CHAPTER 1: INTRODUCTION

KINDS OF BUSINESS ORGANIZATION

1. SOLE PROPRIETORSHIP – one conducted for profit by a lone or single individual who
owns all assets, personally owes and answers all the liabilities or suffers all the losses
and enjoys all the profits to the exclusion of others.
ADVANTAGES DISADVANTAGES Eliminates the bureaucratic process common in
corporations where the board of directors must sit as a body to have a valid transaction.
The proprietor makes his own decisions and can act without delay. Unlimited personal
liability of the proprietor Proprietor owns all the profits without having to share the same
Capital is limited by the proprietor’s personal resources
2. PARTNERSHIP – a contract where 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 (Art. 1767, Civil Code).
3. JOINT VENTURE – a one-time grouping of two or more persons, natural or juridical, in
a specified undertaking.
PARTNERSHIP JOINT VENTURE Has a personality separate and distinct from the
partners Does not acquire a separate and distinct personality from the venturers Has for
its object a general business of particular kind, although there may be partnership for a
single transaction Object is an undertaking of a particular or single transaction
Corporations, generally are not allowed to enter into partnerships* Corporations may
enter joint ventures
*A corporation is generally not allowed to enter into partnerships because (1) the identity
of the corporation is lost or merged with that of another; and (2) the discretion of the
officials is placed in other hands other than those permitted by the law in its creation.
EXCEPTION to the rule is when the following conditions are met: a. The articles of
incorporation expressly authorized the corporation to enter into contracts of partnership;
b. The agreement or articles of partnership must provide that all the partners will manage
the partnership; and c. The articles of partnership must stipulate that all the partners are
and shall be jointly and severally liable for all obligations of the partnership
4. CORPORATION – 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 (Sec. 1, Corporation Code [CC])

LADIA NOTES:

CORPORATION LAW
  Corporation is one of the types of business organizations. It is also the most important in
economic development.

INTRODUCTION
 Sole proprietorship

- One man form of business entity, personally answers all liabilities, but enjoys all the
profits with the exclusion of others
- Limited shareholders responsibility
- Paid subscription in full, you are no longer liable

 Partnership

- Based on mutual trust and confidence

 Joint venture

- one time grouping of persons whether they be natural or juridical

- does not entail continuity because after the undertaking is completed it is already the end
- particular partnership and joint venture would be similar, but there is already a decision
of the Supreme Court declaring them as different
- when they do not register, it does not exist
- Foreign corporations enters into an agreement with a domestic corporation, it must be
registered. Generally they do not need to be registered.

 Corporations

- They may enter into joint venture, but generally they cannot enter into a partnership, but
there are exceptions allowed by the SEC: the 3 exceptions must go hand in hand
1. The articles of incorporation expressly authorized the corporation to enter into
contracts of partnership;
2. The agreement or articles of partnership must provide that all the partners will
manage the partnership; and
3. The articles of partnership must stipulate that all the partners are and shall be jointly
and severally liable for all obligations of the partnership.