Ownership and Structural Forms of Business Organization

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Ownership and structural forms of business organization, applicable laws, requirements for their formations, and advantages and disadvantages Type of Ownership
* Single or Sole Proprietorship. It is a form of business organization which is owned by one person. The owner personally manages his business. Most of businesses in the Philippines (including those which are not registered) belong to single proprietorship. Examples are retailers, market vendors, barbers, tailors, and so forth. a)       Advantages of Single or Sole Proprietorship

1)       It is easy to organize. Financial capital is small, and registration requirements are not difficult to comply with. In fact, in the remote rural areas small businesses do not even bother to apply for license. 2)       The single proprietor is the boss. He makes the decisions and enjoys substantial freedom of action. Possibilities of conflicts or quarrels are minimized. 3)       The owner acquires all the profits from his business. This gives him more incentives to make his business grow. b)       Disadvantages of Single or Sole Proprietorship 1)       In general the financial resources of a single proprietorship are not enough to transform the business into a large scale enterprise. Considering its small assets and high mortality rate, banks are reluctant to grant big loans to single proprietorship type of business organizations. 2)       Benefits of specialization in business management are not present in small scale proprietorship. There is only one manager. In not a few cases, the owner is the only employee. 3)       The owner has unlimited liability. This means that the owner of the business risks not only the assets of his small enterprise, but also his other personal assets like his piece of land, bank deposits, and other personal properties which are not part of his business. In case of loss, such assets are subject to financial claims by creditors. c)        Requirements for formation

Since it is the simplest form of business it is the easiest to register. It is registered through the Bureau of Trade Regulation and Consumer Protection (BTRCP) of the Department of Trade and Industry (DTI). d)       Applicable Laws

Republic Act No. 9178 Barangay Micro Business Enterprises (BMBEs) Act of 2002 * Partnership. It is a form of business organization in which two or more persons agree to own and operate a business. The partners agree to combine their resources (money, materials, and management). They also share their profits and losses. However, there are “silent” partners. They only provide the financial capital but they do not participate in the management. There is also the “industrial” partner. He does not contribute money to the business organization but he is responsible for its management. a)       Advantages of Partnership

1)       It is also easy to organize like single proprietorship. Legal red tape in connection with its registration is not much. 2)       Better management because of the presence or more participants in the operations of the business. 3)       Possibility of bigger resources than in the single proprietorship exists. Financial institutions may extend bigger loans to such business organization considering the combined resources of the partners. b)       Disadvantages of Partnership

1)       Conflicts or quarrels between or among the partners regarding the management or policies of the business are likely to crop up. In fact, under Filipino style, some partners cheat their other partners in matters of profits or expenses. 2)       It lacks stability. The death or withdrawal of one partner dissolves the partnership. To continue its operation, a complete reorganization is needed. 3)       Like the single proprietor, the partners are also subject to unlimited liability, except the limited partners. Such partners, liabilities are only confined to their share of capital contributions in the form of cash or property. c)        Requirements for formation...
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