Law on Business Organizations in the Philippines

The following are the different types of business organizations that one may choose in putting up a business in the Philippines:

a) Sole Proprietorship -- It is the oldest form of business which is owned and usually controlled by one person.

Advantages:

(i) Easiest to form;
(ii) Owner is entitled to all the profits;
(iii) All decisions are the owner’s to make;
(iv) The owner may end the business at any time.

Disadvantages:

(i) Owner usually operates with a limited amount of capital;
(ii) The danger of unlimited liability;
(iii) Owner may not be skilled in running the business.


b) Partnership -- Governed by the Civil Code of the Philippines. There is a partnership when two or more persons contribute money, property or industry to a common fund with the intention of dividing the profits among themselves.

Advantages:

(i) Easy to form;
(ii) Direct rewards;
(iii) Improved growth possibilities;
(iv) Easier to execute decisions than in a corporation; More difficult than it would in a sole proprietorship.

Disadvantages:

(i) Unlimited liability;
(ii) Instability;
(iii) Difficulty in obtaining long term capital;
(iv) Firm is tied to the acts and judgments of one partner as agent
(v) Difficulty in severing partnership ties.

c) Corporation -- Governed by Governed by Batas Pambansa Blg. 68, also known as “Corporation Code of the Philippines”. A Corporation is an artificial being, created by operation of law, having the right of succession, and the powers, attributes and properties expressly authorized by law or incident to its existence.

Advantages:

(i) Limited liability;
(ii) Continuity of existence;
(iii) Selling stock in the corporation;
(iv) Professionalism.

Disadvantages:

(i) Complicated to form;
(ii) Activities limited by charter and various laws;
(iii) Extensive government regulations;
(iv) Double taxation which implies that a corporation can be taxed while its stockholders may also be taxed on the basis of the dividends received.


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