Organizations and Management

Grade Level: Grade 11

SLA No. 4: Forms & Economic Roles of Business Organizations

Phases of Economic Development and Its Impact to Business Environment
Subject Code/Number: ABM/GAS 01
Subject Title: Organization Management
Teacher: Lorelie Buitrago

I. Introduction
How are you today? Everything you need to know about the forms of business
organization will be tackled in this topic. Most production and distribution activities are
carried out by millions of people in different parts of the country by constituting various
kinds of organizations. So, let us see what are these things.

A. Learning Competency
1. Analyze the forms and economic roles of business organizations.
2. Differentiate the phases of economic development and its impact to
business environment

B. Learning Outcomes
1. Differentiate the forms of business organization and nature of ownership.
2. Identify the advantages and disadvantages of each form.

II. Learning Content

What do I need to know? To answer this, you have to read the given text completely
with curiosity and feeling brave about brainstorming new ideas, as you explore how
your business will be structured.

The Role of Business in Social and Economic Development

What is Business?
A business is an organization or economic system where goods and services are
exchanged for one another or for money. Every business requires some form of investment
and enough customers to whom its output can be sold on a consistent basis to make a
profit. Business can be privately owned, not-for-profit, or state-owned. One of the first
decisions you’ll make as a business owner is how your business will be structured. You need
to know the advantages and disadvantages of each of the different forms of business
organization to make sure you make the right decision for your new business.

In making a choice, you will want to take into account the following:

 Your vision regarding the size and nature of your business.

 The level of control you wish to have.
 The level of “structure” you are willing to deal with.
 The business’s vulnerability to lawsuits.
 Tax implications of the different organizational structures.
 Expected profit (or loss) of the business.
Organizations and Management
Grade Level: Grade 11
 Whether or not you need to re-invest earnings into the business.
 Your need for access to cash out of the business for yourself.

Forms of Business Organization

1. Sole Proprietorship

A sole proprietorship is a business owned by only one person. It is the most basic – and easiest
– type of business to establish. You’re entitled to all profits and are responsible for all your business’s
debts, losses and liabilities. The owner faces unlimited liability; meaning, the creditors of the business
may go after the personal assets of the owner if the business cannot pay them and usually adopted by
small business entities.

ADVANTAGES
 Owner receives all the profits
 Profits are taxed only once
 Owner makes all decisions and is in complete control of the company (could also be a
disadvantage)
 Easiest and least expensive form of ownership to organize

DISADVANTAGES
 Unlimited liability if anything happens in the business. Your personal assets are at risk
(including your home in Cebu City)
 Limited in raising funds and may have to acquire consumer loans
 No separate legal status

2. Partnership

A partnership is a single business where two or more people share ownership. Each partner
contributes to all aspects of the business, including money, property, labor or skill. In return, each
partner shares in the profits and losses of the business.

Types of Partnerships that should be considered:

a) 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.

b) Limited Partnership

Who invest in the partnership but have no participation in day-to-day operations and who are not
usually considered to have liability. Creditors cannot go after the personal assets of the limited
partners.
Organizations and Management
Grade Level: Grade 11

C) 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.

ADVANTAGES
 Easy to establish (with the exception of developing a partnership agreement
 Separate legal status to give liability protection
 Profits taxed only once
 Partners may have complementary skills

DISADVANTAGES
 Partners are jointly and individually liable for the actions of the other partners
 Profits must be shared with the partners
 Divided decision making
 Business can suffer if the detailed partnership agreement is not in place

3. Corporations
A Corporation, chartered by the state in which it is headquartered, is considered by law to be a
unique entity, separate and apart from those who own it. A Corporation can be taxed; it can be sued; it
can enter into contractual agreements. The owners of a corporation are its shareholders. The
shareholders elect a board of directors to oversee the major policies and decisions. The corporation has
a life of its own and does not dissolve when ownership changes.

ADVANTAGES
 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 officers and employees.
 Can elect S Corporation status if certain requirements are met. This election enables company to
be taxed similar to a partnership.
Organizations and Management
Grade Level: Grade 11

DISADVANTAGES
 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.

4. Cooperative

Often referred to as a “co-op”, a cooperative is a limited liability business that can organize for-
profit or non-profit. A cooperative differs from a corporation in that it has members, not shareholders,
and they share decision-making authority. Typically, an elected board of directors and officers run the
cooperative while regular members have voting power to control the direction of the cooperative.
Members can become part of the cooperative by purchasing shares, though the number of shares they
hold does not affect the weight of their vote.

