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THREE PRIMARY LEGAL FORMS

OF ORGANIZATION

LEGAL Sole
STRUCTURES FOR Proprietorship

ENTREPRENEURIAL
VENTURES Partnership

Corporation
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Sole Proprietorship

1. ◍ Owned and operated by one person

◍ The owner has unlimited liability

Sole Proprietorship
◍ Most widely used legal form of
organization

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Advantages Disadvantages

◍ Ease of formation ◍ Unlimited Liability

◍ Sole ownership of profits
◍ Decision making and control vested in
one owner
◍ Flexibility
◍ Relative freedom from governmental
control
◍ Freedom from corporate business taxes.
◍ Lack of continuity
◍ Less available capital
◍ Relative difficulty obtaining long
term financing
◍ Relative limited viewpoint and
experience.

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Partnership

2. ◍ Owned by two or more persons acting as

co-owners of a business for a profit
◍ The Revised Uniform Partnership Act
Partnership (RUPA) serves as guide for legal
requirement in forming partnerships
◍ The Philippine Civil Code

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The Philippine Civil Code
◍ Two or more persons may also form a
partnership for the exercise of a
profession.
◍ There is no time limit for the
existence of the partnership as this
depends on the agreement of the parties
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Common types of Partners
◍ General Partners
◍ Limited Partners
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The Philippine Civil Code
◍ Partnership becomes a juridical person
from the time the contract begins
◍ The transferee does not automatically
become a partner unless all the other
partners give their consent
Types of Partnership
◍ Limited Partnership (LP)
◍ Limited Liability
Partnership (LLP)
◍ Limited Liability Limited
Partnership (LLLP)
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Advantages Disadvantages

◍ Ease of formation ◍ Unlimited Liability

◍ Direct rewards
◍ Growth and performance facilitated
◍ Flexibility
◍ Relative freedom from governmental
control and regulation
◍ Possible tax advantage
◍ Lack of continuity
◍ Relative difficulty obtaining large
sums of capital
◍ Bound by the acts of just one partner
◍ Difficulty of disposing of partnership
interest

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Corporation

3. ◍ “An artificial being, invisible,

intangible, and existing only in
contemplation of the law”
Corporation ◍ Corporation is a separate legal entity
apart from the owners.
◍ Revised Corporation Code of the
Philippines

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Revised Corporation Code of
the Philippines
◍ Formed upon the issuance of a
Certificate of Registration by the
Philippine Securities and Exchange
Commission (SEC)
◍ Requires minimum of 5 and maximum of
15 incorporators
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Revised Corporation Code of
the Philippines
◍ Any two or more position may be held
concurrently by the same person
◍ The Article of Incorporation must also
identify the first appointed Treasurer
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Revised Corporation Code of
the Philippines
◍ Majority of directors must be
Philippine residents
◍ Requires a corporation to have at
least the following officer:
◍ President
◍ Treasurer
◍ Corporate Secretary
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Securities and Exchange
Commission (SEC)
◍ 60% of the capital stock must be owned
and held by Philippine citizen
◍ 60% of the members of the board or
directors must be a citizen of the
Philippines
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Advantages Disadvantages

◍ Limited Liability ◍ Activity restrictions

◍ Transfer of ownership ◍ Lack of representation
◍ Unlimited Life ◍ Regulation
◍ Relative ease of securing capital in ◍ Organizing expenses
large amounts ◍ Double taxation
◍ Increased ability and expertise

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“
FINAL THOUGHTS An entrepreneur should always
ON LEGAL FORMS seek professional legal advice.

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