Republic of the Philippines

Department of Education
REGION IV-A CALABARZON
CITY SCHOOLS DIVISION OF BIÑAN CITY

SECOND SEMESTER-3RD QUARTER

BUSINESS ETHICS AND SOCIAL RESPONSIBILITY
WORKSHEET WEEK No. 1
Date of the week: _____________

MELC: _Differentiate the forms of business organizations in terms of their purpose and role in
socio-economic development.
References: __Business Ethics and Social Responsibility by Aliza Racelis
Reminders: Read the lecture first and answer the activities for you to understand the lesson
further. Write your answers on a separate sheet.

LECTURE:
BUSINESS AND BUSINESS ORGANIZATION
A business is an activity that is part and parcel of human society: it is an entity in which economic
resources or inputs, such as materials and labor, are put together and processed to provide goods or services or
outputs to customers. Business are usually complex enterprises involving major activities like purchasing,
manufacturing, marketing, advertising, selling and accounting. The objective of the most businesses is to earn a
profit (although this is not the only aim as what we shall see in the remainder of this course).
Profit is the difference between the amount earned and the amount spent in buying, operating, or
producing something. In this course, we focus on businesses operating to earn a profit, even though many of the
same concepts and principles also apply to not-for-profit organizations. The fundamental reason for examining
the activities of business from a moral perspective is that business organizations, in principle, should help in the
promotion of the common good and in the protection of persons’ rights and interests.
Thus, business make the goods and services you use each day. That includes the products and
services used by other businesses as well as those needed by individual consumers. There are generally three
types of business organizations operated for profit: service, merchandising, and manufacturing businesses.
Service business provide services rather than products to customers. Merchandising businesses sells products
they purchase from other businesses to customers. Manufacturing business change basic inputs into products
that are sold to customers.

THE VARIOUS FORMS OF BUSINESS ORGANIZATION

A business organization may take the form of a proprietorship, partnership, or corporation. Each of
these forms and their major characteristics are listed in Table below.
The three types of businesses we discussed earlier—service, merchandising, and manufacturing—may
be organized as proprietorships, partnerships, or corporations. Given the large size and huge amount of
resources required to operate a manufacturing business, most manufacturing businesses, such as San Miguel
Corporation, are corporations. Most large retailers like SM Supermalls, Robinsons, and Ayala Malls are also
corporations.
1. SOLE PROPRIETORSHIP – a business owned by one person.
 Advantages of a sole proprietorship: (a) total undivided authority; (b) low organizational cost
and license fees; (c) tax savings; and (d) no restrictions on type of business (as long as it is
legal)
 Disadvantages of a sole proprietorship: (a) unlimited liability; (b) limitation on size (and thus on
fund-raising power); and (c) limited by management’s ability to be jack-of-all trades.

Address: P. Burgos St. Brgy. Sto. Domingo, Biñan City Laguna

Website: depedbinancity.com.ph
Email: [email protected]
Telephone no: 511-4143/ 511-8620/ 511-4191/ 511-8746
 2. PARTNERSHIP – an association of two or more people as partners; it refers to an arrangement in
which the individuals share the profits and liabilities of a business venture. Its chief characteristics are:
(a) association of individuals; (b) mutual agency; (c) limited life; (d) unlimited liability; and (e) co-
ownership of property.
The association of individual in a partnership may be based on as simple an act as a
handshake; however, it is preferable to state the agreement in writing.
 A partnership is a legal entity for certain purposes.
 A partnership is an accounting entity for financial reporting purposes.
 Net income of a partnership is not taxed as a separate entity.
Mutual agency means that an act of any partner is binding on all other partners, so long as the
act appears to be appropriate for the partnership. This is true even when partners act beyond the scope
of their authority. Partnership has a limited life. Partnership dissolution occurs whenever a partner
withdraws, or a new partner is admitted.
Each partner has unlimited liability. Each partner is personally and individually liable for all
partnership liabilities. Creditor’ claims attach first to partnership assets and then to the personal
resources of any partner, irrespective of that partner’s capital equity in the company.
3. CORPORATION – an entity created by law that is separate and distinct from its owners and its
continued existence is dependent upon the corporate statutes of the state in which it is incorporated.
The characteristics that distinguish a corporation from proprietorship and partnerships are:
a. The corporation has separate legal existence from its owners.
b. The stockholders have limited liability.
c. Transferrable ownership rights (ownership is in shares of stock).
d. Ability to obtain capital (relative ease)
e. The corporation can have a continuous life.
f. The corporation is subject to numerous government regulations.
g. The corporation must pay an income tax on its earnings, and the stockholders are required to
pay taxes on the dividends they receive: the result is double taxation of distributed earnings.
h. An artificial/judicial “person” endowed with ability for self-management, that is, the
management structure is at the discretion of the board of directors.
The first step in forming a corporation is to file an application of incorporation with the government (in
Philippines, this is done through the Securities and Exchange Commission or SEC). After the
application, of incorporation has been approved, the corporation is granted a charter or articles of
incorporation. The articles of incorporation formally create the corporation. The corporate management
and board of directors then prepare a set of bylaws, which are the rules and procedures for conducting
the corporation’s affairs. Costs may be incurred in organizing a corporation. These costs include legal
fees, taxes, state incorporation fees, license fees, and promotional costs. Such costs are considered
Organizational Expenses (Weygandt, Kieso, and Kimmel, 2012)

