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.