Forms and Types of Business Organization

Summary

In this episode of 'Project Accounting,' the focus is on forms and types of business organization. It covers the identification of business forms by ownership nature, the advantages and disadvantages of four business forms, and a comparison of business types based on activities. The video explains single proprietorship, partnership, corporation, and cooperatives, detailing their characteristics, benefits, and drawbacks. It also discusses business types based on activities: service, merchandising, and manufacturing, providing examples for each. The episode aims to help viewers understand how businesses are structured to meet their goals.

Takeaways

• 😀 Accounting is about economic entities and business organizations describe how businesses are structured to meet their goals.
• 🏢 The objective of most businesses is to maximize profits, but some operate with purposes other than profit, such as non-profit organizations.
• 📚 There are four basic categories of business organization: single proprietorship, partnership, corporation, and cooperatives.
• 👤 Single proprietorship is a business owned by one person, which is the simplest and most common form of business organization.
• 🤝 Partnership is a business owned by two or more persons who contribute to a common fund with the intention of dividing the profits.
• 🏬 A corporation is a separate legal entity with ownership divided into transferable shares of stocks, and it has the power of succession.
• 🤝 Cooperatives are associations of persons with a common bond of interests who contribute equitably to the capital required to achieve their social, economic, and cultural needs.
• 💼 The advantages of a sole proprietorship include the owner keeping all profits, ease of formation, and operation.
• 🤑 Partnerships offer advantages such as pooled capital, shared decision-making, and easier organization compared to corporations.
• 💼 Corporations have the advantage of limited liability for shareholders, continuous existence, and the ability to raise large capital.
• 🏭 Cooperatives benefit from tax exemption on transactions with members, limited liability, and a focus on serving their members.
• 🔄 Businesses can be classified based on their activities into service, merchandising, and manufacturing types.

Q & A

What is the main objective of most businesses?

The main objective of most businesses is to maximize profits.

What are the different categories of business organizations based on how they are established, owned, and operated?

The basic categories of business organizations are single proprietorship, partnership, corporation, and cooperatives.

What is a single proprietorship and what are its advantages and disadvantages?

A single proprietorship is a form of business organization owned by one person. Advantages include the owner keeping all the profits, ease of formation, and operation. Disadvantages include limited capital, unlimited liability, and the business's life is tied to the owner's life.

How is a partnership defined and what are its key characteristics?

A partnership is a contract where two or more persons contribute money, property, or industry to a common fund with the intention of dividing the profits. Key characteristics include shared profits, personal liability, and the need for a written agreement called articles of partnership.

What is a corporation and how is it different from other forms of business organizations?

A corporation is an artificial being created by operation of law, with the right of succession and powers attributes. It is different as it is a separate legal entity with ownership divided into shares of stocks and is regulated by the Corporation Code of the Philippines.

What are the advantages and disadvantages of a corporation?

Advantages of a corporation include limited liability, ease of raising capital, and continuous existence. Disadvantages include complex setup, double taxation of profits, and legal restrictions.

What is a cooperative and how is it structured?

A cooperative is an autonomous and voluntarily joined association of persons with a common bond of interests, aiming to achieve their social, economic, and cultural needs by contributing equitably to the capital. It is structured with members contributing to the capital and is regulated by the Cooperative Development Authority.

What are the advantages and disadvantages of cooperatives?

Advantages of cooperatives include tax exemption privileges and limited liability for members. Disadvantages include limited distribution of surplus, the need for continuous education programs, and potentially slower decision-making processes.

How are business organizations categorized based on their activities?

Business organizations are categorized into service businesses, merchandising businesses, and manufacturing businesses based on their activities.

What are some examples of service businesses mentioned in the script?

Examples of service businesses include public transport companies, beauty parlors, repair shops, and laundry shops.

What is the difference between a merchandising business and a manufacturing business?

A merchandising business buys products at wholesale and sells them at retail, making a profit from the difference in prices. A manufacturing business, on the other hand, buys raw materials and combines them with labor and expenses to create a new product for sale.

Outlines

00:00

🏢 Introduction to Business Organizations

This paragraph introduces the topic of the video, which is about different forms and types of business organizations. It explains the purpose of businesses, which is typically to maximize profits, but can also include providing benefits to society. The paragraph outlines the basic categories of business organizations: single proprietorship, partnership, corporation, and cooperatives. It uses the example of a store called 'Sarasar' to illustrate the concept of a single proprietorship, where one person uses their savings to start a business and is the sole owner. The paragraph also discusses the advantages and disadvantages of a sole proprietorship, such as the owner keeping all profits, ease of formation, and unlimited liability.

