FIRST VID (DIFFERENCE BETWEEN A partnership is created.
And the manner or the
PARTNERSHIP AND A CORPORATION)
Hi, I'm attorney Maricris Bathan Lasco. This is my
virtual classroom. Welcome to my YouTube
channel. In this channel, we shall aim to simplify
the law. We shall explain concepts and principles
of law in under 10 minutes.
Hi, for this video, will talk about the difference
between a partnership and a corporation.
Why is it important to know the difference
between a partnership and a corporation?
It's important to know the difference between
the two, especially when you want to put up a
business.
Is it easier to put up a partnership? Is it easier to
put up a corporation? If you want to put up a
partnership? How do we do it? If you want to put
up a corporation? How do we do it? So there are
so many things to look into to decide as to what
would you want to make. If you want to put up a
business? Is it a partnership on one hand? Or is it
the corporation on the other?
So let's begin with the manner of creating a
partnership and the manner of creating a
Corporation.
First off, you have to know the law that governs
the partnership and the law that governs the
corporation.
The partnership is governed by the civil code,
while the corporation is governed by the revised
Corporation code or the RA 11232. This revised
Corporation code is quite new, this was enacted
in 2019. So there are several changes from the
old Corporation code.
Now let's get into the manner of creation. As I
mentioned, the partnership is created by mere
agreement of the parties. In other words, if A and
B will agree to create a partnership, then the
form by which it is created as a general rule. It
could be written or it could be verbally made. Of
course, there are exceptions. But let's not talk
about that in this video.
What we will need to know is that in creating a
partnership, again, as I mentioned, it's very easy.
It's just by mere agreement of the partners. On
the other hand, the corporation is created by
operation of law. What does that mean? Of
course, at the onset, you will have to agree with
other people if you want to create a corporation,
if you want to create a corporation, then you will
have to apply for your registration before the
Securities and Exchange Commission. And after
complying with all the requirements that are
required by law under the Revised Corporation
code. That is the time when the SEC or the
Securities and Exchange Commission will give
you a Certificate of Registration, and that is the
time when the corporation is created.
So you see the difference?
In a partnership is created by mere agreement.
While in a corporation you are not yet
considered a corporation, up until the state
through the Securities and Exchange
Commission grants you that registration grants
you that being a corporation because the law,
the revised Corporation code treats a
corporation of course, as an artificial being that
is created by operation of law.
So if you are into doing business, and you would
now ask which is easier to create, then of course,
the obvious answer is that the partnership is
easier to create than the corporation.
Now how about the number of partners and the
number of incorporators? Is there a difference
between a partnership and the corporation?
Now remember, I mentioned that our
corporation code was revised just very recently.
Now before the revision of the corporation code,
there was a minimum number of incorporators
and a maximum number of incorporators. It
should not be less than five incorporators but not
more than 15. After the revision however, of the
corporation code, the Revised Corporation code
now does not give a minimum number of
incorporators. However, it still has a maximum
number, it must not be more than 15. Now, why
do I see there's no longer a minimum number?
In other words, you can create a corporation
with just two incorporators. In fact, you can even
create a corporation with you just being the
incorporator. We call it the OPC, or the One
Person Corporation.
Now let's look at the partnership. Can you create
a partnership with only one partner? The answer
is no. Why not? Because the civil code clearly
defines what a partnership is. And it says that a
partnership is an agreement where two or more
persons agreed to contribute money, property
or industry to a common fund. In other words, a
partnership should have at least two partners,
you cannot create a partnership with just
yourself, with just one person unlike now. Again,
prior to the revision of the corporation code, the
minimum number of incorporators if you want to
form a corporation was five. That was the
minimum maximum of 15. But now with the
revised Corporation code, you can in fact, create
youe own corporation with just yourself just you
being the incorporator and you call it the OPC or
the one person Corporation.
Now, is there a separate juridical personality
created when you form a partnership and when
you form a corporation? The answer is yes to
