I.

OBJECTIVES
At the end of this lesson, the students are expected to:
A. identify the different forms of business ownership and describe the nature and
characteristics of each form.
B. appreciate the nature of each forms of business ownership and feel motivated in putting
up a business someday.
C. create a plan for their own business.

II. SUBJECT MATTER

A. Topic
Forms of Business Ownership
B. Materials
Multimedia projector
Speakers
Papers and pen

C. References
Median, RobertoG. 2015. Business and Organization Management. REX
Bookstore, Inc. Manila, Philippines.

https://bizfluent.com/info-8162541-four-types-business-ownership.html

https://www.youtube.com/watch?v=KGI1jfax9cc

https://www.upcounsel.com/types-of-business-ownership

III. PROCEDURES

A. Review

1. What is business ethics?

2. State some current issues related to ethics.

B. Motivation

Logo Quiz. The class will be divided into to groups. The group who scored the highest in
guessing the logo will be declared as the winner.

C. Presentation

Before going here to school, what business establishments dis you see? Just as you went
out from your house, did you see any business establishments? Some of you may say that
you saw a “sari-sari store”, a water refilling station, Jollibee, McDo, BPI, an “ukay-ukay”
store, and so on and forth.

I will show you some pictures, and tell me if you are familiar with these businesses?
 Our lesson for today is about the Different Forms of Business Ownership.

D. Discussion Proper

One of the first decisions that you will have to make as a business owner is the company
should be structured. This decision will have long-term implications, so consult with an
accountant and attorney to help you select the form of ownership that is right for you. 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 ownership structures.
 Expected profit (or loss) of the business.
 Whether or not you need to re-invest earnings into the business.
 Your need for access to cash out of the business for yourself.

1. Sole Proprietorship – This is the simplest business entity there is. As the name implies, the
establishment has just one owner. That owner may choose to use his or her own name or “d/b/a”,
which means, “doing business as”. The requirements are minimal – just a social security number
and the necessary permits and licenses.

These are often a top choice for small businesses because they are so economical to start up.
Benefits include the fact that income is taxed once, instead of twice as a company and then
personal source of revenue. Sole proprietorships are not subjected to as much government
involvement and taxation as some other business types. Since only one person is involved,
conflicts with partners, their associates or family members are nonexistent. Also, it is very easy
to dissolve.

A major point to be aware of is that under the law, there is no distinction between the individual
and the business. That can sometimes jeopardize the owner’s personal assets should the business
go through financial problems. The same is true in the reverse, should the business owner
experience hardships, such as divorce, illness, or some other personal difficulty, the business
may be negatively affected.

It takes an astute individual to successfully operate this type of business. They are 100 percent
responsible for all of the decisions and raising capital. There are also certain employee benefits
that cannot be fully deducted from the firm’s income. Owners should realize that some costs
could only be partially deducted later as an adjustment.

2. Partnership – This formation type takes place when two or more individuals form a written
agreement to operate a business together. Partnerships can also be established between other
businesses and among one or more businesses and one or more individuals. This choice is also
fairly simple and inexpensive to establish. However, partnerships have their own unique set of
tax and liability issues.

Of course, this type of business allows for shared responsibilities when it comes to raising
capital, making important decisions, and managing operations. On the flip side, when conflicts
arise, no matter how large or small, unresolved issues can endanger the business. Those
considering a partnership need to proceed with caution, because if one partner makes a financial
or legal misstep, it can spell disaster for the company as a whole.
3. Corporation – Going through the process known as “incorporation” sets up the most flexible
type of company. Corporations are state-chartered and have a number of legal rights. Its owners
have limited liability because the corporation has separate legal standing. The owners are thereby
protected from personal legal action, should the business be sued. However, corporations
undergo a great deal of scrutiny and are held accountable for their actions at a higher level.

For example, the government oversees the operations of a corporation and requires them to
appoint a board of directors, hold regular meetings, record and publish meeting minutes. Income
is also subject to taxation as both personal and business revenue. Another point to keep in mind
is that ownership can be transferred through the sale of stock or transfer of a controlling interest
within the corporation.

4. Limited Liability Company-LLC – These types of businesses have many of the same built-
in advantages as corporations. Along with their limited liability, LLCs can be owned by a variety
of entities, including individuals, trusts, other LLCs, and corporations. When it is set up under
the proper guidelines, an LLC can be taxed like a partnership, which is an advantage. However,
there is quite a bit of paperwork required to form and operate an LLC to ensure that it will not be
taxed as a corporation.

E. Generalization

I know you’ve learn a lot from this day’s discussion, anyone from the class can answer:

(call at least four students to recite)

1. Differentiate forms of business ownership.

2. Give one advantage and disadvantage of each form of business ownership.

F. Application

Create a plan for you own business in the future.

IV. Assessment

This is the simplest business entity there is.

Identify the word being described in the sentence:

1. This is the simplest business entity there is.

2. The establishment has just one owner.
3. This formation type takes place when two or more individuals form a written agreement
to operate a business together.
4. These are state-chartered and have a number of legal rights. Its owners have limited
liability because the corporation has separate legal standing.
5. These types of businesses have many of the same built-in advantages as corporations.

V. Assignment

In your community where you live, name at least business establishments and categorize them
according to their forms of ownership.