Management

LEGAL FORMS
AND
CHARACTERISTICS
OF BUSINESS
ORGANIZATION
Yuri Walter D. Akiate,
DBA

What factors should a companys owners

consider when selecting a form?
Choose a form of organization by evaluating:
Owners liability for firms debts
The ease and cost of forming the business
The ability to raise funds
The taxes
The degree of operating control the operator can retain
The ability to attract employees

Comparisons of Forms of
Business Organization

Sole proprietorships
Partnerships
Corporations

Sole proprietorships
Advantages

Disadvantages

Relatively low start-up

capital

Greatest freedom from

government regulation
Owner is in direct

control of decision

making
Minimal working capital
All profits go to the

owner

Unlimited liability
Lack of continuity in the
absence of the owner
Highest mortality rate
Difficulty in raising capital
Relatively difficulty to
compete with bigger
businesses
All losses borne by the
owner

Partnership

A business owned by two or more

people who havent filed papers to
become corporation.

Partnership
2 General Types of
Partnership

General Partnerships

Partners co-own
assets and share
profits
Each partner is
individually liable for
all debts and contracts
of the partnership

Limited Partnerships
General Partner
acts as the general
manager
Limited Partner
minimal control over
the daily business
decision

Partnerships
Disadvantages
Unlimited liability
Ease of formation
compared to corporations Lack of continuity in case a
partners or withdraws or dies
Relatively low start-up
Divided authority among
costs
partners
Additional sources of
Difficulty in raising additional
investment capital
capital due to needed consent
of all partners
Limited regulation
Hard-to-find suitable partners
Broader management
Possible development of
base
conflict b/w partners
Usually better managed Action of one partner is
that sole proprietorships
understood to be the action of
all partners

Advantages

Corporation:
A legal entity with an existence
and life separate from its owners;
it can own property, enter into
contracts, sue and be sued, and
operate under terms of its state
charter.

Corporations
Stockholders

Owns the corporation

Can sell or transfer shares at any time
Entitled to receive profits in the form of
dividends

Board of Directors

Elected by stockholders
Govern the firm

Officers

Carry out the goals and policies set by the board

Corporations
Advantages

Limited liability
Specialized
management due to
presence of corporate
officers
Ownership is
transferable due to
shares of stocks
Unlimited life-span
Separate legal entity
from owners
Easier to raise capital

Disadvantages
Closely regulated &
monitored by SEC
Most expensive form of
business organization to
organize
Extensive record keeping
necessary
Double taxation of
dividends (corporation &
stockholders)
Possible development of
conflict between
shareholders & executives

Organizational Structure of
Corporations
Stockholders

elect

Directors

elect

Officers (Top
Management)
President

Vice Treasurer Secretary

President

Cooperatives
A corporation organized and
controlled by its members, who pool
resources together to provide
themselves and their patrons with
goods, services, or other benefits.
Provides democratic control
Open & voluntary membership and
patronage dividends

Cooperatives
Disadvantages
Advantages
Possible development of
Owned and controlled by
conflict b/w members
members
Numerous members tend to
Democratic control
diminish (Ones share in total
Limited liability
dividends)
Unlimited life-span
Longer decision making
Profit distribution (surplus
process than corporations
earnings) to members in
due to more votes to count
the form of dividends
Requires members to
Dividends are in proportion
participate for success
to a members use of
Extensive record keeping
cooperative services
necessary
Highly encouraged by
Less incentives for members
government due to the
to invest additional capital
benefits received by a

