Types of Company Structures in the Philippines

A business enterprise shape is a group of people geared up for some

profitable or charitable purpose. Business entities consist of groups
such as corporations, partnerships, charities, trusts, and different
varieties of organization. Business entities, simply like man or
woman persons, are difficulty to taxation and have to file a tax
return.
One of the most important is the kind of prison structure you choose
for your company. Not solely will this selection have an impact on
how a good deal you pay in taxes, it will have an effect on the
quantity of paperwork your enterprise is required to do, the private
liability you face and your capability to increase money.

In Philippines the most frequent types of groups are sole

proprietorship, partnerships and corporation.

Sole Proprietorship

Sole Proprietorship is a business structure owned by an

individual who has full control/authority of its commercial
enterprise and owns all the assets, personally owes answers to all
liabilities or suffers all losses however enjoys all the profits to
the exclusion of others. A sole proprietorship have to apply for a
enterprise name and be registered with the Department of Trade and
Industry (DTI) – National Capital Region (NCR). In the provinces,
utility may be filed with the DTI regional/provincial offices.

Pros
The owner enjoys all the income of the business: given that it is
owned by way of a single person, he enjoys all the earnings that the
commercial enterprise accrues.
Quick Decision Making: When it comes to making decisions about
changing the type or volume of commodities that the enterprise deals
in, you do not have to seek advice from anyone.
Easy to Manage: As a single commercial enterprise owner, it handy
to control your enterprise because there is no bureaucracy that you
have to comply with when making decisions.
Flexibility: This applies in terms of changing the commodities that
you sell. You can trade them whenever you sense like as long as it is
a general sole proprietorship with freedom to sell any product.
Easy to Start: Yes, this enterprise kind does no longer have very
lengthy felony techniques to observe before it gets established.

Cons
The proprietor incurs all the losses: In case of losses, the sole
proprietor bares all the burden solely.
Unlimited liability: This capability that in case the commercial
enterprise runs bankrupt, the property of the commercial enterprise
owner will be offered to clear off the debts.
The commercial enterprise proprietor pays non-public profits taxes
on the business internet profits.

Partnership

Under the Civil Code of the Philippines, a partnership is handled as

juridical person, having a separate criminal character from that of
its members. Partnerships might also both be well-known partnerships,
where the partners have unlimited legal responsibility for the debts
and obligation of the partnership, or limited partnerships, where one
or extra general partners have unlimited legal responsibility and the
confined companions have liability solely up to the amount of their
capital contributions. It consists of two or greater partners. A
partnership with extra than Peso 3,000 capital need to register with
the Securities and Exchange Commission (SEC).

Pros
Easy to Start: Forming a regular partnership commonly takes a quick
time when you consider that it does not contain long criminal
procedures.
Requires much less capital: The quantity required to begin off a
partnership is no longer equal to the quantity you need to start a
company. The amount of profits are shared according to the ratio of
capital contribution of each partner. The higher the capital you
contributed, the greater the earnings you enjoy.
Consultation: The accurate element with partnerships is that
earlier than arriving at a closing decision, there is usually session
between the partners. This leads to higher decisions that enhance the
business.
Quick Decision Making: A partnership owned and operated via two
humans is effortless to make selections that can decorate the overall
performance of the business. You don’t want to name a meeting to
talk about arising issues, simply a smartphone name is enough.

Cons
Unlimited liability: General partnerships potential that all the
companions have limitless liability. In case of enterprise debts that
the enterprise is unable to pay, the personal property of the
partners are at danger of getting bought in order to clear off the
debt.
Internal Wrangles: Sometimes many partnerships do fail because of
inner conflicts or private interests of a certain partner. The
companions have a burden of paying private income taxes on the net
earnings of the business.
 
Corporation

Corporation is composed of juridical men and women set up under the

Corporation Code and regulated with the aid of the SEC with a
personality separate and wonderful from that of its stockholders. The
liability of the shareholders of a corporation is confined to the
quantity of their share capital. It consists of at least five to 15
incorporators, every of whom should preserve at least one share and
must be registered with the SEC. Minimum paid up capital is Peso
5,000. A company can both be stock or non-stock enterprise regardless
of nationality. Such company, if 60% Filipino – 40% foreign-owned is
considered a Filipino corporation; if more than 40% foreign-owned, it
is viewed a home foreign-owned corporation.
Pros
One of the most attractive things about a organization is that the
proprietors have confined liability. This capacity that in case of
debts, the property of the owners are very safe and stays untouched
by using the creditors.
There is a opportunity to lower taxes in particular when the
proprietor and the enterprise share profits.
At positive times, benefits might also be deducted as commercial
enterprise expenses.
The ownership of a corporation is without problems transferable.
This capacity that in an event whereby the cutting-edge shareholders
and directors foresee a darkish future, they would possibly sell the
agency and for this reason keep away from dropping their capital
investment.

Cons
It is very steeply-priced compared to placing up simple commercial
enterprise setups such as sole proprietorship and partnerships.
Starting a enterprise includes a lot of paperwork. When it comes to
criminal paperwork, the proprietor need to file it with the secretary
of state.
A corporation operates as a separate prison entity and hence is
entitled to pay taxes.
There is slow decision making in firms considering that the
directors have to be consulted earlier than any verdict is reached