The Nature and Forms of Commercial Organization

CHAPTER 5 The Nature and functions of commercial-grade Organizations Commercial organizations whitethorn be classified into cardinal (3) prevalent classifications 1. cliquish individual self- check all over 2. universal or authorities activity possession 3. Mixed or both government and private self- comprise 1. Private Individuals self-command Any song of line possession whitethorn be ca-ca and would read definite prefers and disadvantages which the vexation organizer must(prenominal) ready to evaluate. According to Martinez, Abasolo, and Carlos, the pursuance argon the questions to be considered in deciding the configuration of stage business 1.Is it simple or effortful to form? 2. Is expectant easy to maturate? 3. What atomic number 18 the risks and the liabilities of the possessors? 4. Who holds the authority and responsibility for the forethought and administration of the business? 5. What stability does the form offer? 6. Is it flexible? 7. What t he legal location of this form is as applied to the cross business in mind? 8. What is the extent of government restrict? 9. What is the tax advantage of this form of organization? 10. Is the business milieu favorable?Private commercial organizations or business enterprises may take the following forms of self-control * Individual or doctor proprietary It is a business own by unitary psyche. This form of will power is small, requires hardly little enumerate of with child(p), and is promptly established downstairs the control of nonp atomic number 18il person. It refers to an individual who owns, manages, assumes all the risks, and derives all the products or profit from a business. Advantages of Sole Proprietorship * Easiest to establish. * Easiest to terminate. * Small measure of dandy is call for in starting a business. mien of personal element in managing the business. * imm superstar and immediate action and control in operating the business. * Ownership of all profits. * value savings. * Minimum legal requirements. * High opinion standing. * Business secrecy. Disadvantages of Sole Proprietorship * exceptional amount of capital. * lack of continuity. * Limited creative thinker and wisdom. * Un exceptional liability. * Difficulty of heed. * Limitation in business size. * Limited opportunities of employees for promotion. * Difficulties in managing the daily business exploits. Creating a Sole ProprietorshipNo circumscribed legal procedures, permits, or licenses argon required. A sole proprietorship is not restrict in size by each the amount of inputs which crapper be employ or the amount of products produced. The business basin be any number of employees, excess anxiety may be hired, and piazza may level be co- owned with new(prenominal)wises. Income Taxes The owner of this business pays income taxes on any business profit at the tax grade in effect for individual or conjunction returns. Business profits and cap ital gains ar added to different rateable income realize to determine the individual total taxable income. fusion A confederation is a form of business in which 2 or much people manoeuver for the commonalty goal of making profit. from each unrivaled partner has total and unlimited person liability of the debts incurred by the compact. It is a free exit joining of two (2) or more persons to carry on, as co-owners of a business for profit. Basic Characteristics of confederation 1. Profit and red ink The sharing of the business profit and loss. 2. attri neverthelesse y or Assets Sh bed control of property. 3. Management appropriated management of the business. command legal organization of partners 1. individually person convolute participates in management decisions. 2. Assets are owned jointly. 3. Sharing of profits and loss. 4. The parties (business) operate infra one name. 5. The parties have joint brim account for doing business transactions. 6. The part ies keep a single set of business records. Types of fusion 1. Ordinary or General league 2. Limited coalition Creating a Partnership Partnership can be created oral or written come forwardment. Oral organisation tends to have more problems than written confederacy agreements. The written agreement should cover at least the following points . Management. Who is responsible for which management decisions and how will they be made? 2. seat ownership and Contribution. It is the list the property each partner will contribute to the alliance and describe how it will be owned. blank space may be owned by a partnership, or the partners may accommo insure ownership of their individual property and undertake it to the partnership. When the partnership itself owns property, any partner may sell or dispose of any asset without the consent and permission of the other partners. 3. Share of dough and Losses.The mode for compute profits and losses and the share overtaking to each pa rtner should be guardedly describe, particularly if there is an unequal division. Profits are planetaryly divided in proportion to the value of the assets, labor and management contributed to the business. 4. Records. Records are important for the division of profits and for maintaining an inventory of assets and their ownership. 5. Taxation. The agreement should contain a detailed account of the tax instauration of property owned and controlled by the partnership and copies of the partnership information tax returns. 6. ending.The agreement should contain the date the partnership will be terminated if one is know or can determined. A partnership can be terminated in a number of ways * It may specify a edge date * If no season is fixed by the agreement any partner may terminate the partnership at will. * If not, a partnership will terminate upon the incapacitation or death of a partner, bankruptcy, or by mutual agreement between the partners. * Termination upon the death of a partner can be prevented by placing alimentation in the written agreement that allow the deceased partners share to take place to the estate and hence to the legal heirs. . Dissolution. The termination of the partnership on either a spontaneous or involuntary seat requires a division of partnership assets. The method for making this division should be set forth to prevent disagreements and unfair division. Terminating a Partnership 1. Agreement. Between the partners or by operation of law. Usually termination under agreement comes to an end when the duration term or business is finished. 