CHAPTER 4

FORMS OF BUSINESS ORGANIZATION

INTRODUCTION
Development economy has push formation various organization business in different shapes .
Every business growing business _ own different characteristics Good from in terms of capital,
scale business , ownership , etc operational his activities . For That need specific management
And different between One business with others. So that you can develop And capable compete
in environment business , in choose form business need customized with need And that ability
owned .

Form of business organization refers to the legal and organizational structure used by a business
entity to carry out its operations. The choice of business organization form can influence aspects
such as legal responsibilities, taxes, ownership, and available resources. The following are several
commonly used forms of business organization along with explanations and examples:

There are many reasons why an individual or group of individuals chooses a particular form of
business organization. This choice can be influenced by various factors according to business
needs, goals and circumstances. Here are some common reasons for choosing a particular form
of business organization:
1. Legal Liability: The desire to limit personal liability for business debts. Some forms of
organization, such as an LLC or limited liability company, provide legal protection against
personal liability.
2. Tax: Efforts to optimize tax benefits. Some forms of organization have different tax
treatments, and choosing the right one can reduce a business's tax liabilities.
3. Ownership and Control: How ownership and control of the business will be managed. For
example, if you want to run your own business, a sole proprietorship may be more suitable
than a limited liability company.
4. Capital Raising: The desire to raise capital from various sources, such as investment from
partners, outside financing, or stock sales. Different organizational forms may impact your
ability to access capital.
5. Business Nature: The unique characteristics of your business, such as whether it is a family
business, a high-tech business, an e-commerce business, or a social/non-profit business.
6. Future Ownership: Plans for future growth and ownership of the business. Some forms of
organization are more flexible in terms of ownership structure and transfer of shares.
7. Market and Business Environment: The regulations and rules that apply in the market and
business environment in which your business operates. Some organizational forms are better
suited to certain industries or business environments.
8. Administrative Capabilities: Administrative capabilities available to manage and comply
with applicable legal and licensing requirements.
9. Sustainability: Planning for the long term and growth of your business. Some organizational
forms may be better suited to expansion or diversification.
10. Legal Consultation: Advice from experienced legal counsel or business professionals in
selecting an organizational form that suits your needs.

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FORMS OF BUSINESS ORGANIZATION
It is important to consider various factors carefully before making a decision about the form of
business organization. Understanding the implications of choices is an important step to achieving
long-term success in business. The following forms of business organization are:
1. INDIVIDUAL COMPANY (SOLE PROPRIETORSHIP)
Sole Proprietorship is one of the simplest forms of business organization where the business
is owned and run by one individual without any legal separation between the business owner
and the business itself. In a sole proprietorship, the business owner is the sole entity
responsible for operations, finances, and business decisions. The following is a more
complete explanation and example of a private company:

Characteristics of a Proprietorship Company:

1. Sole Proprietorship: A sole proprietorship is wholly owned by one individual, called
the sole proprietor.
2. No Legal Separation: There is no legal separation between the owner and the business.
This means that the owner is personally liable for all business obligations, including debts
and lawsuits.
3. Simple and Easy to Set Up: Setting up a sole proprietorship is one of the simplest and
easiest forms of business to do. Typically, it doesn't require complicated formal
paperwork to get started.
4. Full Ownership: The owner has complete control over business operations and can make
decisions without having to negotiate with shareholders or other partners.
5. Individual Tax: Income earned from a sole proprietorship is taxed as the owner's
personal income, making it simple from a taxation perspective.
6. Limited Resources: Sole proprietorships often have limitations in terms of resources and
capital because all financial responsibility falls on the owner.

Example of a Sole Proprietorship Company:

1. Sole Owned Food Stall: A food stall owned and operated by a single individual who is
responsible for all aspects of the business, including cooking, customer service, and
financial management.
2. Small Store: An example is a small grocery store or clothing store that is wholly owned
by a single individual who is responsible for purchasing, sales, and inventory
management.
3. Sole Proprietorship: A professional such as a financial consultant, dentist, or freelance
writer who works independently without partners or employees is an example of a sole
proprietorship.

Advantages of a Sole Proprietorship:

1. Simple and Easy to Set Up: There is no complicated bureaucracy or formal requirements
needed to start a sole proprietorship.
2. Full Control: The owner has complete control over the business and the decisions taken.
3. Simplified Taxation: A sole proprietorship's income is taxed as personal income, which
can have a lower tax rate.