greater number of people

Major Characteristics of the

Legal Forms of Business
Organizations

Types of Business
Organizations

# of People
Required to be
Registered

Main
Government
Agency Involved

Variety of Business that

may be Engaged In

Sole
Proprietorship

One

DTI

Broad, any legal

business

Partnership

More than One

SEC

Broad, any legal

business as long as the
partners allow

Corporations

At least 5

SEC

Limited to Articles of
Incorporation state

Cooperatives

At least 15

CDA

Primary limited to what

Articles of Cooperation
state

Characteristics of
Organizations

Types of
Business
Orgn

Ownershi
p

Control of Distinctio
Business
n of
Owners
and
Business
Assets

Profit
and
Losses
(P/L)
Distribut
ion

Lifespan
of the
Business

Implication or
Remarks

Sole
Props

One
Person

Full control
of the
owner

No
distinction

All P/L
goes to
the owner

Business
dies w/
the owner
or if not
renewed

Easiest to organize;
Broad business
transactions; most
numerous; Smallest
in size; high
mortality rate;
tendency for
unprofessional
management

Partnersh
ip

Two or
more

Limited
Control of
partners

No
distinction

P/L
distributio
n is
dependen
t on P/L
agreemen
t in
Articles of
Partnershi

Business
dependent
on the
willingness
and/or life
of the
partners

Relatively easy to
organize; Generates
more investments;
Easily dissolved;
Usually better
management than
sole proprietorship

Characteristics of
Organizations
Types of
Business
Orgn

Ownershi
p

Corporatio At least 5
n
incorporato
rs

Control
Distincti Profit and
of
on of
Losses
Business Owners (P/L)
and
Distributio
Busines n
s
Assets

Lifespan
of the
Business

Implication or
Remarks

Control &
voting
power
dependen
t on
shares of
stocks

50 years
by law
subject to
renewal;
ownership
is
transferab
le via
trading of
shares of
stocks

Harder to organize;
requires legal
procedures; tends to
have biggest
investments;
relatively more
stable; limited profit
sharing

Generally
assets or
corp
separate
& distinct
from
those of
the
owners

Profits
distributed
in proportion
to ownership
of shares of
stocks,
subject to
several
consideratio
ns

Characteristics of
Organizations
Types of
Business
Orgn

Ownershi
p

Control
Distincti Profit and
of
on of
Losses
Business Owners (P/L)
and
Distributi
Busines on
s
Assets

Lifespan
of the
Business

Implication or
Remarks

Cooperati
ve

At least 15;
indefinite
number of
members

Democrat
ic control;
one
member
one vote
policy

50 years by
law subject
to renewal;
life us
distinct &
separate
from
members

Easier to organize
than corporation;
greater benefits to
members-owners
but limited profit
sharing; easily
grows in assets &
membership; Trends
towards professional
management

Generally
assets or
coop
separate
& distinct
from
those of
the
owners

Does a company have any business organization

options besides sole proprietorship, partnership, and
corporation?
Joint venture
An alliance of two or more companies
Formed to undertake a special project
Franchises
Business arrangement between a franchisor and
franchisee
Franchisee uses business name and logo of
franchisor

Specialized Forms
of Business Organization
Joint ventures
Franchises

Joint Venture:
2 or more companies form an
alliance to pursue a specific
project, usually for a specific
time period

Why is franchising growing in

importance?
Business owner does not have to start
from scratch
Buys a business concept with a proven
product and operating methods
Franchisor provides:
Management training and assistance
Use of a recognized brand name, product, and
operating concept
Financial assistance

Franchising:
business organization in which
a franchisor supplies the
product concept to the
franchisee, who sells the goods
or services

Franchises
Advantages

Disadvantages

increased opportunity to loss of control

expand (franchisor)
(franchisor)
recognized name,
costs of franchising
product, and operating
restricted operating
concept (franchisee)
freedom (franchisee)
management training
and assistance
(franchisee)
financial assistance
(franchisee)

Top 10 Franchises for

2008
Top 10 Franchises for 2008

7-Eleven Inc.
2. Subway
3. Dunkin' Donuts
4. Pizza Hut
5. McDonald's
6. Sonic Drive In Restaurants
7. KFC Corp.
8. InterContinental Hotels Group
9. Domino's Pizza LLC
10. RE/MAX Int'l. Inc.
1.

