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OVERVIEW

A business is an organization that uses economic resources or inputs to provide goods

or services to customers in exchange for money or other goods and services. If one is
planning to start a business or is interested in expanding an existing one, an important
decision relates to the choice of the form of organization. The most appropriate form is
determined by weighing the advantages and disadvantages of each type of organization
against one’s own requirements.

LEARNING COMPETENCY
Analyze the forms and economic roles of business organizations

Welcome Note

SPECIFIC LEARNING OBJECTIVES

At the end of this module, the students will be able to:

1. Distinguish between various forms of organizations.

2. Explain the economic roles of business organizations.

GETTING READY

List down 5 examples of business that you know. 1 being the smallest and 3 being the
biggest type.
1. _________________________________________________________
2. _________________________________________________________
3. _________________________________________________________

STARTING POINT
What are the things that you would consider as you venture in business?
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

In this portion, the students will be able to distinguish between various forms of
business organization.

When you’re forming your new business, you will want to take into account the
following:

 Your (practical) 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.

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 The business’s vulnerability to lawsuits.

 Tax implications of the different organizational structures.
 Expected profit (or loss) of the business.

These are the basic forms of business organizations.

1. Sole Proprietorship
A sole proprietorship is a business owned by only one person. It is easy to
set-up and is the least costly among all forms of ownership. 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.

The sole proprietorship form is usually adopted by small business entities.

2. Partnership
A partnership is a business owned by two or more persons who contribute
resources into the entity. The partners divide the profits of the business among
themselves.

In general partnerships, all partners have unlimited liability. In limited

partnerships, creditors cannot go after the personal assets of the limited partners.

3. Corporation
A corporation is a business organization that has a separate legal
personality from its owners. Ownership in a stock corporation is represented by
shares of stock.

The owners (stockholders) enjoy limited liability but have limited

involvement in the company's operations. The board of directors, an elected
group from the stockholders, controls the activities of the corporation.

In addition to those basic forms of business ownership, these are some other types of
organizations that are common today:

Limited Liability Company

Limited liability companies (LLCs) in the USA, are hybrid forms of business that
have characteristics of both a corporation and a partnership. An LLC is not
incorporated; hence, it is not considered a corporation. But, the owners enjoy limited
liability like in a corporation. An LLC may elect to be taxed as a sole proprietorship, a
partnership, or a corporation.

Cooperative
A cooperative is a business organization owned by a group of individuals and is
operated for their mutual benefit. The persons making up the group are called
members. Cooperatives may be incorporated or unincorporated.

Some examples of cooperatives are: water and electricity (utility) cooperatives,

cooperative banking, credit unions, and housing cooperatives.

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TASK FOCUS 1
List at least 10 businesses found in Davao Region and classify them according to their
form of organization.

Sole Company/
Partnership Corporation
Proprietorship Cooperative

In this portion, the students will explain the economic roles of business organizations

The Roles of Business Organization in Economic Development

The role of business in social and economic development cannot be overstated.

Business plays a vital role in the economic development and wealth of a country.
Success in business translates to the economic well-being of a company and its
residents through job creation and offering improved quality of life for the country’s
citizens. Here, we delve into several aspects that relate to the importance of business in
today’s economic environment and society.

Economic Development and Business

Small and large businesses drive economic stability and growth by providing
valuable services, products and tax that directly contribute to the health of the
community. They also provide jobs, strengthening the economic health of each
community where a business is based. Even if a business is headquartered elsewhere,
employing people at each local business contributes to the success of that region, as
with the wages they earn, people buy property, work, shop and otherwise invest in
where they live.

Taxes are used, among other things, to maintain the infrastructure of a city, state
or country – roads, bridges, tunnels, public transportation, libraries and other public
buildings and services, including police officers and firefighters, all benefit from tax
money collected from individuals and businesses. These services are essential to the
good health and positive qualities of local and national citizens. In a capitalist society
like that of the United States, business growth and increased sales means collecting
more taxes, which can directly translate to better maintenance and offerings of local
infrastructure and services that benefit the community.

World Economy and Business

The success of business as a whole directly affects the world’s economy. At its
core, businesses are designed to serve a particular need that people have, and to
provide trusted goods and services related to that need. When consumer confidence or
trust dips in business, it isn’t just sales that are negatively affected. This mistrust has a

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ripple effect and can result in a decline in a country’s general economy, weakening the
strength of its currency and buying power.

Corporate Responsibility and Economic Health

As businesses and corporations grow, their role in corporate responsibility and
social development can become as important as that of their contributions to economic
health. It’s thought that a business shouldn’t just serve as an economic machine, but
also have stewardship in issues that affect society as a whole, such as environmental
concerns, human and worker rights, support of local and national charities, schools, and
a variety of non-profit organizations that offer benefits to the community and make the
quality of life higher for its members.

Role of Business in Development

Business is vital to a country’s economy. Success of businesses can drive the
success of an entire country, including through contributions to the gross domestic
product, or GDP, of a nation, which affects their world standing. If a country supports
businesses with goods and services that are in demand, everyone in the country
benefits. From job creation that results in money being put back into the community to
taxes that help the government smoothly run and provide maintenance and
improvements to the country’s infrastructure, or in other ways that are helpful for its
citizens, there are dozens of ways business success translates to economic
development.

In addition to providing products and services that citizens and residents want,
economic health can allow for exporting goods and services to others who want those
items, contribute to offering avenues for education and training for citizens, create
healthy business competition and provide additional methods of strengthening
economic development for the country as a whole.

The role of business in relation to the economy is a pivotal one. Small

businesses boost economic revenue on a smaller scale, but one that’s of vital
importance, directly and positively affecting the health, quality of life and purchasing
power of residents in the local community.

But small businesses don’t always stay small. Many nationally known brands
today got their start as very small businesses run out of someone’s home or garage.
Startups can become multinational companies that can have a huge and positive impact
on the global economy, benefiting all of the company’s employees and the communities
in which those businesses thrive. Apple, Whole Foods, Amazon and Starbucks were all
ideas started on a small scale that have had incredible, explosive positive impacts not
just on the U.S. economy, but on a global scale.

TASK FOCUS 2

Summarize the discussion above by highlighting the importance of business

organization to the economic development of a nation. Minimum of 4 sentences.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

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______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________

PRACTICE YOUR SKILLS

MULTIPLE CHOICE QUESTIONS. Encircle the letter that corresponds your answer.

1. What kind of business is BEST described by these statements?

I am the only owner of my business.
I take all the risks of doing business.
I keep all the profits.
A. Proprietorship
B. Corporation
C. Partnership
D. Cooperative
2. In a corporation, owners share profit, but liability is limited to –
A. Investment
B. Distribution
C. Theft
D. Production
3. A form of business organization that is authorized to act as a legal entity
regardless of the number of owners.
A. Corporation
B. Proprietorship
C. Partnership
D. Distributor
4. Floral Shops, Bookstores, Farms are examples of what type business
A. Sole Proprietorship
B. Corporation
C. Franchise
D. Multinational Corporation
5. What type of business consists of two or more people?
A. Sole Proprietorship
B. Partnership
C. Corporation
D. Franchise

Enumerate 10 economic roles of business organizations based on the reading selection

above.
1. ________________________________________________________________
2. ________________________________________________________________
3. ________________________________________________________________
4. ________________________________________________________________
5. ________________________________________________________________
6. ________________________________________________________________
7. ________________________________________________________________
8. ________________________________________________________________

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9. ________________________________________________________________
10. ________________________________________________________________