra Institute of Technology

18. Cooperative organization A cooperative association has some elements of a large partnership and also many features of a corporation , although it is distinct from both . 17 December 2009 18 Guevarra Institute of Technology

19. Kinds of cooperative The Consumer’s Cooperative It draws its members from the general public. This cooperative carries on retail trade operations. The Producers’ Cooperative It draws its membership from the producers of grains and other farm products 17 December 2009 19 Guevarra Institute of Technology

20. Kinds of cooperative The Marketing Cooperative Closely related to the producer’s cooperative and often merged with it into one organization . The Financing Cooperative It makes possible for people of small means to acquire a home and to borrow money for other purposes at relatively low rates of interest. 17 December 2009 20 Guevarra Institute of Technology

21. Principles of cooperative Open Membership Democratic Control Limited interest to capital Patronage refund 17 December 2009 21 Guevarra Institute of Technology

22. Power of cooperatives To exercise the same rights and privileges given to persons, partnerships and corporation provided under existing laws. To establish and operate business enterprises of all kinds as their needs dictates and their capabilities allow subject to the provisions of existing laws. To establish rural banks under the Rural Bank Act To enjoy all the privileges and incentives granted by the NACIDA act 17 December 2009 22 Guevarra Institute of Technology

23. Power of cooperatives To petition the government to expropriate idle urban or rural lands for agricultural production , cottage industry , business or housing purposes. To own and dispose property , to enter into contract , to sue or be sued and to do and perform such other acts as may be necessary in the pursuit of its objectives. 17 December 2009 23 Guevarra Institute of Technology

24. Privileges of cooperatives Exemption from income taxes and sales taxes The preferential right to supply rice, corn and other grains , fish and other marine products. Exemption from the application of the Minimum Wage Law. 17 December 2009 24 Guevarra Institute of Technology

25. Corporation It 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. 17 December 2009 25 Guevarra Institute of Technology

26. Nature and characteristics of a corporation It is an artificial business unit and its creation is through the process of law. The basic structure of a corporation The corporation organization is of wide scope The existence of a corporation is practically permanent by operation of law The function of a corporation is public 17 December 2009 26 Guevarra Institute of Technology

27. Kinds of private corporation One in which the capital stock is divided into shares or allot the surplus profit on the basis of the share One in which the capital stock is not so divided. It issues certificates of stock which in reality are merely certificates of membership Stock Corporation Non-stock corporation 17 December 2009 27 Guevarra Institute of Technology

28. Classes of capital stock The right of ownership and active control is vested in the owners of the common stock. The ordinary stock representing the basic ownership. The ownership interest is divided into shares which may or may not have par value. Par value is the amount printed on the stock certificate. Gives the owners special protection or advantages over the common stock holders. It carries preference as to priority in the payment of dividends over the common stock Common Stock Preferred Stock 17 December 2009 28 Guevarra Institute of Technology

29. Classifications of preferred stock Preferred as to dividend Preferred as to asset Preferred as to both dividends and asset Cumulative preferred Callable Convertible 17 December 2009 29 Guevarra Institute of Technology

30. Advantages of corporation Ease of acquiring large amount of capital Flexible ownership Limited liability of stockholders More or less permanent existence Legal entity 17 December 2009 30 Guevarra Institute of Technology

31. The operational advantages The corporation offers an excellent mechanism for mobilizing the large capital needed for modern industrial operations. It permits extended specialization in management , plant and equipment , factory organization, labor and marketing 17 December 2009 31 Guevarra Institute of Technology

32. Disadvantages of corporate ownership Organizational expense Government restrictions and reports Lack of Personal Interest Lack of Secrecy 17 December 2009 32 Guevarra Institute of Technology

33. Corporate combinations The union affected by the absorbing of one or more existing corporations by another which survives and continues the combined business A form of business organization had its origin in a principle of law originally developed for safe guarding the property of minors and other persons not able or willing to administer their own affairs. Merger Trust 17 December 2009 33 Guevarra Institute of Technology

34. Reference Gutierrez, Pura , Garcia 1994. Business Orgainzation and Management. 6 th Edition. R.M. Garcia Pubishing House. Quezon City 17 December 2009 34 Guevarra Institute of Technology