Nature and Forms of Business Organizations  organized by operation of law, owners are

called stockholders.
Ownership
 A Corporation, chartered by the state in which it
• Sole Proprietorship
is headquartered, is considered by law to be a
• Partnership unique entity, Separate and apart from those
who own it.
• Corporation
 The corporation has a life of its own and does
Nature of the Business
not dissolve when ownership changes.
• Service Concern
Service Concern
• Trading or Merchandising
 This type of business operation provides
• Manufacturing Concern services, instead of product, to its customers

Sole Propietorship Examples:

owned by one person  hospital, hotel and lodging, restaurant,

transportation, entertainment, banking and
• own all the assets & profits
financial
• has complete responsibility for liability and
debts of the business
Trading or Merchandising
Partnership
 This type of business operation sells products to
two or more people share ownership of a single
its customers. However, they don’t make the
business
products they sell; instead, they buy or
• law does not distinguish between the business purchase it from other business.
and its owners & partners must have legal  Ex. department stores, sari-sari stores, grocery
agreement stores

a. General Partnership Manufacturing Concern

Partners divide responsibility for management and
liability, as well as the shares of profit or loss according
to their internal agreement.
b. Limited Partnership and Partnership with
Limited Liability
“Limited” means that most of the partners have limited
liability as well as limited input regarding management
decision.
c. Joint Venture
Acts like a general partnership, but is clearly for a
limited period of time or a single project.
Corporation
 a business organization of not less than five
persons.
 This type of business operation converts basic
inputs, such as materials, labor and overhead,
into finished products which are sold to
customers.
 Ex. Textile manufacturing firm, computer and
electronic manufacturer
MILTON FRIEDMAN
 American Economist
 “The Social Responsibility of Business is to
Increase its Profits”
Profit as the Primary Responsibility of a Business
• a manager is hired for a purpose – to make the
firm more profitable
 • a manager does not have a moral responsibility
to take care of the needs of people outside the
firm
• using the company’s money for altruistic
purposes is akin to assuming the role of the
government
• allocating a portion of the profit for altruistic
purposes is actually stealing from the
customers, the employees and the shareholders
of the company
• if you want to help others, then do it in your
own capacity as a private individual and not as
an employee of the firm
• A manager has the fiduciary duty to have an
intention that is in congruence with the
intention of the firm’s owners
The Primacy of Business’ Social Function
 the intention to provide goods and services for
human flourishing is more fundamental and
primary than the profit-making intention
 the society deems a profitable business to be
morally questionable if it does not respond to
society’s life-sustenance and life-enhancement
needs
 profit is essential but it is not the primary
motive of business
 profit is the means and not the end of business
 the incentive for profit motivates the
businessperson to respond to the more
fundamental purpose of providing for the
society’s lack

• a manager has only one social responsibility and Ronald F. Duska

the corporation has a sole purpose – to increase
the profits of the firm so that you also increase
the wealth of its owners
• there is one and only one social responsibility of
business – to use its resources and engage in
activities designed to increase its profits so long
as it stays within the rules of the game – open
and free competition without deception or
fraud
 The Motive is not the Purpose
 one of his main contributions in the debate is
his argument on the distinction between
purpose and motive
 business is seen as distinct from other
organizations and institutions such as public
hospitals, public schools, charity institutions,
government bodies, and NGOs

• by focusing on the profit motive, the business

institution serves the society as it results to free
competition

• free competition ultimately favors the society

• profit that flows back to the business owners

will have a trickle-down effect to other
members of the society

Paul F. Camenisch

 The Primacy of Business’ Social Function

 He argued that there are two essential

elements for any proper definitions of business:
“the provision of goods and services, and the
fact that this is done with the intention of
making a profit.”

 if one element is removed, then it is no longer

considered a business