both. When you form a partnership, the
partnership itself is considered another person
or a juridical person. When you form a
corporation, the corporation also is considered
as another person, another juridical person, both
juridical persons they can transact business. It
can enter into contracts, it can own properties, it
can transfer properties, that's precisely why they
are considered as persons but of course not a
natural person but as juridical persons. But what
is the difference between the two? The
difference now comes as to when the juridical
person begins, or when the juridical personality
of the partnership begins? And when will the
juridical personality of the corporation begin?
For a partnership the juridical personality begins
at the time of the execution of the contract,
meaning once there's a meeting of the minds
once they agree, the partnership is created the
juridical person of the partnership is created vis-
a-vis a corporation. When will the juridical
personality of a corporation begin? It begins
when you have already the Certificate of
Incorporation that is being granted to you by
your Securities and Exchange Commission. Why?
Because we said earlier that the corporation is
created by operation of law.
Another difference between a partnership and a
corporation are the powers that may be
exercised by both a partnership can exercise any
power or powers or acts that are authorized by
the partners, while a corporation can only
exercise powers, as authorized by law, or as
allowed by their registration, or those that are
incident to its existence.
How about as to management, who manages the
affairs of a partnership and who manages the
affairs of the corporation for a partnership if
there is a managing partner that is assigned then
he manages the affairs of the partnership, but if
management is not agreed upon, who will now
manage the affairs of the partnership? It will be
all of them, because each partner will be
considered as an agent of the partnership? How
about the corporation who manages the affairs
of the corporation? That power to manage is
vested in the Board of Directors for stock
corporations and in the Board of Trustees for
non -stock corporations, how about the effect of
mismanagement, if there is a partner who miss
manages the partnership then the other
partners can sue that partner. How about in a
corporation, if a member of the board of
directors or the member of Board of Trustees
mismanages, then it shall be in the name of the
corporation, the corporation will sue the
mismanaging member of the board of directors
or the Board of Trustees.
Another difference between a partnership and a
corporation is the extent of liability of the
partners and the extent of liability of your
stockholders in a corporation. In your
partnership, the general partners may become
subsidiarily liable to the debts of the partnership
with respect to third persons. In other words, if
the partnership no longer has any property with
which to pay off the debts of the partnership to
third persons, the third persons can go after the
general partners. Why am I saying general
partners? Because there are what we call also as
limited partners. They're called limited partners,
because they agree only to have limited liability.
So the third persons or the creditors of the
partnership cannot go after them. But as a
general rule, for general partners, they can be
made subsidiarily liable and in certain
circumstances, which will be subject to another
video, they may be solidary liable, even with the
partnership. However, with respect to
stockholders of a corporation, their extent of
liability will only be limited to what they have
subscribed in the corporation. In other words,
the creditors of the corporation cannot go after
the individual stockholders, they can only go
after the corporation. Of course, there are also
exceptions to that. But as a general rule, the
corporate debts will be answered by the
corporation and the third persons or the
creditors cannot go after the stockholders.
Another difference between a partnership and
the corporation is the transferability of interest.
In a partnership, a partner cannot merely assign
or transfer his interest in the partnership without
the consent of all the partners. Why does he
need consent of all the other partners? Because
a partnership is based on trust and confidence,
because it is based on trust and confidence the
partner cannot just simply sell his interest and
have another person admitted into the
partnership, it has to be with the concurrence or
agreement of all the other partners, while in a
corporation, if you are a stockholder you can
simply sell the interest in the corporation and
you do not need to ask permission or have the
consent from the all the other partners in you
selling your interest or your shareholding in a
corporation. Why? Because it is not based on
trust and confidence. Unlike your partnership.
Another difference between the partnership and
the corporation is the term of its existence. A
