GENERAL CONCEPTS

Kinds of Business Organization

1. Single proprietorship
A single proprietorship is the simplest form of business organization in the Philippines. It is not encumbered by the
strict regulatory laws and rules imposed upon corporations and partnerships.

Government registration of a single proprietorship business is simple. It is made through the Bureau of Trade
Regulation and Consumer Protection of the Department of Trade and Industry [DTI].

Single proprietorship, liability of proprietor:

The single proprietor has unlimited liability in the sense that creditors of his business may proceed not only against
the assets and property of his business but after his own personal assets and property. Creditors with whom he
had incurred personal debts may also run after the assets and property of his single proprietorship
business. Simply put, the law does not make any distinction between his personal affairs and his business
transactions. Before the eyes of the law, they are one and the same, his business being a mere extension of his
person.

2. Partnership
Partnership" is treated as an artificial being created by operation of law with a legal personality separate and
distinct from the partners thereof. It proceeds from the concept that persons may be allowed to pool their
resources and funds to engage in the pursuit of a common business objective without necessarily organizing
themselves into a corporation, upon which the law imposes a much higher form of regulation, limitation and
standards. Philippine partnerships operate under the concept of unlimited liability and unless otherwise agreed
upon by the partners, each one of them acts as manager and agent of the partnership and consequently, their acts
bind the partnership.

Partnership, governing law:

Unlike corporations whose governing law is a special law - the Corporation Code of the Philippines, partnerships in
the Philippines are governed by and covered under Articles 1767 to 1867 of the Civil Code of the Philippines.
These are the provisions of law which govern all aspects of partnerships - from their creation, formation, existence,
operation and management to their dissolution and liquidation, including the obligations of the partners to one
another, to the public or third persons and to the government.

Partnership, how formed; registration requirement:

Partnerships are required to be registered with the Securities and Exchange Commission [SEC]. Registration is
done by filing the Articles of Partnership with the SEC. The Articles of Partnership set forth all the terms and
conditions mutually agreed by the partners thereto.

More specifically, the documents required are as follows:

[1] Proposed Articles of Partnership;

[2] Name Verification Slip;

[3] Bank Certificate of Deposit;

[4] Alien Certificate of Registration, Special Investors Resident Visa or proof of other types of visa [in case of
foreigner];

[5] Proof of Inward Remittance [in case of non-resident aliens].

It bears noting that corporations are not allowed by law to become partners in a partnership.

Partners, liability:

As a general rule, the liability of partners in a partnership organization is unlimited in the sense that the
partnership creditors may run after them for any and all of their assets and property in payment of the partnership
debts. Should one of the partners defray all liabilities of the partnership, he is entitled to be reimbursed by the
other partners for their respective shares therein.

In the case, however, of limited partnerships, the law allows the limitation of the liability of certain partners to the
extent of the amount contributed to the partnership.

Partnership, dissolution:

Philippine law allows the dissolution of partnership for any reason, provided such dissolution does not amount to a
breach of contract or is prejudicial to third parties. The death of a partner or the unauthorized transfer of
ownership of his share in the partnership [in case there is a limitation to this effect] results in the dissolution
thereof. In other words, any change in the composition of the partnership, unless so allowed, will result in the
dissolution thereof. Consequently, the remaining partners may form a new partnership with less or more partners.