Source:http://www.entrepreneur.com/franchise500/

Management of Small
Enterprise

GENERAL
REQUIREMENTS IN
PUTTING UP A
BUSINESS

Learning Objective
Identify the general
requirements that are
needed in putting up a
business, whether it is sole
proprietorship, partnership,
corporation; or cooperative

A. Registering a Business
Name

What's in a name?
A business name is a name under which a
business operates. Business name registration
is compulsory and must be completed before
the business starts operating.
Choosing the right name for your new
business is extremely important. Your business
name distinguishes your products and
services from those of your competitors, and
helps to establish your identity in the
marketplace.

What is an acceptable
business name?

In determining whether a business name

submitted for registration is acceptable the
following factors shall be considered:

The root word or words of the name shall be

considered. (e.g. "Island" instead of "Islander")
The business name should describe the nature of
the business.
It should be comprised solely of any or all of the
following:
Letters, numerals, and punctuation that are part of
the English and Filipino language.

Names which are not

acceptable:

Those which are or whose nature of

business are illegal, offensive,
scandalous, or contrary to
propriety.

Names which are not

acceptable:

Those which are identical or nearly resemble

business names already registered with the
Department of Trade and Industry, the
Securities and Exchange Commission (SEC),
Cooperative Development Agency (CDA),
Department of Labor and Employment (DOLE)
or any other government office authorized by
law to register names, because these are
likely to cause confusion or mistake in the
minds of the public and prejudice the interest
of the owner of the registered business name
or firm name taking into consideration the
following:

Names which are not

acceptable:

nature of the business

product/service handled
location/place of the business
capitalization
general appearance, spelling, sound and
meaning
use of dominant/descriptive words and
such other factors as maybe determined
by the BTRCP Director

Names which are not

acceptable:

Names composed purely of generic words;

Name which by law or regulation cannot be

appropriated;

Names, words, terms, or expressions used

to designate or distinguish, or suggestive
of quality of any class of goods, articles,
merchandise, or service;

Names or styles used by the government in

its governmental functions;

Names which are not

acceptable:

The names or abbreviation of names, of any

nation, inter-governmental or international
organization unless authorized by the
competent authority of that nation, intergovernmental or international organizations;

Names which are deceptive, misleading or

which misrepresent the nature of the business;

Such other names which in the opinion of the

Director are undesirable or analogous to the
above.

How do I apply for a

Business
Name?
Choose a Business Name

Search for a Business Name

Register your Business Name

Submit Documentary Requirements

Pay your Application

How do I complete the

application?
Fill-out the form by typing the required information.
Information marked with red asterisks (*) needs to
be filled-out. Otherwise, you will receive an error
message prompting you to complete them before
the succeeding page will be displayed.
Among these items are:
Email address
Zip code
Middle Name
In addition, if the business you are registering is a
branch, a franchise or was acquired from a
previous business, additional items such as the
exact business name of the franchise, main office
and/or certificate number and date of registration
of the acquired business are also required.
There also some items of information that may be of
particular concern when completing the
application.

What do I need to
register my business
For Single Proprietorship
name?

1. must be a Filipino citizen, at least 18 years

old

2. Filipinos whose names are suggestive of alien

nationality must submit proof of citizenship such
as
birth certificate, PRC ID, voter's ID,
passport
(a) if the applicant has a foreign sounding name,
acquired Filipino citizenship by naturalization, election
or by other means provided by law, he must submit
proof of his Filipino citizenship such as:

What do I need to
register my business
Naturalization certificate and Oath of
name?
allegiance,

Affidavit of election or ID card issued by the

Bureau of Immigration and Deportation, or
Valid ID card issued by the Integrated Bar
of the Philippines (IBP) or Professional
Regulatory Commission (PRC)

3. Processing fee of P300.00 + P15.00

Documentary Stamp


1.
2.

3.
4.
5.

