Discussion of Basic Forms of Business Organization. (Owbership) Organization → represents a group of people who work together for the achievement of common objective

1. TOPIC : FORMS OF ORGANIZATION
SUBTOPICS :
1. Proprietorship
2. Partnership
3. Corporation
4. Hybrid type of Organization
WHAT IS AN ORGANIZATION?
Organization → represents a group of people who work together for the
achievement of common objective.
COMMON FORMS OF BUSINESS ORGANIZATIONS
 SOLE PROPRIETORSHIP
The simplest and most common form of business ownership, sole
proprietorship is a business owned and run by someone for their own
benefit. The business’ existence is entirely dependent on the owner’s
decisions, so when the owner dies, so does the business.
ADVANTAGES OF SOLE PROPRIETORSHIP
 Easiest and least expensive form of ownership to organize.
 Sole proprietors are in complete control,and withinthe parameters
of the law, may make decisions as they see fit.
 Profits from the business flow-through directly to the owner’s
personal tax return.
 The business is easy to dissolve, if desired.
DISADVANTAGES OF SOLE PROPRIETORSHIP
 Owner is 100% liable for business debts
 Equity is limited to the owner’s personal resources
 Ownership of proprietorship is difficult to transfer
 No distinction between personal and business income
 The law does not afford protection to the personal assets of the
entrepreneur from claims against his business.
 Short Term
EXAMPLES OF SOLE PROPRIETORSHIP: Private Tutors, Farms, Small
Shops, Barber Shops, Sari-Sari Stores, Auto-Repair Shops, Youtubers etc.
 PARTNERSHIP
Two or more people share ownership of a single business. Like
proprietorships, the law does not distinguish between the business and
its owners. The Partners should have a legal agreement that sets forth
how decisions will be made, profits will be shared, disputes will be
resolved, how future partners will be admitted to the partnership, how
partners can be bought out, or what steps will be taken to dissolve the
partnership when needed.
Figure 1. Sole Proprietorship Organizational Structure. You as the owner have
all the responsibilities for your business operations.

2. TYPES OF PARTNERSHIPS
1. General Partnership. Partners divide responsibility for
management and liability, as well as the shares of profit or loss
according to their internal agreement. Equal shares are assumed
unless there is a written agreement that states differently.
Example: Let's say that Dottie and Dave decide to open a clothing
store. They decide to name the store D.D.'s Duds. Dottie and Dave
don't need to do anything special in order to form a general
partnership. Once Dottie and Dave agree to form the business, it's
automatically considered to be a general partnership.
2. Limited Partnership and Partnership with Limited Liability .
A limited partnership is a business partnership where at least one
owner is a general partner and at least one owner is a limited
partner. The general partners make everyday business decisions
and are personally liable for business debts. However, the limited
partners simply invest in the business and have little control over
business operations.
Example: Ben, Brandi and Bob are partners in owning and running
a bookstore. They own The Book Nook. Per their partnership
agreement, Ben and Brandi are limited partners. They are investors
in the store. They each gave P50,000 to establish the store. Bob is a
book expert, so he runs the store. Bob is a general partner. Note that
all the partners will be considered general partners unless there's a
written agreement between the partners stating otherwise.
3. Joint Venture. Acts like a general partnership, but is clearly for
a limited period of time or a single project. If the partners in a joint
venture repeat the activity, they will be recognized as an ongoing
partnership and will have to file as such, and distribute
accumulated partnership assets upon dissolution of the entity.
Example: The joint venture partnership between an event organizer
and catering, and lightings services providers for a single event like
a wedding for a one day.
ADVANTAGES OF PARTNERSHIP
 Shared resources provide more capital for the business
 Each partner shares the total profits of the company
 Similar flexibility and simple design of a proprietorship
 Inexpensive to establisha business partnership, formal or informal
DISADVANTAGES OF PARTNERSHIP
 Each partner is 100% responsible for debts and losses
 Selling the business is difficult—requires finding new partner
 Partnership ends when any partner decides to end it.
 Quarrels between partners may occur
 Unlimited Liabilities
 Short term
Figure 2. Partnership Organizational Structure.