05:02

🤝 Partnerships in Business

The second paragraph delves into partnerships, explaining that they are formed by two or more persons who contribute money, property, or industry to a common fund with the intention of sharing profits. It outlines the advantages of partnerships, such as the ability to raise more capital, ease and low cost of organization, and shared decision-making. However, it also points out the disadvantages, including the sharing of profits among partners, personal liability for wrongful acts of partners, and unlimited liability in lawsuits. The paragraph uses the example of a grocery store to illustrate how a partnership might be formed with two individuals contributing capital.

10:02

🏭 Corporations as Business Entities

This paragraph defines a corporation as an artificial being created by law, with the ability to succeed and own properties. It explains that a corporation is a separate legal entity with ownership divided into shares of stocks. The paragraph outlines the characteristics of a corporation, such as being regulated by the Corporation Code of the Philippines and the Securities and Exchange Commission (SEC). It also discusses the advantages and disadvantages of corporations, including limited liability for shareholders, ease of raising capital, continuous existence, and the ability to operate without the need for multiple shareholders in the case of a one-person corporation. Disadvantages include complex setup, double taxation of profits, and legal restrictions.

15:04

🤝 Cooperatives for Collective Benefits

The fourth paragraph focuses on cooperatives, which are defined as registered associations of persons with common interests who join together to achieve their social, economic, and cultural needs. It explains that cooperatives are characterized by member ownership, equitable contribution to capital, and patronage of their own products and services. The paragraph outlines the advantages and disadvantages of cooperatives, such as tax exemption for transactions with members, limited liability, and the need for continuous education programs. It also discusses the democratic nature of decision-making in cooperatives. The paragraph concludes by summarizing the different types of business organizations based on ownership and activities, such as service, merchandising, and manufacturing businesses.

Keywords

💡Sole Proprietorship

Sole proprietorship is a form of business organization owned by a single individual. It is the simplest and most common form of business structure. In the video, the sole proprietorship is exemplified by a store funded with personal savings. The key advantage is that the owner keeps all the profits, but it has disadvantages like unlimited liability and limited capital.

💡Partnership

A partnership is a business organization owned by two or more individuals who contribute resources, such as money or property, and share profits. The script mentions that a partnership is easier to form than a corporation and provides access to more capital, but partners share liabilities and profits. An example is a store where two friends contribute money to start the business.

💡Corporation

A corporation is a legal entity separate from its owners, created through a legal process. It allows for ownership to be divided into shares of stock, and the liability of shareholders is limited to their investment. The video discusses the complexity of setting up a corporation, the benefits of raising large capital, and continuous existence due to legal succession.

💡Cooperative

A cooperative is a business organization owned and operated by a group of people for their mutual benefit. It requires at least 15 members, and its main goal is to serve the interests of its members, not to maximize profit. The script highlights tax exemption privileges and limited liability as benefits, though decision-making in cooperatives can be slow.

💡Limited Liability

Limited liability means that the personal assets of business owners are protected from the debts and liabilities of the business. In the context of the video, this concept is discussed in relation to corporations and cooperatives, where owners’ liabilities are limited to their investments, unlike in sole proprietorships and partnerships.

💡Unlimited Liability

Unlimited liability refers to the responsibility of business owners to cover any debts or losses incurred by the business with their personal assets. The video explains that sole proprietorships and partnerships carry unlimited liability, meaning the owners’ personal property can be used to satisfy business debts.

💡Service Business

A service business provides intangible products or services, such as professional advice, skills, or consultations for a fee. Examples in the video include public transport companies, beauty parlors, and repair shops. This type of business is distinct from merchandising or manufacturing businesses.

💡Merchandising Business

A merchandising business buys goods at wholesale prices and sells them at retail prices to earn profit. The script uses grocery stores and appliance stores as examples, showing how these businesses operate by reselling products to customers at a markup.

💡Manufacturing Business

A manufacturing business produces goods by combining raw materials, labor, and other inputs to create products for sale. Examples given in the video include factories and food processing plants. This type of business differs from service or merchandising businesses because it involves the production of tangible goods.

💡Non-Profit Organization (NPO)

A non-profit organization (NPO) operates for purposes other than making profits, often with a goal to provide benefits to society. The script briefly mentions that not all businesses seek to maximize profits, and some, like NPOs, focus on social, economic, or cultural contributions to their communities.

