Forms of Entrepreneurial Venture
Sole Proprietorship
A sole proprietorship is a business venture owned by one person only. Most of the small businesses operating in the Philippines are sole proprietorship, which is highly encouraged among entrepreneurs.
Characteristics of sole proprietorship:
1. It is easy to form and manage
2. It is a simple business operation
3. It has a limited pool of resources
4. Its growth is limited
5. The owner has unlimited liability
The primary advantage of a sole proprietorship is the ease in its formation and management. However, compared to a partnership and a corporation, a sole proprietorship has limited capital which usually leads to its limited growth in the industry. Under the concept of unlimited liability, the creditor may go after the personal properties of the entrepreneur in the event that the liability or financial obligation of a sole proprietorship is more than the total resources.
Partnership
A partnership is a business venture that is owned by two or more persons (2-4). The owners are usually called partners. Whatever profit or loss that results from the entrepreneurial operation is divided between or among the partners. All the partners may contribute money, property, or industry, and their contributions become common fund of the partnership.
The partners are held personally liable for the partnership's liabilities in the event that the partnership does not have the ability to settle its financial obligations. The life of the partnership is easily dissolved compared to a corporation, particularly for the following reasons:
1. Death of one of the partners
2. Admission of a new partner in an existing partnership
3. Personal insolvency (inability to pay one's debts) of one of the partners
4. Permanent withdrawal of the investment of a partner
Types of Partnership
General Partnerships
A general partnership involves two or more owners carrying out a business purpose. General partners share equal rights and responsibilities in connection with management of the business, and any individual partner can bind the entire group to a legal obligation. Each individual partner assumes full responsibility for all of the business's debts and obligations. Although such personal liability is daunting, it comes with a tax advantage: partnership profits are not taxed to the business, but pass through to the partners, who include the gains on their individual tax returns at a lower rate.
Limited Partnerships
A limited partnership allows each partner to restrict his or her personal liability to the amount of his or her business investment. Not every partner can benefit from this limitation -- at least one participant must accept general partnership status, exposing himself or herself to full personal liability for the business's debts and obligations. The general partner retains the right to control the business, while the limited partner(s) do(es) not participate in management decisions. Both general and limited partners benefit from business profits.
Corporation
A corporation is an entrepreneurial venture formed by at least five but not more than fifteen persons. A corporation can either be stock or non-stock, profit or non-profit, and domestic or foreign. The persons originally forming the corporation are called incorporators.
A corporation is classified as a stock corporation when it is authorized to issue shares of stock to stockholders. A non-stock corporation on the other hand is not authorized to issue shares of stock to the members. The owners of a stock corporation are called stockholders or shareholders; while the owners of a non-stock corporation are called members. The certificate of stock is an evidence of ownership of a corporation. A domestic corporation is organized under the laws of the Philippines. On the other hand, a foreign corporation is organized under the laws of the foreign country but has the authority to operate in the Philippines.
Large businesses are usually organized as corporations. Its management is entrusted to the board of directors who are elected by and from its group of stockholders.
Misconceptions
1. Entrepreneurship has generally been equated with ordinary small businesses.
Entrepreneurship then has come to refer to ordinary small-and-medium scale businesses only, leaving out big businesses in the process.
2. Entrepreneurship is more inclined toward production or manufacturing and is not applicable to buying and selling of goods (merchandising) or rendering of services.
Generally, entrepreneurship includes all types of business operations, namely production or manufacturing, merchandising, and services.
Nature of Entrepreneurial Venture
Merchandising
- a merchandising business is engaged in the buying and selling of products or goods. It does not alter the appearance of the product purchased from the seller.
Service
- a service business provides services to customers.
Service entrepreneurial ventures are classified as non-professional service and professional service.
Non-professional service ventures include laundry shops, car repair shops, beauty parlors, educational institutions, and banking institutions. On the other hand, professional service ventures include law offices, medical clinics, and auditing and consultancy services.
Manufacturing
- a manufacturing venture is a producer of goods or products.
It is engaged in buying raw materials and supplies to be processed into finished goods
Agriculture
- an agricultural entrepreneurial venture is engaged in the production of agricultural goods and animals.
It may sell its products as raw materials or as finished goods.
Hybrid Business
- a hybrid entrepreneurial venture possesses the characteristics and nature of combined types of business entities.
It is inherent in the business to produce and sell goods and at the same time provide services to the customers.
Restaurants and fast-food chains are classified as hybrid businesses because their very nature is to process and sell food and at the same time to provide excellent services to customers. Restaurants and fast-food chains have the attributes of a manufacturing business and a service entity.
Special Corporation
- Special types of business may include cooperatives, joint ventures, and non-profit organizations.
