Handout: Different Legal Entities

A Comparative Note

Basis for Sole Proprietorship Partnership Corporation

Comparison
Ownership Only one person. More than one person. Five or more people. Five
to fifteen individuals can
The owner and the Partnership firm is treated be incorporators, but can
business are treated as as a separate entity. subsequently increase the
the same legal entity for number of stockholders.
tax purposes but for
accounting purposes, A corporation is a
but the business is separate legal entity,
WFNEN 102: Intermediate Program in Entrepreneurship

treated as a separate distinct from its

entity for accounting stockholders.
purposes.

Ease and legal Easy to set up. Easier to set up than a Most complex to set up.
requirements Legal requirements: corporation, but more Legal requirements:
of setting up a. A business name complex than a sole a. Must be
registered with proprietorship registered with
the Department Legal requirements: the SEC.
of Trade & a. A business name b. Minimum paid-up
Industry (DTI). registered with capital is
b. Tax DTI, but if capital Php5,000, or 25%
Identification is more than of subscribed
Number (TIN), Php3,000, it must capital, whichever
which is the be registered with is higher.
same as the the Securities and c. A TIN must be
personal TIN of Exchange obtained from the
owner. Commission (SEC). BIR for the
c. Business permits b. A TIN must be corporation.
from local obtained from the d. Business permits
government Bureau of Internal from local
unit. Revenue (BIR), for government units.
the partnership.
c. Business permits
from local
government unit.

Nature of Personal property of the A partnership can either Liability is limited to

liability owner can be pursued be a general partnership business assets.
by legal claimants for where all partners have
realization of their unlimited liability, or a
claims from the limited partnership where
business. some of the partners, but
not all, are limited
partners and are
Starting Operations
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 Handout: Different Legal Entities
A Comparative Note

accountable only to the

extent of their capital
contribution.

Personal property of
general partners can be
pursued by legal claimants
for realization of their
claims from the business.
WFNEN 102: Intermediate Program in Entrepreneurship

Ongoing Filing of required tax Filing of required tax Filing of tax returns and
regulations returns and payment, if returns and payment, if payment, if applicable;
and applicable. applicable; filing of report filing of report
compliance requirements with SEC for requirements with SEC;
those registered with SEC. and renewal of annual
business permit with local
government units.
Fund raising Least Moderate Most
and scalability

Starting Operations
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