Highlights

Introduction to forms and types of business organization

Definition of business organization and its role in meeting business goals

Explanation of different purposes of businesses beyond maximizing profits

Introduction to the basic categories of business organization

Definition and example of a single proprietorship

Advantages of single proprietorship including sole ownership and ease of operation

Disadvantages of single proprietorship such as unlimited liability and limited capital

Definition and example of a partnership

Advantages of partnership including shared decision-making and increased capital

Disadvantages of partnership such as shared profits and personal liability

Definition and characteristics of a corporation

Advantages of corporations including limited liability and continuous existence

Disadvantages of corporations such as complex setup and double taxation

Definition and characteristics of cooperatives

Advantages of cooperatives including tax exemption and limited liability

Disadvantages of cooperatives such as limited surplus distribution and need for continuous education

Types of business organization based on activities: service, merchandising, and manufacturing

Examples of service businesses and their operations

Examples of merchandising businesses and their operations

Examples of manufacturing businesses and their operations

Businesses that can be classified under more than one type

Summary of the different forms and types of business organizations discussed

Call to action for viewers to like, subscribe, and support the channel

Transcripts

[Music]

hi

everyone welcome back to another episode

of project accounting

so our topic for today is all about

forms and types of business organization

for this episode you will be able to

identify the forms of business

organization by nature of ownership

identify the advantage

and disadvantages of the four forms of

business organization

and compare and contrast the types of

business according to activities

so guyanas and abinadines at the first

episode

accounting is about economic entities

business organization describes

how businesses are structured and how

their structure helps them to meet their

goals

the objective of most businesses is to

maximize profits

however some businesses would operate

with purpose of other than tourist

profits like to provide benefits to

society guyanama npo or non-profit

organizations

so there are different categories of

business organization that relate to how

the business is established

owned and operated the basic categories

of business organization

are single proprietorship

partnership corporation and cooperatives

so tara let's define and know the

advantages and disadvantages of these

forms of business organization

suppose custom octagonasar is our store

that will need 10 000 pesos to start

and you use your ten thousand pesos

savings to start the set business

you are the sole owner of the said

sarasar store

this type of business is called soul or

single proprietorship

sole proprietorship is a form of

business organization which is owned by

one person

the simplest and the most common form of

business organization

it is not separate from the owners sole

proprietors must register with the

department of trade and

industry or dti so support iona sole

proprietorship management advantages and

disadvantages

so elenza advantage and sole

proprietorship i

first the owner keeps all the profits

evisabihin

go into business now and lastly sole

proprietorship is easy to form and

operate

as compared to partnership and

corporation most modeling italian sole

proprietorship cases

requirements

proprietorship first is the life of the

business

is limited to the life of the owner some

of you may ask

business

however please take note now upon the

death of the old owner

the business legally stopped so

considering

take over it is considered as the new

owner

the amount of capital is limited only by

the wealth of the proprietor

limited lion capital proprietor

and lastly owner has unlimited liability

business solar proprietorship is not

separate from the owner

in 25000 and become part owner of the

sarasar

store assuming he agrees and that is

called

partnership so according to the law and

partnership

partnership is a contract whereby two or

more persons bind themselves to

contribute

money property or industry to a common

fund

with the intention of dividing the

profits among themselves

so base a definition partnership is a

form of business

owned by two or more persons yuma owners

are called partners and the details of

the arrangement between the partners

are outlined in a written document

called articles of partnership

yoma partners in milan pera and pueden

elaine contribute

furthering property or knowledge about

the business

tapos divide among partners

based on their agreed sharing so

proprietorship that patmak registers a

dpi

and partnership demand at corporation

ida patmag registers a securities and

exchange commission or sec

so guyana's assault proprietorship may

ending advantages and disadvantages of

partnership

unanimous advantages and partnership i

hire capital

because two or more persons will

contribute to the commerce fund

so mass malaria talaga capital as

compared to sole proprietorship

next demand is partnership is easy and

inexpensive to organize as compared to

corporation

as it is formed by simple contract

between two or more persons

and lastly there is a share in decision

making

so mas madami ideas and puedema come up

support management business and

participation in business by more than

one person

makes it possible for closer supervision

illinois disadvantages no partnership i

there's a sharing of profits masmadaming

people to share in profits as these are

divided among the partners based on

agreed sharing

partners may also be subject to personal

liability for wrongful acts or omissions

of his or her associates

and gaian is a sole proprietorship

partners have unlimited liability

in a lawsuit the personal properties of

the partners can be held beyond their

contributions

and may be used to answer for any

liability of the partnership

grocery not just the sarasota store you

have only 25 000 pesos and your friend

one has twenty five thousand pesos

but kilam on a one million pesos to

start the set business

so para nagisa patio capital to start

your dream grocery store

business with that capital you may now

consider setting up a corporation

so as defining the corporation code of

the philippines

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