Sole Proprietorship
A sole proprietorship is a business venture owned by one person only. Most of the small businesses operating in the Philippines are sole proprietorship, which is highly encouraged among entrepreneurs.
Characteristics of sole proprietorship:
1. It is easy to form and manage
2. It is a simple business operation
3. It has a limited pool of resources
4. Its growth is limited
5. The owner has unlimited liability
The primary advantage of a sole proprietorship is the ease in its formation and management. However, compared to a partnership and a corporation, a sole proprietorship has limited capital which usually leads to its limited growth in the industry. Under the concept of unlimited liability, the creditor may go after the personal properties of the entrepreneur in the event that the liability or financial obligation of a sole proprietorship is more than the total resources.
Partnership
A partnership is a business venture that is owned by two or more persons (2-4). The owners are usually called partners. Whatever profit or loss that results from the entrepreneurial operation is divided between or among the partners. All the partners may contribute money, property, or industry, and their contributions become common fund of the partnership.
The partners are held personally liable for the partnership's liabilities in the event that the partnership does not have the ability to settle its financial obligations. The life of the partnership is easily dissolved compared to a corporation, particularly for the following reasons:
1. Death of one of the partners
2. Admission of a new partner in an existing partnership
3. Personal insolvency (inability to pay one's debts) of one of the partners
4. Permanent withdrawal of the investment of a partner
Types of Partnership
General Partnerships
A general partnership involves two or more owners carrying out a business purpose. General partners share equal rights and responsibilities in connection with management of the business, and any individual partner can bind the entire group to a legal obligation. Each individual partner assumes full responsibility for all of the business's debts and obligations. Although such personal liability is daunting, it comes with a tax advantage: partnership profits are not taxed to the business, but pass through to the partners, who include the gains on their individual tax returns at a lower rate.
Limited Partnerships
A limited partnership allows each partner to restrict his or her personal liability to the amount of his or her business investment. Not every partner can benefit from this limitation -- at least one participant must accept general partnership status, exposing himself or herself to full personal liability for the business's debts and obligations. The general partner retains the right to control the business, while the limited partner(s) do(es) not participate in management decisions. Both general and limited partners benefit from business profits.
Corporation
A corporation is an entrepreneurial venture formed by at least five but not more than fifteen persons. A corporation can either be stock or non-stock, profit or non-profit, and domestic or foreign. The persons originally forming the corporation are called incorporators.
A corporation is classified as a stock corporation when it is authorized to issue shares of stock to stockholders. A non-stock corporation on the other hand is not authorized to issue shares of stock to the members. The owners of a stock corporation are called stockholders or shareholders; while the owners of a non-stock corporation are called members. The certificate of stock is an evidence of ownership of a corporation. A domestic corporation is organized under the laws of the Philippines. On the other hand, a foreign corporation is organized under the laws of the foreign country but has the authority to operate in the Philippines.
Large businesses are usually organized as corporations. Its management is entrusted to the board of directors who are elected by and from its group of stockholders.
Misconceptions
1. Entrepreneurship has generally been equated with ordinary small businesses.
Entrepreneurship then has come to refer to ordinary small-and-medium scale businesses only, leaving out big businesses in the process.
2. Entrepreneurship is more inclined toward production or manufacturing and is not applicable to buying and selling of goods (merchandising) or rendering of services.
Generally, entrepreneurship includes all types of business operations, namely production or manufacturing, merchandising, and services.
Nature of Entrepreneurial Venture
Merchandising
- a merchandising business is engaged in the buying and selling of products or goods. It does not alter the appearance of the product purchased from the seller.
Service
- a service business provides services to customers.
Service entrepreneurial ventures are classified as non-professional service and professional service.
Non-professional service ventures include laundry shops, car repair shops, beauty parlors, educational institutions, and banking institutions. On the other hand, professional service ventures include law offices, medical clinics, and auditing and consultancy services.
Manufacturing
- a manufacturing venture is a producer of goods or products.
It is engaged in buying raw materials and supplies to be processed into finished goods
Agriculture
- an agricultural entrepreneurial venture is engaged in the production of agricultural goods and animals.
It may sell its products as raw materials or as finished goods.
Hybrid Business
- a hybrid entrepreneurial venture possesses the characteristics and nature of combined types of business entities.
It is inherent in the business to produce and sell goods and at the same time provide services to the customers.
Restaurants and fast-food chains are classified as hybrid businesses because their very nature is to process and sell food and at the same time to provide excellent services to customers. Restaurants and fast-food chains have the attributes of a manufacturing business and a service entity.
Special Corporation
- Special types of business may include cooperatives, joint ventures, and non-profit organizations.