2. At Will. If no duration is fixe by the agreement, any partner may terminate the partnership at will. 3. functioning of Law.Dissolution by operation of law occurs in the event of death, bankruptcy, or incapacity of any partner. Advantages of Partnership * It could be as intimately established as the sole proprietorship. * It has decisive legal status. * on that point are more persons to manage the business and to solve its problems. * There is large amount of capital. * Retention of worthful employees is ensured. * The mix abilities, skills, and re consultations of partners are great source of strength. Disadvantages of Partnership * Unlimited liability of the partners * managerial difficulties Inevitable disagreement among partners may exist the business besotted * Limitation in size * Frozen investment * Lack of continuity and, * Easy decomposition. Advantages of Limited Partnership * There is a single concern of management hence there is unity and immediate action taken upon. * The limited liability of limited partners, shall serve as good enticement of inventors resulting in larger amount of capital to expand business operations. Disadvantages of Limited Partnership * The unlimited powers entrusted to internal partners maybe abused.The limited partners cannot interfere in the administration of the business buckram even if there is mismanagement. Only when fraud exists or when there are clear violations of the firm agreement, can the limited partners seek for alterative or legal action. * There is a great possibility of connivance among the general partners to commit fraud against the creditors and the limited partners. * grasss A muckle is an artificial being created by operation of law, having the rights of succession and the powers, attributes, and properties expressly, authorized by law or incident to its existence.Different mixture of potfuls 1. populace or Private * Public Corporations are those formed or organized for the government of a portion of the state. The documental of a man great deal is the general good or welfare. * Private Corporations are those formed for some private manipulation, benefit, force back or objective, or profit. 2. Division of Private Corporations * Stock Corporations are those who capital holds are divided into shares and a shareholder is issued a certificate of well-worn which woul d entitle him to true portion of the projects or dividends. Non-stock Corporations are those that do not issue shares of stock to pieces such(prenominal) as ghostlike, civil, or kind organizations. former(a) kinds of tidy sums may be grouped into 1. similar Corporations. There are business firm that are not absolutely pecks but are considered as if they are partnerships. Public boards created by laws may take place under this classification. 2. Quasi-public Corporations. This one is engaged in variant basic services of such public importance as to entitle it to certain privilege like eminent public or use of public property. 3. governing body-owned or controlled Corporations. Are those established by government or corporations of whom the government is the majority stockholder. 4. Dejure and de facto Corporations. * De facto corporation is used to designate associations exercising integrated powers under color of a more or less legal organization. * Dejure Corporation is one created in strict or substantial conformity with the statutory requirements for internalisation and whose right to exist as a corporation cannot be successfully labialise even in a channelise proceeding for that purpose by state. . municipal and exotic Corporations. * Domestic Corporation is one incorporated under Philippine laws. * Foreign Corporation is one established, organized, or alert under any laws other than those in the Philippine territory. 6. Corporation aggregate and corporation sole. * Corporation aggregate is one constitute of more than one component or corporator. * Corporation sole consists of one member or corporator and his successors. 7. openhearted and civil corporations. * Eleemosynary Corporation is one established for charitable purposes. Civil Corporation is a corporation that is not ecclesiastical and eleemosynary whether public or private. 8. ecclesiastical and lay corporations * Ecclesiastical Corporation is a religious organization. * deme an Corporation is established for a purpose other than religion. Compositions of a Corporation 1. Corporators. These are the stockholders or members and/or both, of the corporation. 2. Incorporators. These are the stockholders or members, and/or both, stated in the articles of internalisation as found in members of the corporation. . Members. These are the corporators of a corporation which has no capital stock. 4. Stockholders or Shareholders. These are the owners of shares of a corporation which have a capital stock and whose names appear in the books of corporation as the holders of a share or shares of stock of the corporation. Classes of Capital Stock 1. The third estate Stock. According to Philippine laws governing the introduction of the corporation, the right of ownership and active control and participation is vested in the owners of the common stock.The common stock carries with it the power and right of balloting, by which the holders have great residual ownership or power over the corporation. communal stock is the ordinary stocks representing the basic ownership. The ownership interest is divided into shares which may or may not have a par value. The par value is the amount printed on the stock certificate. 