1. Page 1 of 2
BUSINESS ORGANIZATIONS
Any two or more persons can pool their
resources and work together to attain their
common objective. A group is an organization
regardless whether it is small or huge.
Business is also defined as an
ORGANIZATION of people with varied skills,
which uses properties and talents to produce
goods and services, which can be sold to
others for more than their costs, thereby
gaining profit.
Definition of Organization
Organization is a collection of persons working
together for a common purpose. A group of
individuals who are cooperating willingly and
effectively for a common end. It is the process
of continuing the work which individuals or
groups have to perform with the faculties
necessary for its execution.
Forms of Business Organizations
1. Single or Sole Proprietorship
o Owned and usually managed by one person
o Oldest and simplest form of business organization
o Prevalent or common particularly in small
businesses
2. Partnership
o Association of 2 or more persons who are co-
owners of
a business.
o Each partner contributes money, property or service.
o Types of Partnership:
 General Partner – liability extends up to his
personal properties
 Limited Partner – liability is limited to the
extent of his contribution
Corporation
o An artificial being created by operation of law with
the
right of succession.
o Existence of shares of certificates of ownership
called
“stocks”; owners of stocks are called “stockholders"
4. Cooperatives
o Voluntary business organization by members-
patrons for the
purpose of carrying on a business activity
that directly benefits its members.
o A non- profit enterprise
o Types of cooperatives: Credit, Consumer,
Producers,
Marketing, Service and Multipurpose
Advantages & Disadvantages of Forms of Business
Organizations
Forms of
Business
Organizations
Advantages Disadvantages
Sole
Proprietorship
o Eas y
to organize/form ;
requires small capital
o All profits belong
to the business
owner
o Owner is the
boss; makes his
own decisions and
executes according
to his wish
O Unlimited
liability
o Lack of
stability;
limited access to
credit
o Limited
knowledge
and skills
Partnership o Eas y
to organize/form ;
availability of more
capital and credit
o Partners get all
profits
o More and better
knowledge of
skills
o Unlimited
liability; lack
of stability
o M anagement
disagreement
o Idle
investment
Corporation o Limited liability;
easy to
raise capital
o Perpetual life
o Specialized
management
o Difficult
to
organize;
strictly
regulated
and
supervised
by
government
o Formal
and
impersonal
employer-
emlopyee
relationship

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Basic Considerations in Organizations
1. Clear and complete statement of the objectives
There should be a specific purpose. The
objective personates all activities within an
enterprise. It should be clearly defined and well
balanced.
2. Thorough Analysis of the entire position surrounding
the business
An analysis should be made. External and
internal factors should be looked into. It serves
as a basis for the future operation of the
business.
3. Necessary functions should be determined
Functions should be logically grouped and
function correspondingly. The scope of work and
duties should be clearly defined as to avoid
confusion within the members of the organization
4. Men best fitted for work and to head each
department or division should be selected
The ability of the executive who will manage
the enterprise or business is an important
consideration. Department heads should be
competent in performing their tasks. They should
be able to work well and effectively with the
other department heads. Sufficient authority
must be given.
Principles of Organization
1. Principle of Objective
The development of plans depends on the
clear understanding of the objective. It adheres
to a definite purpose and goal. It serves as a
guide to future planning and action.
2. Principle of Analysis
The act of breaking up a whole into its parts so
as to find out their nature, qualities and
importance. A full knowledge of the
requirements of the business.
3. Principle of Simplicity
Activities which are not significant should be
eliminated. The creation of a position should be
created on its functionality.
4. Principle of Functionalization
Nature of business determines the main
function. Function is a normal or characteristic
way of doing a task. ( ex. Accounting, sales,
marketing)
5. Principle of Departmentalization or Departmentation
This helps achieve smoother flow of
operations. A territory or location offer
advantages in cutting operation expense. It
may lead to growth and expansion.
6. Principle of Centralization of Authority and
Responsibility
A centralized executive control. The
delegation of authority and responsibilities to
his subordinates. It is the granting of
authority from one executive to another for the
purpose of accomplishing a given task or goal in
the shortest period of time.
7. Principle of Limited Span of Executive Control
Span of Control is the number of
subordinates an executive can manage
effectively. Well trained subordinates require
minimal controlling and can initiate and execute
proper action quickly.
END