BSHM 3-A (silawan, maraya, pamor, lagala, matiga)

Chapter 5: Forms of Tourism and Hospitality Business

We all know that tourism is the fastest growing industries that

includes accommodations, transportation, entertainment,
recreation and food and beverage services. Tourism boosts the
revenue of the economy and create jobs for the locals. Even
though it suffers a huge setback because of the covid-19
pandemic, the affected industry will rise again stronger than
before.
The tourism and hospitality business operates under one of the
four broad legal structures such as sole proprietorship,
partnership, corporation and franchising and that is what we are
going to discuss today.

SOLE PROPITORSHIP
It is a business owned and operated by one person only. It is an
unincorporated business and the owner pays personal income tax
on profit earned. This form of business structure is easy to
establish and dismantle due to lack of government involvement.
When we say unincorporated in means that the business is not
legally registered as a company.
Example of sole proprietorship are your local grocery stores,
barbershop or beauty parlor and local clothe store.
Many businesses start as sole proprietorship but as time passes
by, the company grows and evolves into different legal structure.
For example, the MacDonald’s, coke and apple store they all
started as a sole proprietorship before changing their legal
structure as they grew.
The advantages of sole proprietorship are:
1. As what I’ve said earlier it is the simplest to set up or easy to
establish because there is no need to formally register your
business or notify federal officers.
2. It is least costly form to begin with or simply it doesn’t need a
big investment to start a business.
3. Total decision-making authority, meaning you as an owner has
the full power and obligation to make a decision in duty to answer
for its success or failure.
4. Profit incentive; it is the motivation to earn a return on your
investment greater than you out in.
5. No special legal restriction because it is unincorporated
meaning it is non-registered but you can operate under a
tradename ex: Lyndon's barber shop

The disadvantages are:

1. Demanding an owners time as it is operated by the owner
alone.
2. Growth is limited by the owners financial mean; the owner can
put their own resources to bear when going into business for
themselves but there are limits to their financial resources.
3. Unlimited personal liability, because you have the total decision
making authority as your advantage, it is also your disadvantage
as you will have an unlimited personal liability bcus both business
and personal assets of the owner may be gone.
4. Lack of continuity for the business, because we have the full
authority of our business sometimes, we lack of continuity for
some personal reasons such as health problems.
5. Limited capabilities and skills; the owner lacks the information
and skills necessary to assess economic trends because
sometimes the owner is unable to manage the situation
professionally.

PARTNERSHIP
It is a union or association of two or more person to manage
business and earn profit. This allows the owners to draw on the
resource and expertise of the co-partner. So, if sole proprietorship
owns and operated by 1 person alone, partnership has 2 or more
person, they also share for all the profit, work and liability of the
business.
The best partnerships are those who trust and respect each other.

There are 4 different types of partnership, 1 st one would be

General partnership. It is a legal business agreement between two
or more contributing individuals, each sharing in both profits and
losses, paying taxes on income received, and having unlimited
liability of the firm
For example, let's say that me and jess decide to open a baking
store. The store is named S&F Bakery. Me and jess don't need to
do anything special in order to form a general partnership. Once
me and her agree to form the business, it's automatically
considered to be a general partnership.
Next is limited partnership, An LP is defined as having limited
partners and a general partner, which has unlimited liability. it
exists when two or more partners go into business together, but
the limited partners are only liable up to the amount of their
investment.
The good example for this are the real estate investors.
The 3rd kind is partnership at will it is a partnership whose term of
existence is indefinite. Meaning the term of the partnership
agreement may have expired or the partnership may be at will
and one of the partners desires to leave it. All the partners may
decide that it is preferable to dissolve rather than to continue. A
partnership is immediately dissolved if any of the following occur,
according to the Act: A partner dies or becomes bankrupt. The
court orders the partnership to dissolve. It's illegal to carry on the
partnership's business.
Lasty is general professional partnership, it is a partnership
formed for the exercise of a profession, like law, accounting,
engineering, and architecture. It is basically like general
partnership but the business is about practicing our profession,
like us if we graduated and decided to build a hotel or restaurant
as a business it is considered as general professional partnership.
Advantages of Partnership
1. Easy to set up
2. Partners can complement their expertise and skills in the
business.
3. more financial resources are available for the business than
a sole proprietorship.
4. Partnership shares in the decision-making of the enterprise.
5. The business is not subject to as many government
regulations as companies in corporation.
Disadvantages of Partnership
1. Unlimited liability of at least one partner.
2. There is a possibility of conflict and disagreements between
partners.
3. There is divided authority and profits among partners in the
business.
4. The partnership firm suffers from uncertain existence
because it can be dissolved if one or the partner died.
5. There is limited capital due to restriction on the maximun

