“Completing assigned homework or reading cannot be

neglected without serious consequences. Certainly, it requires

Getting Started! time and effort. But so does anything of value.” – Jerry White

“I choose to do my assignments and homework on time.”

2.1 The Corporate Form of Organization
Most of the world's largest companies do business as corporations. Companies
such as Wal-Mart, Procter & Gamble, Nestle, BDO, the famous ABS-CBN and
General Electric are corporations.

As opposed to a sole proprietorship or a partnership, a corporation is a business that is recognized

by law as a separate legal entity with its own powers, responsibilities, and liabilities. Corporations
enjoy most of the rights and responsibilities that individuals possess: they can enter contracts,
loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes.
The word "corporation" is derived from corpus, the Latin word for body, or a "body of people". It
is defined under the Corporation Code of the Philippines as an artificial being created by
operation of law, having the right of succession, and the powers, attributes, and properties
expressly authorized by law or incident to its existence. It has a juridical personality, which is
separate and distinct from its owners.
“As we organize, act, evaluate…organize, act, evaluate…and organize, act,
evaluate again, our weeks become repeating cycles of learning and growth.”
2.1.1 Characteristics of a Corporation –S. Covey
“I choose to constantly evaluate my school performance and improve it.”

 Separate legal existence from its owners

 The corporation has the legal capacity to act as a legal entity.
 Stockholders have limited liability
 Company owners are only liable for the amount they invested. Creditors and
lenders have no claim to the owners’ for personal assets for payments owed by
the shareholders.
 Ownership held in shares of capital stock
 Shares of stock can be transferred without the consent of the other shareholders.
 Ability to acquire capital through the issuance of stock
 Continuous life
 Its management is centralized in the board of directors.

"One man cannot do right in one department of his life while he is occupied in doing wrong
in any other department. Life is one indivisible whole.” -Gandhi
2.1.2 Classes of Corporations “I choose to find balance between my responsibility in school and my responsibility at home,
friends and everything else.”

1. Stock Corporation has share capital divided into shares and authorized to distribute
profits as dividends among the shareholders.
2. Non-stock Corporation is one where no part of its income is distributed as dividends
to its members. It may be formed for charitable, religious, educational, professional,
cultural, fraternal, literacy, scientific, social, civil service, or similar purposes.

1
 Before you act, always consider the consequences.
2.1.3 Components of a Corporation “I choose to think before I act.”

1. Corporators are those who compose a corporation whether as shareholders or

members, at any time.
2. Incorporators are shareholders or members, mentioned in the Articles of
Incorporation as originally forming and composing the corporation and are
signatories of said articles.
3. Shareholders or stockholders are corporators in a stock corporation which can be
natural and juridical persons.
4. Members are corporators of a non-stock corporation.
5. Subscribers are persons who have agreed to take and pay for original, unissued
shares of a corporation formed or to be formed.
6. Promoters are persons who bring about or cause to bring about the formation and
organization of a corporation.
7. Underwriters are persons or company that underwrite a share issue or an
insurance.
“Those things that provide the greatest amount of immediate
pleasure usually are the very things most detrimental to our
long-term health, happiness and success.”
-Robert Ringer
2.1.4 Partnership distinguished from Corporation “I choose to refuse to do the things I will only regret
for the rest of my life.”

Category Partnership Corporation

Manner of creation By mere agreement
Number of persons Two or more persons
Commencement of From the execution of the
juridical personality articles of partnership
Management Every partner is an agent if
the partners did not appoint
a managing partner.
Extent of Liability Liable up to their personal
assets except for limited
partners
Right of succession No right of succession
Terms of Existence Any period stipulated by the
partners
By operation of law
1 or more incorporators (persons)
From the issuance of
certificate of incorporation by SEC
Vested on Board of
Directors/Trustees
Liable only up to their interest or
investment.
Has right of succession, has the
capacity of continued existence
regardless of death, withdrawal,
insolvency or incapacity of its
directors/stockholders.
Not to exceed 50 years but subject
to extension

Note:
Kindly check out your study planner. To indicate that you have finished grasping the key points at
this part of the module, tick on the checklist for The Corporate Form of Organization. This is a
form of self -assessment so you can personally monitor your learning progress. 

Self-Check

What are the characteristics of a corporation?