Forms of Business (Philippines)

1. Sole Proprietorship - a basic business organization in the Philippines.

PROS
Owned by one person
Making decisions are less
complicated since it is made
ultimately by the owner.
Registration requirements not
complex.
CONS
Unlimited Liability for losses,
debts, Claims for Damages:
Personal assets of the owner are
held liable for claims against the
business.
(Ex. Claims for Damages - if all
assets of the business is not
sufficient to pay for Damages,
properties outside of the business
of the owner can be taken to suffice
it.)
Lack of dissenting opinion because
employees usually never question
owner’s decision even if it is not
the best one. Hence, less room for
discussion and improvement.
Only available to Filipino

Notes:

High risk due to unlimited liability. If we are looking at a chain

of convenience store, more employees are needed and operations
broaden. The more employees and processes involved the higher the
risk of accidents and misjudgments that give rise to liability of the
enterprise.

Lack of dissenting opinion is not that big of an issue since we can

hire experts or experienced consultants to give us key information that
will help us in arriving at decisions

Not applicable to non-Filipino. Naming Ya Sali as sole proprietor

is an issue since she is already considered as an American.

2. One Person Corporation - is a corporation with a single stockholder.

 PROS CONS
Owned by one person (can be Subject to Government Approval
100% foreign owned provided it is
not in violation of constitutional
limitations on Filipino ownership of
nationalized activities and the
Foreign Investments Act {Foreign
Investments Negative List)
Making decisions are less Set up is complicated but doable.
complicated since it is made (registration, articles of
ultimately by the owner. incorporation, bylaws, etc.)
Limited Liability for Damages and
Losses

Notes:

It has a simple structure and has limited liability so liabilities can

only go as far as the money and properties we put into the business

Lack of dissenting opinion is not that big of an issue since we can

hire experts or experienced consultants to give us key information that
will help us in arriving at decisions

3. Partnership - requires two or more people who agree to contribute

assets, with the intent of dividing profits among all parties involved. The
partnership has a juridical personality separate and distinct from that of
each of the partners.

PROS
Non-Filipino can be a partner for
Partnerships that do not own lands
Limited Partnership may be
created to ensure liability of the
enterprise extends only in so far as
the contributions made by the
partners
CONS
We cannot own land, hence we are
going to have to lease or rent
spaces for the stores.
Set up is complicated but doable.
(registration, articles of
incorporation, bylaws, etc.)

Notes:
 In terms of the enterprise not owning land, I don’t know how you
feel about renting, but for me it is not favorable. We may, however,
go around it but it will not be entirely without any risk considering the
Anti-Dummy Law. Limited Partnership, it means the extent of
liability is only up to properties or amount invested by the partners.

4. Corporation (traditional) - is comprised of many individuals ( at least

2 and maximum of 15) who act as a single entity to advance the interest
of the corporation as a whole.Corporations formed or organized by
operation of law have the right of succession and the powers, attributes,
and properties expressly authorized by law or incidental to its existence.
It 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.

PROS CONS
Limited Liability for Damages and The 60% Filipino ownership still
Losses applies. If we are to set up “dummy
incorporators” we have to be really
careful because it is technically a
violation of the Anti-dummy Law
and other related laws.
Set up is complicated but doable.
(registration, articles of
incorporation, bylaws, etc.)