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Forms of business organization

  1.  1. SOLE PROPRIETORSHIP- This is the simplest form of business organization: only individual owns the business. 2. PARTNERSHIP- This refers to an association of two or more persons to carry the on as co- workers of a business for profit. “By the contract of partnership , two or more persons bind themselves to contribute money, property, or industry to a common fund with the intention of dividing the profits among themselves” (Article 1767, New Civil Code).
  2.  3. CORPORATION- This refers to a separate body consisting of at least five individuals treated by law or incident to its existence” (Sec. 2, The corporation Code of the Philippines.
  3.  SOLE PROPRIETORSHIP PARTNERSHIP CORPORATION OWNERSHIP One Owner Two or more owners Five or more owners CAPITALIZATION Depends on the needs of the business Depends on the needs of the business Depends on the type of the business as prescribed by law LIFE OR TERM OF EXISTENCE Dependent on the owner Dependent on the Partners Fifty years and renewable
  4.  SOLE PROPRIETORSHIP PARTNERSHIP CORPORATION Management Structure Managed by the sole proprietor Managed by one or more partners Managed by the board of directors Profit Distribution To sole owner To partners based on agreement or based on law To stockholders based on declaration of the board of directors REPORTING REQUIREMENTS to to to 1. Municipal Mayor 2. DTI 3. BIR 4. SSS 1. Municipal Mayor 2. DTI 3. SEC 4. BIR 1. Municipal Mayor 2. DTI 3. SEC 4. BIR
  5.  SOLE PROPRIETORSHIP PARTNERSHIP CORPORATION 5. Pag-Ibig or HDMF 6. PhilHealth 5. SSS 6. Pag-Ibig or HDMF 7. Philhealth 5. SSS 6. Pag-Ibig or HDMF 7.PhilHealth Income taxation Sole proprietorship pays individual income tax A partner pays individual income tax on his share of partnership profit Pays corporate income tax, stockholders pay on dividends received Some partnerships are exempted from income tax, others are taxed like corporations
  6.  SOLE PROPRIETORSHIP PARTNERSHIP CORPORATION Liability to Third Partry Unlimited liability of sole proprietor Unlimited liability for general partners, limited liability for limited partners Limited liability of stockholders
  7.  Sole Proprietorship ADVANTAGES 1. Easy to form, less government requirements 2. Fast decision making, only one person decides 3. Flexibility of operations 4. Suited to small business DISADVANTAGES 1. Limited source of capital 2. Life may be dependent on the life of the owner 3. Management that may be dependent on the capacity of the owner
  8.  Partnership ADVANTAGES 1. Easy to form, subject to less government requirements 2. Suited to the practice of a profession 3. Some are exempted from income tax 4. Flexibility of operation DISADVANTAGE S 1. Unlimited source of the partner for the debts of the partnership 2. Limited term of existence 3. Limited capital
  9.  Corporation ADVANTAGES 1. Capacity as a legal entity 2. Practically unlimited life 3. Limited liability of stockholders for corporate debts 4. Wider source of capital DISADVANTAGES 1. Activities limited by the articles of incorporation and corporate by laws 2. Possibility of abuse of power of officers 3. Subject to more governmental requirements
  10.  As to type of business operation 1.Marketing or Trading Partnership- is one engagd inm buying of goods and selling he same without a change in physical form. 2.Manufacturing Partnership- Business purchases raw materials and converts them into finished products. Classification of Partnership
  11.  3. Service Partnership- involves rendering of professional or non-professional services. Professional Services- Services are rendered by accountants, lawyers, engineers, doctors, and the like. Non-Professional Services- Are those offered by repair shops, tailoring shops, and transportation companies and similar types of business.
  12.  As to Liability 1. General Partnership- Is one in which all the partners are general partners who are liable for partnership debts to the extent of their professional property after all the partnership assets have been exhausted. 2. Limited Partnership- is one formed by two or more persons under the provisions on limited partnership, having as members one or more general partners and one or more limited partners. The limited partners are liable only to the extent of their capital contributions.
  13.  As to Liability 1. General Partner- Is the one who is liable for partnership debts to the extent of his personal property after all the partnership assets have been exhausted. 2. Limited Partner- is one whose liability for partnership debts is limited to his capital contribution. 3. General-Limited partner- Is one who has all the rights, powers, and subject to all the restrictions of a general partner whose liability is limited to his general contribution. Classification of Partners
  14.  As to Contribution 1. Capitalist Partner- is one who contributes money or property to the capital of the partnership. 2. Industrial partner- Is one who contributes his work, labor, or industry to the partnership. 3. Capitalist-Industrial Partner- Is one who contributes money or property as well as his work or industry to the partnership.
  15.  The formation of the corporation requires much work, such as contracting people, opening accounts with a bank and preparing necessary documents. These activities are usually undertaken by a promoter. A promoter is one who undertakes to form a corporation or causes it to be formed for a specified purpose or purposes; and who further undertakes to procure for the corporation the capital, rights, property, and organization necessary to achieve such purpose or purposes. The costs incurred in the formation of the corporation are called organization costs. Corporate Formation
  16.  All corporations organized under the Corporate Code shall file with the SEC articles of incorporation in any of the official languages; duly signed and acknowledged by all the incorporators, containing substantially the following matters, except as otherwise prescribed by the Corporate Code or by special law: Articles of Incorporation
  17.  1. The name of the corporation; 2. The specific purpose or purposes for which the corporation is being incorporated. When a corporation has more than one stated purpose, the article of incorporation shall state which is the primary purpose and the secondary purpose or purposes, provided that a non-stock corporation may not include a purpose which would change or contradict its nature as such;
  18.  3. The place where the principal office of the corporation is located must be within the Philippines. 4. The term for which the corporation is to exist; 5. The names, nationalities, and residences of the incorporators; 6. The number of directors or trustees which shall not be less than five (5) or more than fifteen (15)
  19.  7. The names, nationalities, and residences of the persons who shall act as directors or trustees; 8. If it will be a stock corporation- the amount of its authorized capital stock in lawful money of the Philippines, the number of shares into which it is divided; and incase the shares are par value shares, the par value of each, the names, nationalities and residences of the original subscribers, and the amount subscribed and paid by each on his subscription, and if some or all of the shares are without par value- such facts must be stated.
  20.  9. If it will be a non-stock corporation, the amount of its capital, the names, nationalities and residences of the contributors and the amount contributed by each; and 10. Such other matters which are not inconsistent with law and which the incorporators may deem necessary and convenient.
  21.  The Securities and Exchange Commission shakk have jurisdiction, supervision, and control over all corporations, partnerships or associations, who are the grantees of primary franchise and/or license or permits issued by the government to operate in the Philippines; and in the exercise of its authority, it shall have the power to enlist the aid and support of any and all enforcement agencies of the government, civil or military. SEC Supervision and Control Corporations