Chapter 3 2.
Lower government fees
FORMS OF BUSINESS OWNERSHIP 3. Low capitalization
Disadvantages of Sole Proprietorship:
1. One has the liability to pay all debts
MAJOR FORMS:
and obligations of the business from his
● Sole proprietorship
own pocket.
● Corporation
2. Burdensome in terms of
● Partnership
decision-making and running the
- General partnership
business.
- Limited partnership
3. With limitations on raising higher
capital.
MINOR FORMS:
4. The existence of the business
● Joint Stock Company
coincides with the death, sickness or the
● Joint Venture
will of the proprietor.
● Business Trust
PARTNERSHIP
Article 1767 of the New Civil Code states,
- "By the contract of partnership, two or more
person bind themselves to contribute money,
property, or industry to a common fund, with the
intention of dividing the profits among
themselves. Two or more persons may also form
a partnership for the exercise of a profession."
Important Requirements of a Partnership:
1. There must be a valid contract.
2. There should be a contribution of either
money, property, or industry to a common fund.
3. The business, object, or purpose of the
partnership must be lawful.
4. The purpose of the partnership is for profit
and with the intention of dividing the same
among partners; and
5. There must be two or more persons with legal
SOLE PROPRIETORSHIP capacity to enter in the contract of partnership.
Obligations of a Sole Proprietor: Some Classifications of Partnership:
1. Secure license and business permits 1. As to Liability:
2. Register business name - General Partnership is a partnership where all
3. Pay taxes the partners who are liable to the extent of their
4. Pay all debts and obligations of the separate property after the partnership asset
business personally has been exhausted.
- Limited Partnership is a partnership with one or
Advantages of Sole Proprietorship: more general partners and one or more limited
1. Enjoys all the profits solely partners. In limited partnership, the general
partner will be held liable beyond his Advantages of Corporation:
contribution. A limited partner is however liable 1. It has strong legal personality
only to the extent of his contribution. 2. Free transferability of shares
2. As to Duration: 3. Centralized management (Board)
- Partnership at will is a partnership without a 4. Limited liability
fixed duration set by the partners. It may be 5. It may last long
terminated depending upon the will of the
partners. Disadvantages of Corporation:
- Partnership for a Specific Period is a 1. Complicated process
partnership which is agreed upon to exist for a 2. It is subject to control and regulation
specific term or period or for the of the government
accomplishment of a particular undertaking. 3. Operation is costly
CLASSIFICATION OF PARTNERS
1. Capitalist partner
- One who contributes capital, either
property of money
2. Industrial Partner
- Is one who contributes talents or skills.
3. Capitalist-Industrial Partner
- Is a partner who contributes both
capital and industry skills
4. General Partner
- Is a partner who is liable beyond the
extent of what he/she has contributed.
5. Limited Partner
- Is a partner in a limited partnership and
is liable only to the extent of what he
has contributed.
6. Managing Partner
- Is a partner who manages the
business of the partnership. All partners
must manage if there is no managing
partner appointed.
COMPONENTS OF A CORPORATION
1. Incorporators (Founders of the Corporation)
CORPORATION are the people who originally formed the
corporation. Their names appear in the articles
Section 2 of the Corporation Code of the of incorporation.
Philippines provides,
- A Corporation is an artificial being 2. Corporators are those people that compose
created by operation of law, having the that corporation, the board of directors, or board
right of succession and the powers, of trustees, stockholders or members, including
attributes, and properties expressly the incorporators.
authorized by law or incident to its a. Stockholders and members
existence. b. Corporate
c. Directors and trustees
ADVANTAGES AND DISADVANTAGES OF
THREE MODES OF DISSOLUTION OF COOPERATIVES
CORPORATION
1. Voluntary Dissolution ADVANTAGES:
2. Involuntary Dissolution - Limited liability (only dependent on the
3. Expiration of shortening or term amount of their shares)
- Ease of expansion (more money due
DISSOLUTION to shares)
- Involves selling all the assets of the company, - Ease of transferring ownership
clearing off all the liabilities and accounts and - Relatively long life (50 years and more,
discharging all the claims. most stable)
- Greater ability to hire specialized
VOLUNTARY DISSOLUTION management
- A Corporation seeking voluntary dissolution
shall submit a verified request signed by its duly DISADVANTAGES:
authorized representatives containing the - More expensive and complicated
corporate name, SEC registration number, organize (may take months or years)
principal office, a statement requesting for the - Double taxation
dissolution, and reason for the dissolution. - More extensive government
restrictions and reporting requirements
INVOLUNTARY DISSOLUTION - Employees lack personal identification
- For involuntary dissolution, Section 138 of the with and commitment to corporate goals
Revised Corporation Code (RCC) provides that
the Securities and Exchange Commission (SEC)
may motu proprio, or upon filing of a verified 2. MUTUAL COMPANIES
complaint by any interested party, dissolve a - A mutual company is a
corporation for the following grounds: Non-use financial-service firm (such as an
of their corporate charter; continues inoperation insurance company or a savings and
of the corporation; upon receipt of a lawful court loan association).
order dissolving the corporation; and upon
finding by final judgment that it procured its
incorporation through fraud.
DISSOLUTION BY SHORTENING
CORPORATE TERM
- A corporation may proceed with voluntary
dissolution by amending its articles of
incorporation to shorten its corporate term.
MODIFICATIONS ON CORPORATION
1. COOPERATIVES
- A cooperative is defined as "An
organization composed of individuals or
small businesses that have banded
together to reap the benefits of a larger
organization".