3. EXAMPLES OF PARTNERSHIP: Legal Services Providers, CPA Services,
Doctors’ Offices, Small Shops with 2 or more owners in partnership
agreement
 CORPORATION
A corporation is owned by several people, called shareholders,
and has a personality separate and distinct from them. Shareholders
are responsible for the debts of the corporation only up to the extent of
their capital contribution. Corporations can either be stock or non-stock
and are controlled by the Board of Directors or Trustees. Registration of
corporations is with the SEC.
Corporations are, for tax purposes, separate entities and are
considered a legal person. This means, among other things, that the
profits generated by a corporation are taxed as the “personal income” of
the company. Then, any income distributed to the shareholders as
dividends or profits are taxed again as the personal income of the owners.
A corporation is an artificial being created by operation of law,
having the right of succession and the powers, attributes and properties
axpressly authorized by law or incident to its exixtence.
-The Corporation Code of the Philippines
As a rule, corporations cannot enter into partnerships with one
another but they are allowed to enter into joint ventures.
Corporate structure refers to how a business is organized to
accomplish its objectives. The corporate structure of a business is
important because it determinesthe ownership, control, and authority of
the organization. In a corporation, these characteristics are represented
by three groups: shareholders,directors, and officers. Ownershipbelongs
to the shareholders. Control isexercised by the board of directorson behalf
of the shareholders, while authority over the day-to-day operations is
vested in the officers.
ROLES AND RESPONSIBILITIES OF SHAREHOLDERS, DIRECTORS
AND OFFICERS
SHAREHOLDERS
In a corporation, a group of shareholders have shared
ownership, represented by holding shares of common stock. Most
business corporations are established with the goal of providing a
return for its shareholdersin the form of profits. Shareholders have
the right to share in the profits of the business but are not
personally liable for the company's debts. This concept is known
Figure 3. Corporation Organizational Structure.

4. as limited liability and is one of the main advantages of the
corporation as a form of doing business.
BOARD OF DIRECTORS
The board of directors is responsible for overseeing and
directing the businessof the corporation in the best interest of the
shareholders. The key point here is oversight; the board is not
expected to actually operate the business. Rather, its purpose is to
oversee operations, approve major plans, and monitor financial
performance.The chairmanof the board is technically the leader of
the corporation, responsible for running the board effectively. The
chairman is usually elected from the board of directors. The
chairman's duties include maintaining strong relationships and
open communication with the chief executive officer and other
executives, formulating business strategy, and representing the
company's management and board to the general public and
shareholders.
CEO, CFO AND COO
The CEO makes all the major decisionsfor the company and
also functions as the company representative for the media and
public. At some companies, depending on the size and structure,
the CEO also holds the title of president, or founder, and might also
be the chairperson of the board of directors. The CFO, or Chief
Financial Officer, only oversees the financial operations of a
company and reports to the CEO. The COO, or Chief Operations
Officer, oversees the day-to-day administrative and operational
functions of a company and also reports to the CEO.
ADVANTAGES OF CORPORATION
 Shareholders have limited liability for the corporation’s debts or
judgments against the corporation.
 Generally, shareholders can only be held accountable for their
investment in stock of the company. (Note however,that officers
can be held personally liable for their actions, such as the failure
to withhold and pay employment taxes.
 Corporations can raise additional funds through the sale of stock.
 A Corporation may deduct the cost of benefits it provides to
officersand employees.
 Long term
DISADVANTAGES OF CORPORATION
 The process of incorporation requires more time and money than
other forms of organization.
 Corporations are monitored by federal, state and some local
agencies, and as a result may have more paperwork to comply with
regulations.
 Incorporating may result in higher overall taxes. Dividends paid to
shareholders are not deductible from business income; thus this
income can be taxed twice.
EXAMPLES OF CORPORATION: PepsiCo, Microsoft, IKEA, FedEx, eBay,
Jollibee Food Corporations, Universal Robina Corporations, Nestle
Corporations etc.

5.  HYBRID ORGANIZATION
Hybrid organization is one that mixes elements, value systems and
action logics (e.g. social impact and profit generation) of various sectors
of society,i.e.the public sector, the private sector and the voluntary
sector. A more general notion of hybridity can be found in Hybrid
institutions and governance.
According to previous research organizations under hybrid
between public and private spheresconsist of following features:
1. Shared ownership
2. Goal incongruence and different institutional logics in
the same organization
3. Variety in the sourcesof financing
4. Differentiated forms of economic and social control
A hybrid organizational structure is a framework that employs
multiple reporting structures in the organization. A hybrid form of
organization,for example,is created by combining functional and product
structures. Employees are required to work on many projects and report
to multiple managers under a hybrid organizational structure.
Example A: An engineer working on a project should, in an ideal world,
report to his project manager. In the hybrid management structure, however,
the engineer may be invited to work on another project for a limited time if a
need develops, resulting in a situation in which he reports to both project
managers.
Example B: Starbucks is an example of a hybrid organizational structure.
Starbucks implements a mix of three organizational structures: functional
structure, geographical structure and product-based structure. Starbucks
has functional departments such as finance, marketing and human
resources.
Other examples of Hybrid Organizations:
Figure 5. Hybrid Organization Structure

6. -END-
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