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The different types of business structures in the Philippines, including sole proprietorship, partnership, and corporation. It explains the advantages and disadvantages of each structure, as well as the legal requirements for setting up a business. The document also touches on the topic of attracting investors and the limitations on foreign ownership in each type of business structure.
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When you decide to start a business, there are many factors that come into play, one of which is determining your business structure. Your business structure will determine the costs, taxes, ownership, and jurisdiction of your business. This is the most basic and informal type of business structure in which a single individual has complete control and ownership of the business. A partnership is formed when two or more individuals own the business. Corporations are owned by a minimum of five (5) and a maximum of 15 shareholders. Business models in the Philippines
Sole Proprietorship Requires a minimum amount of capital Minimal regulations and compliance requirements from government agencies Easy to register Sole proprietor has complete control of the business Easy to manage, with no necessary formalities or regulations about having a board of directors, committee, or meeting minutes Sole proprietor acquires all assets and profits of the business and can freely mix business and personal assets Sole proprietor is subject to unlimited personal liability for the debts, losses, and liabilities of the business Sole proprietor cannot raise capital by selling an interest in the business or obtain capital funding through established channels No clear-cut definition between personal and business income because the sole proprietor is personally liable for the income tax of the business Sole proprietorships rarely survive the death or incapacity of their owners and hence do not retain value Business bankruptcy affects the owner personally Personal lawsuits against the sole proprietor can potentially consume all their personal assets and negatively affect the financial aspects of the business Lawsuits filed against the business are also deemed as lawsuits filed against the owner; creditors of the owner or of the business itself can reach both the business and the owner’s personal assets, and if such lawsuits are successful, the owner is obligated to pay the damages with his or her own money
A partnership company is a legal form of business operation in the Philippines between two or more individuals who share and manage both the profits and losses of the company. There are two kinds of partnership: general and limited. In a general partnership, business partners share unlimited liability for the debts and obligation of the company. On the other hand, limited partnerships are called as such since some partners will have unlimited liability, while others will have liability equal only to the amount of their capital contribution. The Philippines allows foreigners up to 40% of ownership in a partnership. Partnership
Corporations are owned by a minimum of five (5) and a maximum of 15 shareholders. Each of the incorporators must hold at least one share in the corporation, and their liability is limited only to the amount of their capital share. In the Philippines, a corporation is treated legally as a personality separate and distinct from that of the stockholders who own the corporation. The corporation should be SEC-registered, with a minimum paid up capital of P5,000. A foreigner can have up to 40% ownership in a corporation. corporation
two kinds of corporation The capital of a stock corporation is divided into shares, which are distributed to investors. In return, investors receive dividends and part of the surplus profits computed based on the number of shares they hold. A non-stock corporation does not issue shares of stock to its members since the entity exists for charitable, educational, cultural, or other equivalent purposes. Stock Corporation 1 2 Non-stock Corporation