Disadvantages of Sole Proprietorship:

1. Unlimited Personal Liability: Owners are personally liable for all business debts and
lawsuits. This means the risk of losing personal assets if the business experiences
problems.
2. Capital Limitations: Resources and capital are often limited in sole proprietorships
because all financial responsibility falls on the owner.
3. Limited Growth Ability: Sole proprietorships often have limitations in terms of growth
and expansion due to limited resources.

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 Example of a Sole Proprietorship Business Entity:
1. A barber who independently owns and operates a barbershop.
2. A freelance writer who writes and publishes books independently.
3. A culinary entrepreneur who runs his own small restaurant.
4. An independent contractor in the construction industry.

Sole proprietorships are suitable for small businesses that require a high level of control by the
owner and do not have a large amount of capital. However, keep in mind that the risk of unlimited
personal liability is one of the most important aspects to consider when choosing this form of
organization. Owners need to be prepared to face financial risk personally if the business
experiences problems.

2. FELLOWSHIP COMPANY
A partnership form of business is a form of business organization in which two or more
individuals or legal entities work together to run a joint business with the aim of achieving profit.
In this form, the partners share responsibility, profits and losses based on the agreement that has
been made.

Partnership ventures are a flexible form of business organization and can be a good choice
especially for businesses started by several individuals or legal entities who wish to share
responsibilities and profits. However, it is important to have a clear partnership agreement and
understand the responsibilities and risks associated with this type of business. The following are
some general characteristics and types of partnership forms of business:

General Characteristics of Partnership Businesses:

1. Partnerpartnership : A partnership business involves two or more partners working together
to run the business. Partners can be individuals or legal entities such as companies.
2. Profit Sharing: Profits and losses of the business are shared among the partners according to
the percentage of ownership or special agreements that have been agreed upon.
3. Joint Liability: Partners are jointly and severally liable for the obligations and debts of the
business. This means the partners' personal assets can be used to pay off business debts.
4. Written or Oral Agreement: Although most partnership ventures are based on a written
agreement (partnership agreement), in some cases, the agreement may be based on an oral
agreement.
5. Co-Management or Delegation: Partners may participate in the management of the business
jointly or may choose to delegate management to one or more partners acting as managers.

Types of Partnership Businesses:

1. General Partnership: In this type, all partners are involved in business management and
share responsibilities and profits equally. They also have full responsibility for the business's
debts.
2. Limited Partnership: A limited partnership involves partners who have different roles.
There are general partners who have full responsibility for the business and limited liability
partners who only participate as financiers and have limited liability in proportion to their
capital contribution.
3. Limited Liability Partnership (LLP): In an LLP, all partners have limited liability for the
obligations of the business, meaning their personal assets are not involved in paying business
debts. Partners have flexibility in managing their management and responsibilities.
4. Term Partnership (Limited Duration Partnership): This type has a certain time limit to
operate or until the achievement of certain goals.

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 There are various forms of partnership business, namely:
1. General Partnership (General Partnership):
In a general partnership, all partners have equal responsibility for the management of the
business and share the responsibilities, profits, and losses equally. They also have full
responsibility for the business's debts. Example: Two friends open a clothing store together,
contributing equal capital, and sharing responsibility for managing the business as well as
profits and losses.
2. Limited Partnership (Limited Partnership):
Limited partnerships involve two types of partners: general partners and limited liability
partners. General partners participate in the management of the business and have full
responsibility for the debts of the business, while partners with limited liability act only as
financiers and have limited liability in proportion to their capital contribution. Example: An
investor provides capital to a law firm with a general partner who manages the day-to-day
business. General partners are fully responsible, while investors are only responsible
according to the amount of capital invested.
3. Limited Liability Partnership (LLP):
In an LLP, all partners have limited liability for business obligations, meaning their personal
assets are not involved in paying business debts. Partners have flexibility in managing their
management and responsibilities. Example: A law firm consisting of several attorneys who
wishes to avoid personal responsibility for the legal actions of other partners.
4. Term Partnership (Limited Duration Partnership):
This type has a certain time limit for operation or until the achievement of certain goals. After
a certain time limit, the partnership will end or can be extended. Example: A partnership is
formed by several architects to design and build a large project. This fellowship has a time
limit until the project is completed, and then it will end.