What do I need to
register my business
For Corporation, Partnership and
name?
Cooperative
Filled out the application form
Certified photocopy of SEC and CDA registration
and Articles of Incorporation, Partnership or
Cooperative (by the board of secretary)
Board Resolution for the authorized signatory, if
signatory is not one of the incorporators
Board Resolution for the registration of an adopted
name/branch with specific address (if applicable)
Processing fee of P500.00 + P15.00 Documentary
Stamp.


1.

2.
3.
4.
5.

What do I need to
register my business
For Foreign Investor
name?
Photocopy of Alien Certificate of Registration
(ACR)
updated the current year. Present original for
comparison.
Accomplished DTI Form No.17 under R.A. 7042.
Current written appointment of Filipino Resident Agent.
Clearance from other involved agencies such as
Department of Science and Technology (DOST), PNP etc.
In case of alien retailer, current year's permit to engage
in retail business per R.A. 1180.

For Special Documentary

Requirements

Copy of the Business Name of the main

office/establishment, for branch application

Bulk Sales Certificate, if the business name was obtained

pursuant to Act No.3952 as amended, (The Bulk Sales
Law) and Affidavit executed by the transferee-applicant

DTI Accreditation Certificate for applicants engaged in

repair service covered by and pursuant to Presidential
Decree No. 1572 and its implementing Rules and
Regulation, as amended.

DTI Accreditation Certificate for applicants engaged in

importation, manufacture, sale or servicing of the fire
extinguisher, supplies and equipment pursuant to
Presidential Decree 721 and its Implementing Rules and
Regulation, as amended.

For Special Documentary

Requirements

DTI Bonded Warehouse License for applicants engaged

in the business of "warehouse" as defined under Act
3893, as amended (Bonded Warehouse Act)

DTI issued Certificate of Authority for applicants

engaging as merchandise or ship broker as defined
under Act 2728 (Law on Brokerage Business)

Consent Agreement, or equivalent contract if a

business is covered by a Franchise or similar
agreement.

Affidavit executed by all compulsory heirs authorizing a

representative to renew a business name under the
name of the deceased registrant solely for the purpose
of winding up the business operation

For Special Documentary

Requirements

Deed of Sale, Assignment or Transfer, as the case may be, and a

notarized written waiver from further use of the same business name, in
cases contemplated

Affidavit executed by the applicant declaring his/her relationship with the

deceased registrant within the second degree of consanguinity or affinity
and a notarized consent and waiver executed by all the compulsory heirs
or other legal heirs, in the absence of compulsory heirs

Affidavit executed by the registrant declaring that the purpose of

registration is to perpetuate the memory of the deceased in his/her
expertise or interest and a notarized consent and waiver executed by all
the compulsory heirs or other legal heirs, in the absence of compulsory
heirs

Such other documents required in this Order, those as may be required

in subsequent laws and regulations and those which in the opinion of the
Director are necessary to protect the interest of the government and the
public.

For Special Documentary

Requirements
The applicant shall undertake to execute the
following:

Declare that all information supplied in the application

filed are true and correct to the best of her/his belief
and knowledge;

Declare that any false or misleading information

supplied, or production of materially false or misleading
document to support the application shall be a ground
for the appropriate criminal, civil and/or administrative
action against the registrant; and

Change and/or cancel the registered business name in

the event that there is already another person, firm or
entity lawfully using an identical or confusingly similar
business name

1.

2.

Juridical person applying

for registration of an
In case of a juridical person, any name that is different
from
its primary registered
name and used orname
signed in
adopted
business
connection with his/its business on any written or printed
receipts, including receipts for business taxes, duties and
fees and withdrawal or delivery receipts; any written or
printed evidence of any agreement or business
transaction and any sign or billboard conspicuously
exhibited in plain view in or at the place of his business or
elsewhere, announcing his business.
Certified true copies of Certificate of registration
with SEC, CDA, DOLE, etc., whichever is applicable,

Certified true copies of the Articles of

Incorporation, Partnership, Cooperation or
Constitution, whichever is applicable.

3.