partnership can be for any term or duration,
depending on what the partners agree on. While
your corporation (this is another amendment in
the Revised Corporation Code) can have
perpetual existence, except when it is provided
for otherwise in their articles of incorporation.
Prior to the Revised Corporation code in the old
Corporation code, there was a limitation in the
duration or in the term of existence, it was only
for 50 years renewable for another 50 years.
However, in the Revised Corporation Code, now
tells you that the corporation as a general rule,
has perpetual existence. Another difference
between a partnership and a corporation is its
dissolution. In a partnership it can be dissolved
anytime by the will of the partners however,
your corporation cannot be dissolved without
the consent of the state that means you have to
go through again, the Securities and Exchange
Commission to ask that the registration of the
corporation be terminated so that it will now be
considered as it no longer exists unlike in the
partnership when the partners can just
terminate it at will. Again, however in a
corporation it must be with the consent of the
state.
That's it for this video. I hope you learned the
distinction between the partnership and the
corporation. If you have learned anything from
this video, please feel free to click like and
subscribe. If there's any other principle or
concept of law, which you would want me to
discuss in this channel, please put them in the
comments section. Thank you for watching. See
you next time in MBL classroom.
SECOND VID (DOCTRINE OF PIERCING THE VEIL
OF CORPORATE ENTITY)
Hello once again, welcome to our virtual
classroom. For this video, I would like to talk
about the doctrine of piercing the veil of
corporate entity.
In another video where I talked about
corporations, I was also able to talk about the
doctrine of corporate entity where we said that
a corporation being an entity merely created by
operation of law, it being an artificial being, it is
considered an entity that is separate and distinct
from the stockholders composing it or from the
members composing it. That is the doctrine of
corporate entity. Again, the corporation has a
separate juridical personality that is again
distinct from the members or the stockholders
composing it.
Now what then is the doctrine of piercing the veil
of corporate entity?
By the term piercing the veil, that will already tell
you that we are to disregard the doctrine of
corporate entity. We are to disregard treating
the corporation as a separate entity.
As I have mentioned in the previous video, when
you say doctrine of corporate entity, yes, the
corporation is to be treated separately such that
the liabilities of the corporation will remain to be
the liabilities of the corporation. Tt does not
become the liabilities of the officers or the
directors. That's the doctrine of corporate entity.
But what is now this doctrine of piercing the veil?
As mentioned, we disregard this separate and
distinct personality of the corporation.
The question now is, when do we disregard the
separate injury legal personality of a
corporation? When then do we consider the
corporation and the directors and the officers as
one?
When do we pierce the veil?
It is when the corporate entity or the corporation
is used as a shield for fraud. The corporation now
is used as a vehicle to perpetrate fraud or illegal
activity.
The doctrine of piercing the veil will tell you that
the court can actually disregard the corporate
entity to remove the barrier between the
corporate entity and the directors or the officers,
so that the directors and officers can now be
made liable, civilly or criminally, due to their
illegal acts or due to the fraud that they have
committed.
Let me give you an example to better understand
the doctrine of piercing the veil. Again, when we
discuss the doctrine of piercing the veil of
corporate entity we have to discuss side by side,
the doctrine of corporate entity.
Example: create another corporation. Thinking that by
dissolving it, Mr. X cannot go after them, because
ABC Corporation borrowed money from Mr. X.
of the doctrine of corporate entity.
Again, in the doctrine of corporate entity, we
said that the corporation is separate and distinct
from the stockholders or the incorporators of the
Now remember, that the reason that they
corporation.
dissolved the corporation was for the purpose
rather of defrauding Mr. X, so that the
corporation will not will not be able to pay the
So in that example, ABC Corporation borrowed
debt of the corporation to X. They dissolved it, as
money from Mr. X. If Mr. X now would want to
if they are unable to pay and then they
demand payment for the loan that was obtained
transferred all the assets of ABC corporation to a
by ABC Corporation, then Mr. X will have to go
new corporation - XYZ Corporation, still owned
after ABC Corporation. It shall be ABC
by the same set of owners or stockholders.
Corporation that will be liable.