COMPARISON AND CONTRAST AMONG THE VARIOUS FORMS OF BUSINESS ORGANIZATION

The owner of a sole proprietorship has complete control over the company’s finances and operations.
Sole proprietors are not required to consult with anyone when it comes to making business decisions. All
partners of a partnership have input regarding how the company’s resources are used and other important
business decisions. In a partnership business, all partners are responsible for making decisions that will impact
the business. This may provide multiple viewpoints, which could potentially lead to better business decisions.
The sole proprietor can maintain complete control over all aspects of the business. There are no
shareholders to pacify and no board of directors to appease. If you feel need to purchase a piece of equipment,
you do not have to justify your actions to others. On the other hand, corporations have an advantage when it
comes to raising capital for the business—the ability to raise funds through the sale of stock. In addition,
corporations file taxes separately from their owners. Owners of a corporation only pay taxes on corporate profits
paid to them in the form salaries, bonuses, and dividends, while any additional profits are awarded a corporate
tax rate, which is usually lower than a personal income tax rate. This is as opposed to single proprietorship which
often pay income tax twice, first on the business earnings and then on personal income when the owner draws a
salary or takes distribution from the company.

Address: P. Burgos St. Brgy. Sto. Domingo, Biñan City Laguna

Website: depedbinancity.com.ph
Email: [email protected]
Telephone no: 511-4143/ 511-8620/ 511-4191/ 511-8746
These comparisons and contrasts are summarized in Table below.

Form of Business Entity Characteristics

Proprietorship is owned by ● 70% of business entities in the United States.
an individual ● 20% of business entities in the Philippines
● Easy and cheap to organize.
● Resources are limited to those of the owner.
● Used by small businesses.

Partnership is owned by ● 10% of business organizations in the United States.

two or more individuals. (combined with limited liability companies)
● 16% of business organizations in the Philippines (2020)
● Combines the skills and resources of more than one
person

Corporation is organized ● Generates 90% of business resources.

Under state or federal ● 20% of the business organizations in the United States.
statutes as a separate legal ● Ownership is divided into shares called stock.
taxable entity. ● Can obtain amounts of resources bu issuing stock
● Used by large businesses.
● 64% of the business organizations in the Philippines
(2020)

Limited Liability Company (LLC) ● 10% of business organizations in the United States.
combines the attributes of a (combined with partnerships)
partnership and a corporation. ● Often used as an alternative to a partnership.
● Has tax and legal liability advantages for owners.

THE ROLE OF EACH FORM OF BUSINESS ORGANIZATION IN THE ECONOMY

Small business owned by sole proprietors are well recognized worldwide as vital and significant
contributors to economic development, job creation, and the general health and welfare of economies.
Microbusinesses (firms that employ fewer than ten people) from a dynamic, integral part of the market economy,
providing goods and services and a gateway by which millions enter the economic and social mainstream of
society. In the US, for example, almost half of all private sector workers are employed by microbusiness firms.
On the other hand, the Industrial Revolution brought with it new forms of machine production that
enabled businesses to make massive quantities of goods to ship and sell in national markets. These changes, in
turn, required large organizations to manage the enormous armies of people that had to be mobilized to process
the output of these machines on long assembly lines in huge factories. The result was the large corporation that
came to dominate our economies. These large businesses, in general, offer better jobs than small businesses, in
terms of both compensation and stability. Also, corporations provide such benefits as: links with suppliers,
increased consumer spending, the transfer of knowledge from one firm to another, and the sharing of pools of
workers. However, competitive forces sometimes fail to steer companies in a socially beneficial way and instead;
lead them to act in a socially harmful manner. For example, a company might knowingly pollute neighborhood
with substance that is not yet illegal, in order to save the costs of reducing its pollution and thereby be more
competitive. This wave of large corporations has brought with it a host of new ethical issues, including the
possibilities of exploiting the workers who labor at the new machines, manipulating the new financial markets that
finance these large enterprises, and producing massive damage to the environment.