incidental to its existence

so based on definition a corporation is

a business

organized as a separate legal entity or

artificial person

under the corporation law tapos new

ownership i divided into shares of

stocks

elanzimar characteristics the

corporation i

it is the law or the corporation code of

the philippines fingonagona corporation

and the sec or the securities and

exchange commission

is the government agency primarily

tasked to regulate private corporations

in the philippines

corporations should be formed by five or

more incorporators and the owners are

called stockholders or shareholders

the word corporation or incorporated

appears in the name of the npp

and the management of the business is

delegated by the shareholders to the

board of directors

with the passage of the revised

corporation code for the name register

with only one shareholder

in other words possible democrats turn a

company in the philippines without the

need for four other shareholders

this type of company is classified as a

one person corporation

or opc and especially beneficial for

micro

small and medium-sized businesses so

even if

only one person owns this corporation it

still has

limited liability in contrast to its

sole proprietorship

champre merending advantages and

disadvantages and corporation

in lenziman advantages now corporation i

limited liability

shareholders liability is limited

landsat among investigation

in this elaborating have boolean to

separate personal properties unlike sole

proprietorship and partnership

also it is easy to raise huge capital

madame kasich on shareholders so must

make it a great capital

as compared to sole proprietorship and

partnership except empress opc

then corporation enjoys continuous

existence because of power of succession

of 50 years or higher cooperation is

ownership illinois disadvantages ai

setting up is complex it is not easy to

organize

because of complicated legal

requirements and high costs

beyond double taxation of profits

government

taxon dividend and also

corporations are subject to several

legal restrictions

because corporations need to comply to

several provisions of the corporation

law

based on their capital contribution this

form of business organization is called

cooperatives

so as defined in the cooperative law

cooperative is an autonomous and julie

registered association of persons

with a common band of interests who have

voluntarily joined together to achieve

their social

economic and cultural needs and

aspirations by making equitable

contributions to the capital required

electional characteristics and

cooperatives i

human owners which are called members

contribute equitably to the capital of

the

opera team so in order to organize a

cooperative

there should be 15 or more natural

persons

the members are expected to patronize

their products and services

and the word cooperative appears in the

name of the entity

this form of business organization is

regulated by the cooperative development

authority or the cta

so an anonymous advantages and

disadvantages

and cooperatives first is tax exemption

privilege

generally cooperative online a

transaction with members

this islam is subject to any taxes and

fees imposed

under internal revenue laws and other

tax laws

merending

goal is to serve their members and

strengthen the cooperative movement by

working together

so guyana corporation cooperatives has

limited liability which means your

liability

members are limited to amount invested

illness among disadvantages and

cooperatives i

there's a limited distribution of

surplus limited language

members based on their capital

contribution

next demand cooperatives also requires

continuous education programs for

members

contribute effectively and efficiently

to the development of their cooperatives

and lastly mabaga and paguanama

decisions are cooperatives

then as a corporation each person may

have the opportunity to offer their

opinion on a matter before a final

choice gets made

next month is types of business

organization based on their activities

so business isn't engaged in any of the

following

service merchandising or manufacturing

service business offers professional

skills advice and consultations for a

fee

examples of these service businesses are

public transport companies

beauty parlor repair shops and laundry

shops

so next the man is young merchandising

merchandising business

buys at wholesale and later sells the

products at retail

they make a profit by selling the

merchandise or products

at prices that are higher than their

purchase costs

so examples of many merchandising or

trading businesses are grocery

supermarkets car dealers and appliances

stores

so next one is your manufacturing

business

so on manufacturing business demand it

buys raw materials and uses them in

making a new product

therefore combining raw materials labor

and expenses into a product for sale

later on

so examples at all issue factories

garment factories

and food processing plants so there are

businesses that may be classified under

more than one type of business

for example a bakery combines raw

materials in making lobes of bread

somali manufacturing business sha

whether in shang mckee turned on

customer order in small coffee table

servings of enzymata and hot coffee

so service business nutrients at the

same time

so to summarize what we have learned

today

there are four kinds of business

organization based on ownership

it includes single proprietorship which

is owned by one person the simplest and

the most common form of business

organization

partnership which is owned by two or

more persons with the intention of

dividing profits among themselves

corporation which is a business

organized as a separate legal entity

under the corporation law

with the ownership divided into

transferable shares of staffs

and cooperatives which is a jewly

registered association of persons

voluntarily joining together

to achieve their social economic and

cultural needs

meridian three types of business based

on their activities

it includes service business which

offers professional skills advice and

consultation for a fee

merchandising business which buys at a

wholesale and later sells the products

at retail

and manufacturing business which buys

raw materials and uses them in making a

new product

therefore combining raw materials labor

and expenses

into a product for sale later on

so if you like this video or if this

video helped you

please give a thumbs up and subscribe

for more episodes

thank you

[Music]

hmm