The appropriate form of partnership to use will depend on the business goals, ownership structure,
and level of responsibility desired by the partners. It is important to have a clear partnership
agreement and follow the applicable laws and regulations of the country or jurisdiction where the
business operates.

3. LIMITED COMPANY (PT)

A Limited Liability Company (PT) is a legal entity that has its own legal identity and is separate
from its owner. A PT can be established by one or more people (shareholders) to run a joint
business with limited responsibility according to the capital paid in. This means that the owner of
the PT is not responsible for the company's debts exceeding the amount of capital paid in.

Characteristics of a Limited Liability Company (PT):

1. Divided Ownership: PT has shareholders who have ownership and voting rights according
to the number of shares owned.
2. Limited Liability: PT owners (shareholders) are only responsible for the company's debts up
to the amount of capital contributed, so their personal assets are not involved in the company's
obligations.
3. Separate Legal Entity: PT is considered a separate legal entity from its owners. This means
that PT can have its own rights and obligations, and can sue and be sued in court.
4. Share Capital: PT is financed through shares, and this capital is used to operate the business,
invest, or expand.
5. Supervision and Governance: PT has a supervisory structure that involves shareholders and
a board of directors to run the business and make strategic decisions. A Limited Liability
Company (LLC) is a form of business organization that combines the characteristics of a
limited company (corporation) and a limited partnership (limited partnership). ). An LLC
provides legal protection to its owners, called “members,” similar to a limited liability
company, but with greater operational flexibility. The following is a more detailed

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 explanation of LLC along with examples:

Example of a Public Company:

1. PT Toko Buku Bahagia: This company is engaged in trading books and stationery, selling
various types of books, stationery and school supplies.
2. PT Warung Makan Selamat: Small restaurant that serves local cuisine or typical regional
food.
3. PT Creative Graphic Design Services: This company offers graphic design services, such
as creating logos, brochures and other graphic designs for local clients.
4. PT Small Handicraft Factory: Manufacturing business that produces handicraft goods such
as ceramics, glassware or woven products.
5. Financial Consulting Service Provider PT: Company that provides financial consulting
services to small and medium businesses, including financial planning, taxation and financial
management.
6. Information Technology Service Provider: Small IT company that provides software
development services, technical support and IT solutions to local businesses.
7. PT Pusat Pendidikan Bahasa: Company that organizes language courses, such as English
courses or other foreign language courses.
8. PT Studio Fotografi: Small photography studio that provides photography services for
various events, such as weddings, families and personal portraits.
9. PT Gedung Construction Company: Small construction company that focuses on
commercial or residential building construction projects.
10. Tourism Service Provider PT : Small travel company that offers local travel packages, such
as tours, accommodation and transportation.

4. PUBLIC COMPANY (PT) GO PUBLIC

A Public Company (Public Corporation) is a form of business organization whose shares can be
traded publicly on the stock exchange. This means shares of a publicly traded company can be
bought and sold by shareholders on the open market. This form of organization has specific
characteristics that influence how the company is run and how it is governed. The following is a
more complete explanation of public companies along with examples:

Characteristics of a Public Company:

1. Public Share Offering: A public company has its shares which can be traded publicly on the
stock exchange. They list these shares on authorized stock exchanges to facilitate trading.
2. Dispersed Share Ownership: Ownership of a publicly traded company is typically spread
among many shareholders, including individuals, financial institutions, and institutional
investors.
3. Board of Directors: Public companies are led by a board of directors consisting of
individuals elected by shareholders to oversee management and strategic decision making.
4. Strict Financial Disclosure: Publicly listed companies have an obligation to report their
finances regularly and transparently to stock market authorities and the public. This financial
report includes a balance sheet, profit and loss statement, and cash flow, as well as notes on
accounting policies.
5. Limited Liability of Shareholders: Shareholders in a publicly traded company are liable for
their losses only to the extent of their investment in the company's shares. They are not
personally liable for the company's debts.
6. Stock Trading Activities: Public company shares are traded on secondary markets such as
the Stock Exchange (BEI), or other stock exchanges. Investors can buy and sell these shares
according to the determined market price.

