Forms of Business Organization to Choose from
up the business.
Single or Sole Proprietorship
1. Single Ownership- This is the simplest form with the following advantages:
a. easy to form
b. less problem in decision-making
c. easy to dissolve
disadvantages are:
a. limited capital- the business' capital may be limited by the limited resources of the owner that working capital requirement may be a problem. Example is when the collection of the business is longer than anticipated and vendors' demand for payment ia shorter in terms of payment.
b. unlimited liability- the liability extends up to the personal assets of the owner. If the business fails, the government, vendors and other creditors can run after the personal properties if the business assets are not enough to meet the payments.
c. loans may not easily be secured compared to the other types which have more people as guarantors/payors.
Partnership
This is a type of business organization where there are two or more partners. In the US, an S type of corporation is treated like a partnership, taxation-wise. Profits./losses
are distributed to the partners/stockholders and are taxed or are treated as losses/deductions from the other personal incomes of the taxpayers.
Partnership should always have one general partner whose liability after dissolution and liquidation of the business extends up to his personal assets. Limited liability partners are liable only up to the extent of the value of their investments. When business resources are exhausted to pay creditors, the personal assets of the limited liability partners can not be held to use for payment of obligations. An industrial partner is one whose investment is not cash or tangible assets but his expertise or services that he rendered in exchange of partner's equity.
Corporation
Corporation is formed by a group of investors called incorporators.
The incorporators are the stockholders but stockholders may not necessarily
be incorporators.
In the Philippines, there is what is called family or closed corporations.
These are stock corporations which ownerships are strictly for members of families
only. Closed because the stocks are not publicky traded in the stock market. There
are family corporations however where majority ownerships are still held by the families and the rest are publicly traded.
The minimum paid-up capitalization depends on the kind of industry the business will be engaged in.
Non-profit organization. oops.
posted by cathy at 3:11 PM