Examples of cooperatives are: water and electricity (utility) cooperatives, cooperative banking,
credit unions, and housing cooperatives.

ADVANTAGES
 Generally inexpensive to register.
 A cooperative organization is owned and controlled by members.
 Members have an equal vote at general meetings regardless of their level of investment or
involvement. One member, one vote.
 All members must be active in the co-operative.
 This type of organization has a limited liability.
 Profit distribution (surplus earnings) to members is carried on in proportion to the use of
service; surplus may be allocated in shares or cash.

DISADVANTAGES
 A cooperative organization entails longer decision-making process.
 It requires members to participate for success.
 It has less incentive, and there’s also a possibility of development of conflict between
members.
 As co-cooperatives are formed to provide a service to members rather than a return on
investment, it may be difficult to attract potential members seeking a financial return.
 There is usually limited distribution of profits to members and some co-cooperatives may
prohibit the distribution of any surplus.
 Members providing greater involvement or investment than others will still only get one vote.
 Extension record keeping is necessary in this form of organization.
Organizations and Management
Grade Level: Grade 11

Economic Development – is a development of economic wealth of the countries, regions, or

communities for the well-being of their inhabitants.

Importance of Economic Environment

As business enthusiasts, it is important to know the economic status of our country so that we
could further help it improve and develop.

Five Phases in Economic Development

1. MALTHUSIAN – proposed by Thomas Robert Malthus (1766-1834). It’s a theory about

economic growth which depend on the rate of the population of the certain area. He said that
the economic growth is inversely proportional to the population. The higher the population,
the higher the economic growth and vice versa.

Positive Effect:

 The standard of living to the growth rate of population.

 Ex: urban communities are more commercialized compared to rural communities.

Negative Effect:

 the size of the population negatively affects the standard living of the people.

2. GOVERNMENT – LED (LOCAL ECONOMIC DEVELOPMENT) - An approach towards economic

development which allows and encourages local people to work together to achieve
sustainable economic growth and development. It supports the formation of a partnership
between local and national institutions towards strategic implementations.

3. A LA KUZNETS (GOVERNMENT VS. ENVIRONMENT) - Proposed by Simon Kuznets who said

that the existence of a pattern or behavior, between economic growth and environmental
degradation, consistent with the environmental Kuznets curve (EKC) hypothesis.
Organizations and Management
Grade Level: Grade 11

4. HUMAN CAPITAL BASED - is a measure of the economic value of an employee’s skill set.
Refers to the knowledge, skill sets and motivation that people have, which provide
economic value. It could be invested in through education, training and enhanced
benefits that lead to an improvement in the quality and level of production.

5. POST DEMOGRAPHIC TRANSITION - proposed in 1929 by Warren Thompson. It is the

transition from high birth and death rate to lower birth and death rate as the country
develops from pre- industrial to an industrialized economic system. Fertility rate
decreases when child mortality is low, and is weakly dependent in GDP.

Impact of the Economic Development

Positive Negative
 Standard of living of the people will  Air Pollution
increase  Water Pollution
 Rising employment  Soil Pollution
 Increased capital investment  Noise Pollution
 Benefit to Government  Loss of Biodiversity
 Superior public services  Climate Change
 Technological development  Long-term toxins
 Increased life expectancy  A decline in sources of oil/coal/gas
 Better education
 Increased research and development
 More choice

III. Self-Learning Activities

Activity 1. Content Evaluation

1. Differentiate the impacts of business developments in the Philippines
between the years 2000 and 2021.
2. How does it affect the lives of the Filipino people?
3. If the Philippine government will impose a 2-child policy, what is its impact
on our economy?

Activity 2. Concept Webbing

1. Recall the tragedy that happened in Naga City last September 20, 2018.
2. Establish the reasons behind the tragedy.
Organizations and Management
Grade Level: Grade 11
3. Do you believe that the Apo Land and Quarry Corporations (ALQC) should
be held accountable for the people who died that day? Support your answer.

REFERENCES

https://www.yourarticlelibrary.com/business/cooperative/advantages-and-disadvantages-
of-cooperative-society-discussed/40799
https://smallbiztrends.com/2014/01/5-common-business-structures.html
https://www.youtube.com/watch?v=jK41svhXisg
https://prezi.com/caxalxhhyhyo/5-phases-of-economic-development/