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 Example of a Public Company:
1. PT Astra International Tbk (ASII): Astra International is one of the largest companies in
Indonesia operating in various fields, including automotive, agribusiness, infrastructure and
human resources.
2. PT Telkom Indonesia Tbk (TLKM): Telkom Indonesia is the largest telecommunications
company in Indonesia that provides telecommunications and information technology
services.
3. PT Bank Rakyat Indonesia Tbk (BBRI): Bank Rakyat Indonesia (BRI) is one of the largest
banks in Indonesia which focuses on banking services for the micro, small and medium
sectors.
4. PT Bank Mandiri Tbk (BMRI): Bank Mandiri is one of the largest banks in Indonesia
which provides various banking and financial services.
5. PT Unilever Indonesia Tbk (UNVR) : Unilever Indonesia is a branch of the multinational
company Unilever which operates in the consumer products sector such as food, drinks,
beauty and personal care.
6. PT Indofood Sukses Makmur Tbk (INDF): Indofood is one of the largest food and
beverage producers in Indonesia with well-known brands such as Indomie, Indomilk, and
many more.
7. PT HM Sampoerna Tbk (HMSP): Sampoerna is one of the leading cigarette manufacturers
in Indonesia, and this company is part of Philip Morris International.
8. PT Perusahaan Gas Negara Tbk (PGAS): Perusahaan Gas Negara (PGN) is a company
operating in the energy and natural gas sector in Indonesia.
9. PT Adaro Energy Tbk (ADRO): Adaro Energy is one of the largest coal producers in
Indonesia, operating in the energy and mining sectors.
10. PT Bank Central Asia Tbk (BBCA): Bank Central Asia (BCA) is one of the largest private
banks in Indonesia which provides various banking services.

Public companies generally have easier access to funding sources because they can raise capital
through share offerings. However, they are also subject to strict regulatory rules and significant
reporting obligations. In addition, the board of directors of a public company must consider the
interests of shareholders when making strategic decisions. These organizations must also operate
with a high degree of transparency to maintain shareholder and public trust.

5. COOPERATION (COOPERATIVE)
Cooperatives are a form of business organization that is owned and run by its members to meet
common needs. Cooperatives aim to provide economic or social benefits to their members, not to
generate profits that will be shared with owners or external shareholders. Cooperatives are often
founded by individuals or groups who have a common interest or goal, such as purchasing goods
or providing services. The following is a more complete explanation of cooperatives along with
examples:

Cooperative Characteristics:
1. Member Ownership: One of the main characteristics of cooperatives is the ownership held
by members. Members are the owners and shareholders of the cooperative, and they have
voting rights in the organization's decision making.
2. Common Goals: Cooperatives are founded to meet the common needs of their members.
These goals can range from the joint purchase of goods at lower prices to the provision of
services that benefit members, such as cheap credit or health services.
3. Profit Sharing: Profits earned by a cooperative are distributed to its members based on their
contributions. This can be done in the form of dividends, discounts or loyalty points.
4. Internal Democracy: Cooperatives operate based on democratic principles. Each member
has equal voting rights in organizational decision making. Decisions such as election of the
board of directors or policy changes are made based on member voting.

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 5. Openness and Transparency: Cooperatives are expected to operate with a high level of
openness and transparency. Financial and operational information must be available to
members and openly accessible.

Example of Cooperative:
1. Farmer Cooperatives: A number of farmers join cooperatives to buy seeds, fertilizers, and
agricultural equipment at lower prices. Profits from sales of agricultural products can also be
shared with members.
2. Consumer Cooperatives: Consumer cooperatives can be founded by individuals who wish
to purchase products or services at better prices. Examples include housing cooperatives
where members can purchase homes at reduced prices or food cooperatives where members
purchase food at wholesale prices.
3. Credit Cooperatives: Credit cooperatives are financial institutions owned and operated by
their members. They provide banking services such as savings, loans, and credit cards at
favorable interest rates for their members.
4. Health Cooperatives: Health cooperatives may provide medical services or health insurance
to their members at lower costs than the public market. Examples include health cooperatives
that provide medical services and medicines at more affordable costs.
5. Educational Cooperatives: Educational cooperatives can be founded by teachers or parents
who wish to improve their children's education. They can provide services such as tutoring
or access to learning resources at a lower cost.

The advantages of cooperatives include purchasing goods or services at lower prices, profits being
shared among members, and democratic control over business decisions. However, cooperatives
also have challenges in terms of management and growth, as well as ensuring members' active
involvement in decision making and operations.

