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FORMS OF BUSINESS

OWNERSHIP

Most important decisions


One of the most important decisions a
prospective entrepreneur has to make is the
form of ownership that has to be adapted.

The choice would depend largely on:


o resources
o personal objectives

Forms of ownership applicable


to business

1. Sole proprietorship
2. Partnership
3. Corporation

Sole Proprietorship
Sole proprietorship
is a business
owned and
operated by a
single person.

Advantages Of Sole
Proprietorship
Ease and cost of formation
Secrecy
Distribution and use of profits
Control of the business
Government regulation
Taxation, and
Closing the business

Disadvantages Of Sole
Proprietorship

Owners lack of ability and experience


Difficulty in attracting good employees
Difficulty in raising more capital
Limited life of the firm
Unlimited liability of the proprietor

A partnership is an
association of two or more
business partners who coown a business for the
purpose of making a profit.

Ease of formation
Pooling of knowledge and skills
More sources of capital
Ability to attract and retain employees;
and
Tax advantages

Unlimited liability
Limited life
Potential conflict between partners
Difficulty in dissolving the business

1. General partnership- is an association of


two or more persons, each with
unlimited liability, and who are actively
involved in the business.
2. Limited partnership- is an arrangement
in which the ability of one or more
partners is limited to the amount of
assets they invested
in the business.

1.
2.
3.
4.
5.
6.
7.
8.
9.

General partner
Limited partner
Silent partner
Dominant partner
Capitalist partner
Managing partner
Industrial partner
Secret partner
Liquidating partner

A corporation is a legally chartered


enterprise with most of the legal
rights of a person, including the right
to conduct a business, to own and
sell property, to borrow money, and
to sue and be sued.

Limited liability
Ease of expansion
Ease of transferring ownership
Relatively long life
Greater ability to hire specialized
management.

More expensive and complicated to


organize
Double taxation
More extensive government restrictions
and reporting requirements

Employees lack personal identification


and commitment

General Requirement &


Procedures for Registration
Prospective
entrepreneur must
check with the
government
agencies concerned
for updated or
revised
administrative rules
& policies, as well
as recent legislative
enactment that may
have to be compiled
with.

Registering a Single
Proprietorship
Register

the business name with the


Department of Trade & Industry under the
Bureau of Domestic Trade.
2

pcs. 2x2 picture

Application

P110.00

fee or registration fee of

Registering a Partnership
Prepare partnership agreement
Fill the partnership agreement with
the SEC
Pay filing fee
Evaluation of the application by the
lawyer & staff of Corporate & Legal
Department
Release of the approved registration
is within 15-30 days

Registering a Corporation
Prepare Articles of Incorporation &
By-laws, bank certification
File Articles of Incorporation & Bylaws with the SEC
Pay registration fee
Evaluation of the application by the
lawyer & staff of Corporate & Legal
Department
Release of the approved registration
is within 15-30 days

The papers or documents issued by


DTI, SEC, CDA (Cooperative
Development Authority upon
approval of the registration are
instruments which are national in
character. After complying with the
national agencies, there is the Local
Government Code which empowers
the local government units to take full
administrative control of their
respective jurisdiction and make
legislation, as well as ordinances
(including tax/fees impositions) best
fitting to the needs of the locality.
And this is where the business
registrants are affected.

DEALING WITH LOCAL GOVERNMENT UNITS


The papers or documents issued by DTI and SEC
Authority upon approval of the registration are
instruments which are national in character.
After complying with the national agencies,
there is the Local Government Code which
empowers the local government units to take
full administrative control of their respective
jurisdiction and make legislation, as well as
ordinances (including tax/fees impositions)
best fitting to the needs of the locality. And this
is where the business registrants are affected.

To be able to finally operate the business and open the


doors to the public, the entrepreneurs have to comply
with all the permits and clearances imposed by the local
government units. These are the following:
1.
2.
3.
4.
5.
6.
7.

Mayors permit
Building permit
Sanitary permit
Cigar and Liquor permit
NBI clearance
Barangay clearance
SSS, PHIC, Pag-ibig, other government
agencies

Agencies like DENR


and DepEd may have to be
consulted for their
requirements to the
registering organization. The
entrepreneurs own
neighborhood may likewise
oppose a business
proposition within the
village or subdivision.

HOW MUCH
MONEY IS
NEEDED

There is no specific or
mandatory provision in law
in putting up a sole
proprietorship business.
Unlike the partnership and
corporation, Securities and
Exchange Commission
requires a bank
certification attesting to
the fact that indeed, the
paid up capital requirement
as indicated in the
incorporation papers is
deposited in the bank.
Under the law, the
minimum authorized
capital requirement for the
corporation is one hundred
thousand pesos, and 25%
of this must be subscribed,
and at least 25% of the
subscribed capital must be
paid up.

THE BEST FORM OF


OWNERSHIP
The summary of the pros and cons of various
forms of business organization is shown below.
It would give the entrepreneur the chance to
evaluate his options.

ASPECT
1. Liability of
owner/s
2. Ease of
expansion
3.Life of firm
4.decisionmaking
5.Taxation of
income
6. Ease of
formation &
dissolution

Sole
Partnership
Corporation
Proprietorship
unlimited
limited/unlimited limited
not easy

not easy

easy

dependent on dependent on
the owner
the partners
swift
moderately fast

not dependent
on the owners
takes time

once

once

twice

easiest

not so easy

Takes time

Summary:
The small business operator is afforded
with three business ownership choices:
sole proprietorship, partnership and
corporation
Each of the three forms of ownership has
its own unique advantages and
disadvantages
The differences relate to effective control
of the business, sharing of profits and
liabilities, and potential for expansion.

Summary:
The greatest advantage of sole
proprietorship is the sole power to control
which is vested in the owner.
Partnerships provide opportunities for
additional sources of capital but power has
to be shared among the partners.
The nature of corporations provides
means for expanding easily. This is in
addition to the limited liability provision
enjoyed by stockholders.