TYPES OF BUSINESS

ORGANIZATIONS
The Sole Proprietor
The Partnership
The Corporation
The Cooperative
The Sole Proprietor

is the simplest business form under which one
can operate a business
is a popular business form due to its simplicity,
ease of setup, and nominal cost
is not a legal entity


Advantages
Owners can establish a sole proprietorship
instantly, easily and inexpensively.
Sole proprietorships carry little, if any, ongoing
formalities.
A sole proprietor need not pay unemployment
tax on himself or herself (although he or she
must pay unemployment tax on employees).
Owners may freely mix business or personal
assets.

Disadvantage
Owners are subject to unlimited personal
liability for the debts, losses and liabilities of
the business.
Owners cannot raise capital by selling an
interest in the business.
Sole proprietorships rarely survive the death
or incapacity of their owners and so do not
retain value.

Great Feature
One of the great features of a sole
proprietorship is the simplicity of formation.
Little more than buying and selling goods or
services is needed.
No formal filing or event is required to form a
sole proprietorship; it is a status that arises
automatically from one's business activity.


How is an organization financed
The person uses his or her own capital to
establish a business and is the sole owner.
A sole proprietorship can operate under the
name of its owner or it can do business under
a fictitious name

How is this type of Organization put up
in the Philippines
A sole proprietor need only register his or her
name and secure local licenses, and the sole
proprietor is ready for business.
Example
Sari-Sari Store
The Partnership

Is an association of two or more persons for
the purpose of engaging in a business for
profits
Advantages
persons may be allowed to pool their resources and
funds to engage in the pursuit of a common business
objective without necessarily organizing themselves
into a corporation, upon which the law imposes a
much higher form of regulation, limitation and
standards
Dissolution of the partnership may take place at
anytime by mere agreement of the partners
Provides an easy method whereby two or more
persons of deferring talents may enter into business,
each carrying those burdens that he can handle best
Disadvantage
The death of a partner or the unauthorized
transfer of ownership of his share in the
partnership [in case there is a limitation to this
effect] results in the dissolution thereof
In other words, any change in the composition of the
partnership, unless so allowed, will result in the dissolution
thereof.
How is this type of Organization put up
in the Philippines
Partnerships are required to be registered with the Securities and
Exchange Commission [SEC]. Registration is done by filing the
Articles of Partnership with the SEC. The Articles of Partnership set
forth all the terms and conditions mutually agreed by the partners
thereto.
More specifically, the documents required are as follows:
[1] Proposed Articles of Partnership;
[2] Name Verification Slip;
[3] Bank Certificate of Deposit;
[4] Alien Certificate of Registration, Special Investors Resident Visa
or proof of other types of visa [in case of foreigner];
[5] Proof of Inward Remittance [in case of non-resident aliens].
It bears noting that corporations are not allowed by law to become
partners in a partnership.

How is an organization financed

The Cooperative

A cooperative is a legal entity owned and
democratically controlled by its members. Members
often have a close association with the enterprise as
producers or consumers of its products or services, or
as its employees.
Cooperatives often share their earnings with the
membership as dividends, which are divided among
the members according to their participation in the
enterprise, such as patronage, instead of according to
the value of their capital shareholdings (as is done by
a joint stock company).

How is an organization financed
A. directly from members themselves
b. from retained surpluses generated by the
cooperative business
c. from outsiders.

A. Directly from members
Members help finance the operations and growth
of the cooperative through:
- One-time or annual membership fees
member contributions with no individual
ownership attached, such as service fees.
Member share capital
individual member deposits with the
cooperative which may be used for business
deferred payment to members for part or all of
their produce delivered to the cooperative

B. From cooperative business surpluses
Funds created through the retention of cooperative business
surpluses that are not directly allocated to members are another
important source of cooperative capital. This is a long term source
of funds since most cooperatives rules allow these funds to be
distributed only when a cooperative is liquidated. Unlike loans, or
individual member deposits, the cooperative does not have to pay
interest to use these funds. Of course, retaining such funds by the
cooperative also represents a cost to the individual members who
otherwise would have had that portion of the surplus allocated to
them. Members willingly accept this cost when the benefits it
creates for them are clear and worthwhile.
This source of funds from retained surpluses is often
called institutional capitaland represents the collectively-owned
wealth of the cooperative.

C. From outsiders
In addition to institutional capital and member capital, cooperatives often
make use of external sources of funds to run their operations or to finance
investments. These non-member sources of funds may include
cooperative or commercial banks, suppliers, government or donor
agencies. External funding may be provided in different ways:
as a grant
as a short-term loan
as a long-term loan
as trade credit offered by a supplier.
Commercial providers of funds, such as banks, generally provide credit or
loans that are legally secured by collateral (pledged assets of the
cooperative). They are motivated by profit and seek to minimize risk. Non-
commercial providers, such as governments or donors, generally provide
credit on more generous terms at below market rates of interest or
provide grants. Their motivations may be social, political or economic -
often a mixture of all three.

How is this type of Organization put up
in the Philippines