Juridical person applying

for registration of an
Items (a) and (b) may be certified either by the issuing
government
agency or
its corporate secretary,
or
adopted
business
name
his/her equivalent.

4. An original copy of the Board Resolution authorizing

the registration of an adopted name, for original
application.

5. A duly certified document establishing the

position/authority of the signatory issued by
Corporate Secretary or his/her equivalent.

6. SEC Certificate of Authority to engage in busines in

the Philipppines, if foreign capital investment
exceeds thirty percent (30%) of the total capital
stock

Who Can Apply?

Any individual who is at least eighteen (18)

years old, or any juridical person who is doing
business or proposing to do business in the
Philippines under a business name as defined in
this order, and is not disqualified by any existing
law or regulations to engage in business are
required to register under the business name
law.
A person who has been convicted of any crime
involving moral turpitude, shall not be qualified
to apply for the registration of a business name
except when such person had been granted
absolute pardon by the President of the
Philippines, had served his sentence, or had
been discharged from probation, as provided by
law.

Signatories
The signatories of application for registration are as
follows:

For individual applicants, the applicant himself; or by

the person holding power of attorney for the him if the
application is under a special power of attorney
For corporations, the Board Director, CEO or Board
Secretary;
For partnerships, one of the partners;
For cooperatives, the President or Secretary thereof;
For legitimate labor organizations, the President or
Secretary thereof.
If the application is signed by a person holding power
of attorney for the applicant, the application shall be
accepted provided that the original power of attorney
is presented and a copy thereof submitted as part of
the supporting documents.

o
o
o
o
o

What happens after

submitting my
An applicant can reserve a business name
online up to three (3) working
days, free of
application?
charge. The registrant however, shall comply

with all the necessary requirements for

registration within the same period in order
that the application can prosper.
In cases where any of the proposed names can
no longer be registered, or when a document is
rejected, the applicant shall be required to
resubmit proposed names or the required
documents, as the case may be, within the
fifteen (15) working days from notification,
verbally or otherwise.
Failure to resubmit the same within the
prescribed period shall be deemed
abandonment of the application filed and the
corresponding fee or fees paid shall not be
refunded.

Requirments in Registering
Sole Proprietorships

Generally, most DTI offices in the country require

the following:
Applicant must be 18 years of age or older;
Two recent passport sized photos of applicant;
Proofs of Filipino citizenship (e.g. birth
certificate and/or voters ID);
DTI registration certificate of business name;
Business Permit and/ or Mayors Permit
Location map of business establishment;
Barangay clearance
Community Tax Certificate of proprietor;
Tax Identification Number (TIN)

Requirments in Registering
Sole Proprietorships

SSS registration (if you have employees);

DOLE registration (if employees number
is five or more)
Building occupancy permit;
Mechanical Permit (in some cases);
Electrical inspection;
Pollution clearance;
Sanitary/health certificate; and
Police clearance

Sample of Business
Forms/Certifications

Business Permit
Sanitary Permit

Compliance Certificate
Building Certificate

Requirements in Registering
Partnerships & Corporations

Generally, most SEC officers in the country require

the following besides most (if not all) of those
mentioned above:
Certified true copy of articles of partnership or
incorporation, by-laws and registration certificate
duly approved by SEC;
For corporations having foreign incorporators, the
registration certificate should specify with the
Foreign Investment Act ( and other applicable
laws, if need be); and
A certificate from the SEC specifying increases in
capital in applicable cases.

Citizens Manual

Registration of Partnership &

Corporation

Schedule of Fees (SEC)

Requirements in Registering
Cooperatives

Generally, most CDA offices in the country require the

following:
Registration with the nearest CDAS office;
Business name registration with the nearest DTI
office;
Permit to operate a Cooperative from the LGU;
TIN
Registration with DOLE if necessary;
Location map of business establishment;
Barangay clearance;
Certified true copy of articles of cooperation, by
laws and CDA registration; and
A certificate from the CDA specifying increases in
capital in applicable cases.

Thank you for

listening!!!
End of my report