Bus Org A 02

Classifying Businesses

Module 02 - Classifying businesses

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Classifying businesses according to size (Magna Carta for Small Enterprises) Size

Capital/Assets(P)

Manpower

Micro I Micro II Micro III Small Medium Large

less than P10,000 P10,000 - P99,999 P100,000 - P500,000 P500,001- P5 million > P5 M to P20 M > P20 M

family 1 - 10 11 - 20 21 - 99 100 - 199 200 and above

Module 02 - Classifying businesses

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Classifying businesses according to form of ownership    

Module 02 - Classifying businesses

Sole proprietorship Partnership Corporation Cooperative

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Single proprietorship Owned by a single person who solely benefits from the profits...

... or suffers the losses Module 02 - Classifying businesses

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Partnership Agreement of two (2) or more persons who bind themselves to contribute money, property or industry to a common fund... ... with the intention of dividing profits among themselves Module 02 - Classifying businesses

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Corporation 

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Artificial being created by operation of law Has the right of succession and the powers, attributes and properties expressly authorized by law of incident to its existence.

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Characteristics of a corporation  

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It is a legal personality distinct from the incorporators and shareholders Ownership is held by various natural or juridical persons through the purchase of shares of capital stock Stockholders elect directors who formulate general plans and policies and appoint the officers

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Characteristics of a corporation 

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The principal administrative officers of a corporation are the president, one or more VPs, a corporate secretary, and a treasurer The officers are responsible for the active management of the corporation and have the right to engage the necessary personnel for operations

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Cooperative

Non-profit enterprise, owned and democratically controlled on a mutual basis by its members who participate in the patronage of its operation (e.g. savings, credit) Module 02 - Classifying businesses

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Sole proprietorship (advantages)  

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Module 02 - Classifying businesses

Control of the business Ease in forming, expanding, reorganizing, selling, or dissolving Reliance on own resources 10

Sole proprietorship (advantages) 

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Module 02 - Classifying businesses

Personal satisfaction from being an independent worker Profits are kept by owner

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Sole proprietorship (disadvantages)   

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Lack of all-around business ability Limited capital and credit accommodation Risk of financial loss is shouldered by owner alone Unlimited liability Long and irregular working hours Limited output

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Partnership (advantages) 

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Module 02 - Classifying businesses

Relatively easy to organize compared to corporation More personal talents become available More capital and better credit facilities 13

Partnership (advantages) Each partner may have a large personal following which s/he can bring to the business  Partners take greater interest in the business than do employees 

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Partnership (disadvantages) Unlimited liability for general partners  Possible disagreement among partners  Possible problems with the assignment of managerial responsibilities  Lack of stability 

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Corporation (advantages) 

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Generally, stockholders are not liable for liabilities beyond their investment Greater stability of existence and continuity of operations

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Corporation (advantages) Accumulation of more capital possible  Easier liquidation of investment 

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Corporation (disadvantages)     

Limitations on corporate activities Higher rate of taxes applied Required submission of several reports Increased clerical work if the number of stockholders is large Control may be exercised by only a small group of stockholders

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