Clearly, ABC Corporation now cannot be

In other words, it shall be the assets of ABC
considered a separate and distinct from the
corporation that will be used to pay off the debt
board of directors, incorporators or
to Mr. X, because again, the doctrine of
stockholders. Why?
corporate entity will tell you that ABC
Corporation is separate and distinct from the Because the corporate the doctrine of corporate
incorporators from the stockholders from the entity was used as a vehicle for fraud.
board of directors of such corporation.

Mr. X can now ask the court to pierce the veil.

In other words, Mr. X cannot go after the board
of directors or the stockholders or the
incorporators for the payment of such note. The
board of directors is not obligated to get money
from their own pockets to pay for the debt of
ABC Corporation, that is the doctrine of
corporate entity.
Now, when can the doctrine of corporate entity
be pierced?
Meaning, Mr. X can now go after the board of
directors or officers who are guilty of committing
this fraudulent scheme.
So in the doctrine of corporate entity, the
general rule is the corporation is separate and
distinct, such that the creditor cannot go after
the officers or the board of directors for the debt
of the corporation.

For example, that ABC corporation that the

In piercing the veil, such is allowed, of going after
Board of Directors decided that they don't want
the guilty member of the board of directors or
to pay Mr. X for one reason or another. The
the guilty stockholder for perpetrating a fraud
corporation actually had sufficient assets, but
for using the corporation as a vehicle to commit
they wanted to get away with paying. What the
fraud just like in our example.
Board of Directors did was to dissolve the
corporation. They dissolved it and then they
So by piercing the veil, the creditor in our
example Mr. X can now go after the officers or
the members of the board of directors who were
guilty of committing this ordinance. That is the
principle behind doctrine of piercing the veil of
corporate entity.
Another example where the corporation is used
as a vehicle to commit fraud:
Supposing Mr. A has several creditors. He is
insolvent, not necessarily that he has no
properties only that his properties are not
enough to pay all his creditors. He does not want
to be any of them. So what he does is he creates
a corporation and transfers whatever property
that he has left to the corporation.
When the creditors will now attach will now try
to collect from him and will now try to attach
properties they could no longer attach any
properties because he has none, as he has
already transferred his property to a corporation
that he has created for the purpose of such
fraudulent scheme. For the purpose of
defrauding his creditors.
Now, can the creditors go after the corporation
for the debts of Mr. A?
The answer now is yes, because you can apply
the doctrine of piercing the veil.
Again, the doctrine of corporate entity would
have told you that the creation of Mr. A’s
corporation is supposedly a personality that is
separate and distinct from Mr. A. However, since
he created this corporation as a means to
commit fraud, then you can apply the doctrine of
piercing the veil.
Now of course, the creditors will have the
burden of proof if they want the courts to pierce
the deal of corporate entity. Why? Because of
the principle that he who alleges must prove.
So there are several other cases that the
Supreme Court applied the doctrine of piercing
the veil of corporate entity I will put some of the
cases here so that you can check them out. (See
vid)
_______________________________________
THIRD VIDEO TRASCRIPT
For this video I want to talk about the different
classes of corporations as classified by Section 3
and 4 of your Revised Corporation Code.
Let’s look into Section 3:
SEC. 3. Classes of Corporations. – Corporations
formed or organized under this Code may be
stock or nonstock corporations. Stock
corporations are those which have capital stock
divided into shares and are authorized to
distribute to the holders of such shares,
dividends, or allotments of the surplus profits
on the basis of the shares held. All other
corporations are nonstock corporations.
There are therefore 2 major types of
corporations as classified under Section 3 of your
Corporation Code and that is your Stock
Corporation and Non-Stock Corporation.
What is a Stock Corporation?
Your stock corporation is basically your ordinary
business corporations that were created for the
purpose of making a profit and such profit is then
distributed to the stockholders in the form of
dividends on the basis of their investment or of
their shareholdings.
This is what you usually see. The business
corporations. The purpose is to make profit.
Another thing to remember about stock
corporations is that they have a Capital Stock
that is to be distributed for those who would
want to have shareholdings in a corporation.
This tells you that if it is a corporation created by
a special law or a special charter, that means that
the primary law that will govern them will be
the charter or the law creating them. The
Revised Corporation Code will only apply
suppletorily.

As opposed to a Non-stock Corporation. A non-
stock corporation does not have a capital stock
that is distributed to the members. We do not
call them stockholders. If it’s a non-stock
corporation we call them Members of the Non-
Stock Corporations. As opposed also to a stock
corporation for the purpose of making profits,
your non-stock corporation is not created for the
purpose of making a profit.
It is created for the public welfare or for the
public good. Non-stock corporations are usually
those that are religious, charitable, scientific,
literary, or civic organizations. They are created
for public welfare or public good. They are not
created for profit.
What are examples of corporations that are
created by special charter? Your government-
owned or controlled corporations (GOCC) like
Landbank of the Philippines, GSIS, Development
Bank of the Philippines. The GOCCs they have
their own charter or there is a law that created
them. The law that created them will govern
them primarily and suppletorily the general law
on corporations or your revised corporation
code.
_______________________________________

There are however some institutions that can be

created either in the form of stock corporations
or non-stock corporations as in educational
institutions. Some schools are non-stock non-
profit and there are also schools that are for
profit or are stock corporations. There are also
businesses that can only be created in the form
of stock corporations as in the case of banks or
financial institutions.

Now how about Section 4?

Section 4 talks about corporations created by

special charters.

SEC. 4. Corporations Created by Special Laws or

Charters. – Corporations created by special laws
or charters shall be governed primarily by the
provisions of the special law or charter creating
them or applicable to them, supplemented by
the provisions of this Code, insofar as they are
applicable.