Chapter 7:

OWNERSHIP &
ORGANIZATION
Reporters:
Mateo, Charisse
Garcia, Darl Anne
Madrid, Mc Joren
Quintanilla, Carl Cindel
Claramont, Gabriela
Aguisando, Zacheverell
Things to consider in selecting the
best legal form of organization
Ownership
Management
Financing
Liability
Incentives
Taxation
Retention of income
Protection
 Sole Proprietorship

Content:
The sole proprietorship is a form of business
organization initiated, owned or capitalized, and
managed by a single person.

As defined, the entrepreneur is the capitalist,

the manager, and administrator, and in the
beginning of the business, he practically does
everything for the business.
Advantages:
•Easily created and terminated.

•Direct, undiluted action.

•All rewards to owners.

• Flexibility.

•Minimum regulation and taxation.

Disadvantages:
•Unlimited liability.

•Capital limitations.

•Perils of individual.

•Limited skills and capabilities of the

sole owner.
Partnership
Definition:
A partnership is an association of 2 or
more business partners who co-own a
business for the purpose of making a
profit. In a partnership, the co-owners
(partners) share the assets, liabilities,
and profits of the business according to
the terms of the partnership agreement.
Types of Partners:
1.General partner.
2.Limited partner.
3.Silent partner.
4.Dominant partner.
5.Capitalist partner.
6.Managing partner.
7.Industrial partner.
8.Secret partner.
9.Nominal partner or partner by
estoppels.
10.Liquidating partner.
Advantages:
•Pooling of resources.

•Ability to obtain capital.

•Simplicity and incentive.

•Limited regulation and taxation.

Disadvantages:
•Unlimited liability.

•Tenuous existence.

•Independence on management
harmony and coordination.

•Problems in share liquidation.

CORPORATION
A corporation is an artificial
being, invisible, intangible, and
exists only in contemplation of
law. Its owners are the
stockholders who can sell their
interests in the corporation
without affecting the continuity
of its operations because the
life of the corporation is
dependent or distinct from that
of the owners or stockholders.
 Advantages:

• Limited liability.
• Legal entity.
• Ready transferability of ownership.
• Obtaining capital.
• Employee benefits.
 Disadvantages:

• Legal formality and cost.

• Cost and time involved in the
incorporation process.
• Taxation.
• Potential loss of control by founders
of the corporation.
COOPERATIVE
Republic Act 6938, otherwise known as the
Cooperative Code of the Philippines, defined a
cooperative as a duly registered associations of
persons, with a common bond of interest, who
have voluntarily joined together to achieve a
lawful common social or economic end, making
equitable contributions to the capital required,
and accepting a fair share of the risks and
benefits of the undertaking in accordance with
universally accepted cooperative principles.
PRINCIPLES OF COOPERATIVE
 Open & voluntary membership

 Democratic control

 Limited interest on capital

 Division on net surplus

 Cooperative education

 Cooperation among cooperatives

ADVANTAGES & DISADVANTAGES:
 Tax privileges
 Ability to provide direct benefits to its members &
the entire community it serves
 Inequality of profit distribution

 The pro-masses or pro-poor bias of the

cooperatives
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 thebusiness name with the Department

of Trade & Industry under the Bureau of
Domestic Trade.

•2 pcs. 2x2 picture

•Application fee or registration fee of P110.00

 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 & By-laws
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
 Registering a Cooperative
The following documents shall be forwarded to CDA
(Cooperative Development Authority):

 Four (4) copies of the economic survey with a general

statement describing briefly the structure, purpose,
economic feasibility, area of operation, size of
membership, and other pertinent data.
 Four (4) copies of Articles of Incorporation together with
the bond of accountable officers
 Four (4) copies of By-laws
 Registration fee as prescribed by the CDA
DEALING WITH
LOCAL
GOVERNMENT
UNITS
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.
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. Mayor’s permit
2. Building permit
3. Sanitary permit
4. Cigar and Liquor permit
5. NBI clearance
6. Barangay clearance
DEALING WITH
OTHER
GOVERNMENT &
PRIVATE BODIES
Agencies like DENR and
DepEd may have to be
consulted for their
requirements to the
registering organization. The
entrepreneur’s own
neighborhood may likewise
oppose a business
proposition within the
village or subdivision.
 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
 
HOW MUCH corporation is one hundred
thousand pesos, and 25% of
MONEY IS this must be subscribed, and
NEEDED 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.
PROPRIETORSHIP PARTNERSHIP CORPORATION
Advantages:
1. Simplicity in 1. Ease of 1. Limited liability of
creation establishment stockholders
2. Low cost to 2.Division of profits 2. Ability to attract
establish based on larger amount of
partnership capital
3. Owner receives 3. Larger pool of 3. Ability to have
all profits capital than perpetual life
proprietorship