numbers of partners.
Unlike the sole proprietorship, partnership requires to be
legally registered with the security and exchange commission
(SEC) to be able to start their business.
It is according to the civil code article 1767, By the contract of
partnership two or more people bind themselves to contribute
money or industry to a common fund, intended to divide the
profits themselves.
The article of partnership is an instrument in writing by which the
parties enter into a contract or agreement of partnership. The
principal parts of the articles of partnership are as follow;
a. partnership name under which the company shall
transact business
b. names nationalities and residence or the partners.
if it is limited partnership, the kind of partner is
weather general or limited.
c. principal office of the partnership
d. purpose or purposes of the partnership
e. duration of terms of existence of the
partnership
f. capital of the partnership
g. transfer clause
h. undertaking to change partnership name
i. other provision, condition, terms, and
stipulation
j. signature of the partner
k. notarial page

CORPORATION
is a legal entity that is separated and distinct from its owner.
created by individuals, stockholders, or shareholders, with the
purpose of operating for profit. Corporations are allowed to
enter into contracts, sue and be sued, own assets, remit federal
and state taxes, and borrow money from financial institutions.
some of the known corporation in the Philippines are San
Miguel corpo, marelco corpo, the and the petron corpo
It says in the republic act no. 11232 that No share may be
deprived of voting rights except those classified and issued as
“preferred” or “redeemable” shares, unless otherwise provided
in this Code: Provided, that there shall always be a class or
series of shares with complete voting rights.
Republic Act 11232, or the Act Providing for the Revised
Corporation Code of the Philippines, was signed into law by
President Rodrigo R. Duterte on 21 February 2019. It amends a
38-year-old Corporation Code in an effort to improve the ease
of doing business in the Philippines.
So here are some key provisions of the new code
1. Perpetual Terms nasiring ha section 115 nga gin aalow it usa
ka corporation n amag exist beyond 5 years term provided
in the old code
2. One-Person Corporation- in the revosed code gin tanggal an
minimum number of incorporation required para maka
organized hin usa ka corporation and allowed the formation
of one person corporation, corporation with a single stock
holder and without a minimum authorized capitalstock
required
3. No minimum amount of capital stock
4. Participation via remote communication,
in abstain. So ha revised corporation code gin allow didto it
use hin remote communication like video conference and
teleconferencing during hit stockholder meeting
5. Emergency Board-amendment also includes the provision
hin emergency board pag it vacancy hit corporation’s board of
director prevents an mga remaining na director pag cunsolt hin
quorum( it quorum amo inin hiya it minimum numbers of
members hin usa ka assembly na dapat present ha bisan anon
a meeting to make the proceeding of that meeting valid) from
making emergency action required to prevent grave,
considerable importance and irreparable loss or damage
6. Electronic and Monitoring system- the revised corporation
code mandated the commission to develop and implement the
electronic filing and monitoring system, so far, commission has
implemented an online company registration system
Corporation by estoppel refers to someone contracting and
dealing with a business as if it were a corporation. In so doing,
it is an admission that the entity is a corporation and therefore
estopped to deny its incorporation should an action arise out of
the contract or course of dealing.
A stock corporation has authorized capital stock divided into
shares of stock either with or without par value. It's engaged in
income-generating activities and authorized to declare
dividends. A non-stock corporation has no authorized capital
stock.
A holding company is a company whose primary business is
holding a controlling interest in the securities of other
companies. A holding company usually does not produce goods
or services itself. Its purpose is to own shares of other
