Ownership and Structural Forms of Business Organization
Ownership and structural forms of business organization, applicable laws, requirements for their formations, and advantages and disadvantages
Type of Ownership * Single or Sole Proprietorship. It is a form of business organization which is owned by one person. The owner personally manages his business. Most of businesses in the Philippines (including those which are not registered) belong to single proprietorship. Examples are retailers, market vendors, barbers, tailors, and so forth.
a) Advantages of Single or Sole Proprietorship
1) It is easy to organize. Financial capital is small, and registration requirements are not difficult to comply with. In fact, in the remote rural areas small businesses do not even bother to apply for license.
2) The single proprietor is the boss. He makes the decisions and enjoys substantial freedom of action. Possibilities of conflicts or quarrels are minimized.
3) The owner acquires all the profits from his business. This gives him more incentives to make his business grow.
b) Disadvantages of Single or Sole Proprietorship
1) In general the financial resources of a single proprietorship are not enough to transform the business into a large scale enterprise. Considering its small assets and high mortality rate, banks are reluctant to grant big loans to single proprietorship type of business organizations.
2) Benefits of specialization in business management are not present in small scale proprietorship. There is only one manager. In not a few cases, the owner is the only employee.
3) The owner has unlimited liability. This means that the owner of the business risks not only the assets of his small enterprise, but also his other personal assets like his piece of land, bank deposits, and other personal properties which are not part of his business. In case of loss, such assets are subject to financial claims by creditors.
c) Requirements for formation
Since it is the simplest
Type of Ownership * Single or Sole Proprietorship. It is a form of business organization which is owned by one person. The owner personally manages his business. Most of businesses in the Philippines (including those which are not registered) belong to single proprietorship. Examples are retailers, market vendors, barbers, tailors, and so forth.
a) Advantages of Single or Sole Proprietorship
1) It is easy to organize. Financial capital is small, and registration requirements are not difficult to comply with. In fact, in the remote rural areas small businesses do not even bother to apply for license.
2) The single proprietor is the boss. He makes the decisions and enjoys substantial freedom of action. Possibilities of conflicts or quarrels are minimized.
3) The owner acquires all the profits from his business. This gives him more incentives to make his business grow.
b) Disadvantages of Single or Sole Proprietorship
1) In general the financial resources of a single proprietorship are not enough to transform the business into a large scale enterprise. Considering its small assets and high mortality rate, banks are reluctant to grant big loans to single proprietorship type of business organizations.
2) Benefits of specialization in business management are not present in small scale proprietorship. There is only one manager. In not a few cases, the owner is the only employee.
3) The owner has unlimited liability. This means that the owner of the business risks not only the assets of his small enterprise, but also his other personal assets like his piece of land, bank deposits, and other personal properties which are not part of his business. In case of loss, such assets are subject to financial claims by creditors.
c) Requirements for formation
Since it is the simplest