6. NON-PROFIT CORPORATION / FOUNDATION

Non-Profit Corporations / Foundations are a form of business organization established for
charitable, educational, religious or humanitarian purposes, and do not have the aim of generating
profits that will be distributed to external owners or shareholders. The main goal of a Non-Profit
Corporation/Foundation is to provide community benefits or a specific cause that is consistent
with their mission. The following is a more detailed explanation of Non-Profit
Corporations/Foundations along with examples:

Characteristics of Non-Profit Corporations/Foundations:

1. Charitable or Humanitarian Goals: Non-profit corporations/Foundations have goals that
focus on the good of society or a specific cause, such as providing health care, education,
social services, or advocacy on social issues.
2. Not for personal gain : One of the main characteristics is that non-profit corporations do not
aim to generate profits that will be distributed to owners or shareholders. Instead, they use
surplus revenue to support or expand their mission.
3. Different Tax Statuses : Many non-profit corporations/Foundations qualify for tax statuses
that eliminate or reduce their obligation to pay federal taxes and often state taxes as well.
4. Organizational Structure: Non-profit corporations/Foundations have an organizational
structure similar to a limited company, including having a board of directors who oversee
strategic decision making and executive management who manage daily operations.
5. Funding from Donations and Grants: The main sources of funding for non-profit
corporations are donations from individuals, foundations, governments or other
organizations, as well as grants that can be provided by external parties.

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 6. Reporting Obligations: Non-profit corporations/Foundations have reporting obligations that
vary according to their jurisdiction and status. They often have to report their finances and
activities openly.

Examples of Non-Profit Corporations/Foundations:

1. Red Cross: A humanitarian organization that operates worldwide to provide emergency aid,
health services, and education to people in need.
2. World Wildlife Fund (WWF) : An organization dedicated to protecting biodiversity and
environmental conservation, working to protect species and natural habitats.
3. Habitat for Humanity: Organization that helps build homes for those in need around the
world.
4. Profit Universities: Many colleges and universities have non-profit corporation/Foundation
status, focusing on education and research rather than making a profit.

The advantages of non-profit corporations/Foundations include the ability to carry out charitable
missions, obtain support from donors, and favorable tax status. However, they often face
challenges when it comes to obtaining consistent funding and meeting stringent requirements and
regulations.

7. GOVERNMENT OWNED BUSINESS ORGANIZATIONS

Government-owned business organizations are entities owned and operated by the government,
whether at the local, regional or national level. They have a variety of goals that include public
service, economic development, and the provision of certain services to the community. The
following are several types of government-owned business organizations along with explanations
and examples:
1. State-Owned Enterprises (BUMN):
BUMN is a company owned by the central or regional government. They operate in various
economic sectors and have various objectives, such as natural resource management,
infrastructure, and public services. Examples: PT Telkom Indonesia (telecommunications),
PT Pertamina (energy), PT PLN (electricity), PT Angkasa Pura I (airports), etc.
2. Regional Owned Enterprises (BUMD):
BUMD is a company owned by the regional government. They operate at a regional or local
level and aim to develop the regional economy as well as provide services to local residents.
Examples: PT Sarana Multi Infrastruktur (SMI) (formed by the DKI Jakarta Provincial
Government for infrastructure development), PDAM (Regional Drinking Water Company) in
various cities/districts .
3. State Owned Banks (BUMN Banks):
State-owned banks are banks owned by the central or regional government. They provide
banking services to the public, support the economic sector, and implement government
policies related to finance. Example: Bank Mandiri (state owned), Bank Rakyat Indonesia
(BRI) (state owned).
4. State Electricity Company (PLN):
PLN is a state-owned company tasked with providing electricity for public and industrial
needs in Indonesia. Example: PT PLN (Persero).
5. State Port Company (Pelindo):
Pelindo is a state-owned company that manages ports in Indonesia, supports trade and
national logistics. Example: PT Pelindo I (Persero), PT Pelindo II (Persero).
6. State Airline:
State-owned airlines operate to connect cities and countries, supporting tourism and business.
Examples: Garuda Indonesia (state-owned), Lion Air (which has state-owned shares through
PT Angkasa Pura I).

Government-owned business organizations usually have the primary goal of providing services

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to the community, supporting economic development, and implementing government policies.
They can operate in various economic sectors, including transportation, energy, banking, and
more.

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Yogyakarta
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