companies to form a corporate group.
The term subsidiary company refers to a separate entity that
exists under the umbrella of another corporation, called a
parent or holding company. Subsidiary companies typically
operate on their own while still benefiting from the resources
provided by their parent company.
A corporation aggregate is a separate legal entity formed by
several individual persons. The corporate aggregate has an
existence which is separate from the persons comprising it.
There are three types of corporation aggregate: chartered,
statutory and registered.
FRANCHISING
It enables businesses to grow quickly into several geographic
market at once with proven and tested strategy.
This is a method of distributing products or services involving
franchisor and franchisee. It franchisor amo inin hira it nag
himo hin trademark brand or name ha business industry tas it
franchisee amo liwat ini it na bayad hin fee ha franchisor para
tugutan hiya na gamiton an business ni franchisor para maka
gain hin profit. Pero dre ini ibigsabihin bakay nagbayad ka imo
na it business, no. nag bayad ka la hin fee or nag bayad ka ha
owner an business para gamiton an iya name ngan system,
shempre papalakarun mo ito na business based han ko pano
gin palakad ni franchisor an bubusiness. Now to the types of
franchising, damot klasi hin franchising but according to allen
there are generally 3 types of franchising 1 st is an dealership it
enables manufacturer to distribute products without having to
do the day to day work of retailing. Perfect example ini is mga
nag babaligya hin kotse like Toyota, ford,misubishi ngan iba pa.
they benefit from combined marketing strength pero meyda
nira kota.Next is service franchises, it provides tax preparation,
temporary employees, payroll preparation, and real estate
services to customers. A very perfect example of this kay an
mga fast-food chains, this business is already in operation
independently before they applies to become a franchise
mebers.Lastly are the product franchises, amo init pinaka
popular na type hin franchise, they offer product, a brand
name and an operationg model. Example ini kay coca-cola,
pepsi mga clothing lines and etc. According naman kan
scarborogh there are also 3 different type of franchising
namely trade name, product distribution and pure(business
format)
Trade name is also known as product franchising where a
manufacturer grants a franchisee the right to sell its product
but with no method of doing a business
Next is product distribution, this franchise concept is like a
supplier-distributor relationship. The franchisor is responsible
in providing the product while the distributor will be the one to
sell the product
Lastly is the pure(business format) it is also identified as name
an process franchise, it features a broader and ongoing
relationship between the franchisor and the franchisee. In
other words, this type of franchising provides the franchisee
with a complete business format including license for a trade
name, the product or service to be marketed, the physical
plant, methods of operation, a marketing strategy plan, a
quality control process, and so on.

Benefits of franchising
Proven business system and procedures.
Management training and support
Benefits from strong brand name
Standardized quality of goods and services
National advertising
Financial assistance
Proven product and tried recipe
The franchise can benefit from economies of scale
Marketing research may be undertaken by the franchiser
Franchise system are often favored banks due to established
track record

Disadvantage of franchising
Franchising fee and ongoing royalties
Strict adherence to standardized operating procedures
Restriction on purchasing
Innovation may be limited because the franchise operates to a
strict formula of production, sales, and marketing in the
Philippines, franchising is governed by general laws depending
on the issues at hand. For example provisions hit franchising
contract kay governed by the applicable section han civil code
samtang an intellectual property code kay ma apply ha mga
issue han mga trade mark. A Technology Transfer Arrangement
need not be registered with the intellectual property office if it
complies with the mandatory provisions and does not contain
any of the prohibited clauses.