A partnership and a corporation are popular choices among the various business

structures, often known as entities. More than one person can run both, but the management
requirements for each company are different. To start, let us identify the basics of each structure.

A partnership is defined by the Philippine Civil Code Article 1767 as a contract between
two or more persons that agree to contribute money, property, or industry to a shared fund to
split the profits among themselves. A partnership is a separate legal entity from that of the
members in the partnership. The IRS regards a partnership as a pass-through firm, meaning each
partner must contribute their share of the partnership's profits and losses to their income. On their
portion of the business, partners are required to pay personal income taxes. The business may be
liable for employment and sector-specific excise taxes, while partners may also be liable for self-
employment and anticipated taxes.

On the other hand, a corporation is a distinct legal entity from its owners. A corporation,
as defined in RA 11232, is an artificial being created by operation of law, having the right of
succession and the powers, attributes, and properties expressly authorized by law or incidental to
its existence. A corporation can act independently, generate revenue, pay taxes, and face legal
repercussions. This business structure affords complete personal liability protection to business
owners.

Compared to other commercial entities, corporations are subject to stricter record-

keeping requirements. Owners of corporations are required to submit yearly reports, have annual
shareholder meetings, choose a board of directors to run the company, and abide by the bylaws.
A company might be expensive to operate due to these additional duties. The two most popular
possibilities for corporations are C corporations and S corporations. However, there are other
varieties as well. As summary, here is a chart determining the critical differences of partnership
and corporation:

Partnership
Ownership The owners are partners.
Profit/Loss Personal income tax returns
immediately disclose income.
Liability Individual partners are liable
Decision-making Partners decide on the
partnership's operations and
Corporation
Ownership rests with the
shareholders, and there may
be any number of
stockholders.
Directors determine whether
to pay wages or dividends out
of profits. or keep the money
for the business.
The company is liable.
Shareholders are not
personally accountable, except
for unpaid wages
The corporation's directors
make decisions.
 investments.
Taxation Partners must pay taxes on the The business must submit a
income they directly declare corporate income tax return
on their personal tax return. and pay the necessary taxes.