An introduction to:

Business
Legal
Structures
1. Sole Proprietor
A sole proprietorship is the simplest and most
common structure chosen to start a business. It is
an unincorporated business owned and run by one
individual with no distinction between the business
and the owner. You are entitled to all profits and
are responsible for all your business's debts,
losses and liabilities.

Example Chart:

CEO
(You)

Marketing Production Service Management

(You) (You) (You) (You)
2. General Partnership
An association between two or more people in
business seeking a profit. Partnerships can be created
with little formality, but because more than one
person is involved, a partnership agreement should be
created. A partnership agreement stipulates the
terms of the partnership by formalizing rules for
profit/loss sharing, ownership percentages,
dissolution terms, and management rights among
many other things.

Example Chart:
CEO
Reina De Guzman

COO
Astrid Garcia

Marketing Production Service

George King Daniel Marte Everest Silva
3. Limited Liability Company (LLC)
AA hybrid between a corporation,

general partnership,
and sole proprietorship. Owners of an LLC are called
members. Members may include individuals,
corporations, other LLCs and foreign entities. Most
states permit an LLC with only one owner, called a
“single member LLC.”

Example Chart:

LLC
Employees Manager

Member
(owner)

Member
2. General Partnership
Corporations are the most complex business structure.
A corporation is a legal entity that is separate and
independent from the people who own or run the
corporation, namely shareholders. A corporation has
the ability to enter into contracts separate from that
of the shareholders, but it also has certain
responsibilities such as the payment of taxes.
Corporations are generally more appropriate for larger
established companies with multiple employees or when
other factors apply (i.e. corporation sells a product or
provides a service that could expose the business to
sizable liability). Ownership is designated by issuing
shares of stock.

Example Chart:
Q&A
1. What are the four Business Legal Structures?
Sole Proprietorship, General Partnership, Limited Liability Company
(LLC) and Corporations
2. What are the PROs and CONs of each structure?
Sole proprietorship advantages
Owner receives all the profits
Profits are taxed only once
Owner makes all decisions and is in complete control of the
company (could also be a disadvantage)
Easiest and least expensive form of ownership to organize
Sole proprietorship disadvantages
Unlimited liability if anything happens in the business. Your
personal assets are at risk (including your home in Missouri)
Limited in raising funds and may have to acquire consumer
loans
No separate legal status
Q&A
SPartnership advantages
Easy to establish (with the exception of developing a
partnership agreement)
Separate legal status to give liability protection
Profits taxed only once
Partners may have complementary skills
Partnership disadvantages
Partners are jointly and individually liable for the actions of
the other partners
Profits must be shared with the partners
Divided decision making
Business can suffer if the detailed partnership agreement is
not in place
Q&A
Limited liability company advantages
Most common business structure and specifically created for
small businesses
Must have insurance in case of a suit
Separate legal entity
Usually taxed as a sole proprietorship
Unlimited number of owners
Limited liability company disadvantages
Can be costly to form
Yearly administrative costs
Personal tax liability
Legal and accounting assistance is recommended
Q&A
Corporation advantages
Limited liability
Transfer of ownership, shareholders can sell their shares
Capital is easier to raise through the sale of stock
Company paid fringe benefits
Tax benefits
Corporation disadvantages
Double taxation (corporation and shareholder earnings taxed)
Can be costly to form
More administrative duties - required by law to have annual
meetings, notify stockholders of the meeting, must keep
minutes of meetings and turn in
Pay corporate taxes at a different time than other forms of
business
Q&A
3. How are each structures regulated in the Philippines?
Sole Propriertorship - Department of trade and industry,
while the rest are regulayed by the Securities and Exchange
Commission (SEC) of the Philippines.

4. What are the processes and requirements for

registering your business under each Business Legal
Structure?
Create a business structure.
Choose and register a business name.
Get an EIN.
Obtain licenses and permits.
Prepare to pay taxes.
Create a compliance plan.
Get Business Insurance.
Q&A
5. Finally, which is the BEST TYPE of Business Legal
Structure?
SFor start ups, it would have to be sole proprietorship since its
low cost and its an easy set up and low cost. Generap Partnership
is the same too however you would have to work with someone
else. I think either of the both would make a good choice.