2. The Preffered Stock. The owners of preferred stock are shell outed special protection or advantages over the common stockholders. It carries predilection as to priority in the granting of dividends over the common stock or as to capital in case of dissolution.Upon dissolution of the corporation, for instance, the preferred stock has priority in the distribution of the assets. There are some(prenominal) classifications of preferred stock * Preffered as to dividends. * Preffered as to assets. * Preffered as to both dividends and assets. * Cumulative preffered. * Callable. * Convertible. Advantages of Corporation * Limited liability of stockholders. * Large amount of capital. * Flexible ownership. * Length of life. * Efficiency of man agement. * embossment of expansion. * Legal entity. Disadvantages of Corporation * Taxation. Organizational expense. * Government restrictions and reports. * Lack of personal interest. * Lack of secrecy. * carry restrictions. The Corporate Combination and spinal fusion The coalition. Merger means the union affected by the absorbing of one or more existing corporations by another which survives and continues the combine firm. In other sacred scriptures, merger takes place when the control of some(prenominal) corporations is vested in a single corporation, in which case stocks of the absolute corporation may be issued in place of the stocks of the other corporations.There is no vernal business firm. The absorbing corporation dust the similar single although larger corporation. In consolidation, the consolidating corporations are dissolved, their properties and businesses transferred to a single company. Merger and consolidations may be adopted as a strategy by several compani es in a given industries when they strongly agree that it is more economical and work in concert rather than competing with one another. * reconcilings The playscript reconciling is derived from the French word cooperari. The word co means with.Combined with operari (to work, from oppose, operas, work ), it delineates the theory of working together. The accessible excogitation shows a process of working together and thinking together to light upon and please the best of life. Cooperative is the dynamic form of business enterprise that embodies the philosophy of corporation. It signifies the voluntary assent of people to form themselves into a group for the promotion of their common involve by mutual action, democratic control and sharing of economic benefits of the basic of deal by members.Republic round No. 6938, An Act to Ordain A Cooperative compute of the Philippines, defines joints as a duly registered association of persons, with a common bond of interest, who h ave voluntarily joined together to achieve a lawful common social or economical end, making honest contributions to the capital required and accepting a fair share of the risks and benefits of the undertaking in accordance with universally accepted cooperative principles. Principles of Cooperatives 1. Open and Voluntary Membership.Membership in a cooperative shall be voluntary and usable to all individuals regardless of their social, political, racial, or religious background or beliefs. 2. Democratic Control. Cooperatives are democratic organizations. Their affairs shall be administered by the persons elected or appointed in a manner agreed upon by the members. Members of primary cooperatives shall have equal voting rights on a one-member-one- vote principle Provided however, that in the case of substitute and tertiary cooperatives, the formulations of Article 37 shall apply (Voting System) * Each member of a primary cooperative shall have only one vote.A secondary or tertiar y cooperative shall have voting rights as delegate of members-cooperatives, but such cooperatives shall have only pentad votes. The votes cast by the delegates shall deem as votes cast by the members thereof. * No voting agreement or other wind to evade the one-member-one-vote provisions, except as supplyd under subsection hereof, shall be valid. * No member of a primary cooperative shall be permitted to vote by substitute unless provided for specifically in the by-laws of the cooperative. However, the by-laws of a cooperative other than a primary may provide for voting by proxy.Voting by proxy means allowing a delegate of a cooperative to represent or vote in behalf of another delegate of the same cooperative. 3. Limited Interest on Capital. Share capital shall receive a rigorously limited rate of interest. 4. Division of last-place Surplus. Net surplus arising out of the operations of a cooperative belongs to its members and shall be equitably advanced for cooperative develo pment, common services, indivisible suspend fund, and for limited interest on capital and/or patronage refund in the manner provided in this Code and in the articles of cooperation and by-laws. . Cooperative Education. All cooperatives shall make provision for the education of their members, officers, and employees and of the general public found on the principles of cooperation. 6. Cooperation among Cooperatives. All cooperatives, in tell to best serve the interest of their members and communities, shall actively cooperate with other cooperatives at the local, national and international levels. Types and Categories of Cooperatives (R. A. No. 6938) 1. Types of Cooperatives. Cooperatives may fall under any of the following types . credit rating Cooperative is one which promotes thrift among its members and create funds in order to grant loans for productive and provident purposes. b. Consumers Cooperative is one whose primary purposes are to procure and distribute commodities o n members and non-members. c. Producers Cooperative is one that undertakes joint output whether agricultural, or industrial. d. Marketing Cooperative is one which engages in the supply of the production inputs to members and markets their products. e.Service Cooperative is one which engages in aesculapian and dental care, hospitalization, transportation, insurance, housing, labor, electric light and power, communication, and other services. f. Multi-Purpose Cooperative is one which combines two or more of the business activities of these different types of cooperatives. 2. Categories of Cooperatives. Cooperatives shall be categorized according to membership and territorial consideration as follows 1) In legal injury of membership, cooperative shall be categorized into a.Primary The members of which are natural persons. b. Secondary The members of which are primary. c. tertiary The members of which are secondaries upward to one or more apex organizations. Those cooperatives, the members of which are cooperatives shall be known as federations or unions as the case may be. 2) In cost of territory, cooperatives shall be categorized according to areas of operations which may or may not coincident with the political subdivisions of the country.