ACTIVITIES:
DEVELOPMENT:
Learning Task 1:
Address: P. Burgos St. Brgy. Sto. Domingo, Biñan City Laguna
Website: depedbinancity.com.ph
Email: [email protected]
Telephone no: 511-4143/ 511-8620/ 511-4191/ 511-8746
TRUE OR FALSE. Directions: Analyze each sentence below and write whether it is True or False. Write your
answers on a separate sheet of paper.
1. Business is a passive process.
2. Tax preparation is more difficult in a sole proprietorship than in a corporation.
3. A corporation is a separate entity distinct from all the owners.
4. Your liability as a shareholder is only limited to the amount of your investment.
5. A partnership may generate funds through selling shares of stocks.
6. A corporation may be owned by one person.
7. Handling money for a sole proprietorship is easier than partnership.
8. Book stores and sari-sari stores fall under the service businesses category.
9. Manufacturing businesses include baked goods and cosmetics.
10. The sole proprietor can pass the business down to his/her heir.

ENGAGEMENT:
Learning Task 2:
CASE ANALYSIS:
NEGOSYO Company began as a small enterprise buying and selling various food products. After a few
years of successful operations, it added apparel and footwear to its wares. During this initial stage, NEGOSYO
managed to work on the basis of its proprietor’s capital, borrowing from its bank from time to time when needed.
After more years of operation, NEGOSYO found that it needed to draw larger amounts of funds through
bank borrowing, as well as to hire more personnel for the growing marketing needs and services, apart from
administrative functions like accounting, among others. The proprietor carefully weighed his options: “Shall I
incorporate my business so that I can have greater and easier access to funds, especially larger loans from
banks? If I hire more people as my company goes bigger, will I be able to manage and control well the personnel
working for me? If I begin offering ownership shares to other people outside my family, will serious
disagreements arise among us in terms of products and services to offer in the future as well as managerial
style?”
These and other questions occurred to the proprietor of NEGOSYO Company. He has approached you
for advice.

GUIDE QUESTIONS: Based on the situation above, give the owner of NEGOSYO Company appropriate advice
regarding whether or not to incorporate his business. You might wish to categorize the pros and cons into the
following:
1. business size issues
2. issues related to mission and objectives
3. procedures for incorporation
4. personnel issues
5. funding source issues

ASSIMILATION: (15 items)

Learning Task 3:
A. Directions: Analyze each sentence below and write whether it is True or False. Write your answers on a
separate sheet of paper.
1. A sole proprietorship needs higher start-up costs.
2. Partnership business lacks formality compared with managing a limited company or corporation.
3. Profit is the difference between the amount received and the amount spent on something
purchased, produced, or manufactured.
Address: P. Burgos St. Brgy. Sto. Domingo, Biñan City Laguna
Website: depedbinancity.com.ph
Email: [email protected]
Telephone no: 511-4143/ 511-8620/ 511-4191/ 511-8746
4. Merchandising businesses turn basic inputs into products which are sold to consumers.
5. In a sole proprietorship, the owner decides alone.

B. Directions: Match the terms in Column A to its corresponding definition in Column B. Write the letters of your
answers on a separate sheet of paper.

A B
6. Corporation A. It is a business owned by one person only.
7. Sole proprietorship B. It is the amount received minus the amount spent.
8. Business C. It is an independent entity distinct from its owners.
9. Partnership D. It involves important operations like advertising, marketing, etc.
10. Profit E. It is a business venture by two or more people.

C. Directions: Read each sentence and write the letter of your answer on a separate sheet of paper.
11. Which is not true about a corporation?
A. The life of a corporation has no limit.
B. The business does not have any independent legal status.
C. The business operates even without any real oversight from the owners.
D. Corporation files taxes separately from its owners.
12. All of these are advantages of a partnership, except:
A. there is sharing of burden.
B. the partners both own and control the business.
C. there is better decision-making because two heads decide.
D. it has lower start-up cost.
13. Which of the following is not a nature of business?
A. It aims to earn profits.
B. There are four forms of business organization.
C. It is an active process.
D. It involves significant operations such as buying, assembling, etc.
14. Which of the following is not a role of a corporation to the economy?
A. Corporation provides benefits such as connections with suppliers, etc.
B. Corporation makes massive quantities of goods.
C. Corporation hires huge number of workers.
D. Corporation finds it difficult to raise capital.
15. The following are the advantages of a sole proprietorship, except:
A. there could be difficulty in raising capital.
B. tax preparation is a lot faster.
C. the sole proprietor can pass the business down to his/her heir.
D. handling money for the business is easier.

Address: P. Burgos St. Brgy. Sto. Domingo, Biñan City Laguna

Website: depedbinancity.com.ph
Email: [email protected]
Telephone no: 511-4143/ 511-8620/ 511-4191/ 511-8746