FORMS OF ORGANIZATION

2. 
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).

3. 
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.

4. 
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

5. 
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

6. 
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

7. 
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

9. 
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

10. 
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

11. 
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

12. 
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

13. 
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.

14. 
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.

15. 
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

16. 
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.

17. 
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

18. 
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

19. 
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;

20. 
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)

21. 
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.

22. 
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.

23. 
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