PART IIT REVIEW OF THE FORMS OF BUSINESS ORGANIZATIONS OBJECTIVE; To have a review of the forms of business organizations and have a better understanding about them, INTRODUCTION: To start a business enterprise, it is important that attention Must be given immediately to the form of Organization under which the business Shall operate, hence, the selection of the form of business organization, A. THE SOLE PROPRIETORSHIP Sole Proprietorship = is termed as ona-man business enterprise for it is Conceived, established and managed by only one individual, The sole owner of the business has no partners and no shareholders; hence the sole owner is Personally liable for all the firm's obligations, Advantages: 1, The owner is independent in making decisions, The sole owner can make his own decision without delay and interference; hence, he can just commence or cease business activities without much legal formalities. 2. The owner is entitled to all the profits, The owner has every motive and inspiration to work harder in the enterprise because whatever profits he will earn, will all go to him, 4, small amount of capital is required in starting, Here, sete wie fave thesecest Gd ation ba iret nen could easily have opportunities to go into the business world,7 organization & financial operation. This just commence operation before the lagal fe ore compltd wah” Howevar, unless One owes OF incurs rustroaness during the course of business: operation, the owner has full claim to all the assets of the business. Disadvantages: 1. Limited Capital, If the owner can not furnish sufficent capt for ts usiness operation, he may find t difficult to secure said capital from others, because the security or collateral he car offer to creditors 1 limited to the asset of his business and his personal holdings. 2. Unlimited liability. If the business fails, he will assume heavy risks. because all his assets whether or not connected with his business can be legally seized by the creditor for the payment of his financial obligations. 3. Incapacity of Sound Judgment. Tho owner is incapacitated of sound Judgment on serious mattars affecting his business, as the soy, “no one head is better than two heads” in 2 solo which requires that the owner must be a “jack of all proprietorship trade” anda “master of none”. It lacks stability. When the owner is sick, dead or incapacitated, the business may close temporarily or it may die together with the owner. ‘The owner assumes all the risks should the business fails. If the business becomes insolvent, the owner being alone, shoulders all the losses of the business. Organization Requirements: the business name with the Dept. of Trade and Industry; 1. Register 2 Pay the city or municipal licenses with the LGU; 3. Apply for a VAT or non-VAT number from BIR; and 4. Register the books of accounts with the BIR. 4 PARTNERSHIP Partnership = is a voluntary association of two (2) or more persons to carry on, as co-owners, 3 business for profit. (by Osborn, et. Al.) It ts a contract between two or mora persons binding themselves to ‘or industry to a common fund, with the intention contribute money, property Sf dividing the prof among themselves. (Civil Code, Art. 1767) from the moment Commencement of @ Partnership: A partnership begins of the execution of the contract. The partnership agreement will set out how management decisions are to be made and the proportions of the profits to which each partner is entitled. The partners then pay personal income tax on their share of the profits of the partnership.Classes of Partners: As to Liability: 3. General Partner = one who is liable for the debts of the partnership to the extent of his separate property after the partnership assets are already exhausted. Limited Partner = one whose liability for the partnership debts is limited to his capital contribution. General-Limited Partner = one whose hability is limited to his capital but has all the rights, powers and subject to all the restrictions of a general partner. As to Contribution: 1. Capitalist Partner = one who contributes his money or property to the capital of the partnership. Industrial Partner = one who contributes his work, labor or industry the common fund of the partnership. Capitalist-Industrial Partner = one who contributes money or property as well as his work or industry to the capital of the partnership. Other Classes: 7. Managing Partner = one who manages the affairs of the partnership. Liquidating Partner = one who liquidates the affairs of the partnership after it is dissolved. Ostensible Partner = one whose connection with the partnership is open and made known to the public by including his name in the firm's name. Secret Partner = one whose connection with the partnership is not made known to the public. Silent Partner = one who has. no voice or say in the management of the affairs of the partnership. Dormant Partner = one who does not participate in the management of the affairs of the partnership and whose connection with it, is not made known to the public, Nominal Partner = one who is not actually a partner but is made liable for the debts of the partnership to third persons.Requirements in Organizing A Partnership: Register the business name wath the Dept. of Trade & Industry; Propare the Articles of Co-Partnersiip and have it notarzed; Secure a Tax Account Number for the partnership from the BIR; Register the notanzed Articles of Co-Partnershup with the SEC; Secure permit or heenses fram the LGU; Apply for VAT or non: VAT number from WIR; and Register books of accounts with BIR. No uRWNe THE CORPORATION: Corporation = 1s an artificial being created by operation of law having the night of succession and the powers, attributes and properties axpressiy guthonzed by law or incident to its existence, (Civil Code) ‘Types of Corporation: 1. Public Corporations = are those corporations organued for the purpose of carrying out the objectives of the state or government 2. Private Corporations = are those which are established for business, chantable, religious of professional purposes. Private corporations may be either stock or non-stack corporations. ‘Steps in Incorporation: i. drafting & execution of the articles of incorporation by the in : 2. deposit by the temporary treasurer of the cash paid for shares 3. fing & submission of basic requirements with ‘the Secunties & ‘Commissi € by laws; } registration data sheet/subscribers information sheet; e) 's affidavit; a) authority to verify bank account, etc. 4. payment of the filing foo (1/10 Of 1% of authorized capmal stock plus 20% but not less than P 500) for AOI; P 210 for by-laws; and payment of legal research fee (1% of filing fee). Ths 1s applicable to stock corporations. 5. Ieuance of a Certificate of Incorporation by the Securities & Exchange Sacure city or municipal licenses with the LGU; Obtain VAT or non-VAT account number from the BIR; Registration with the BIR of books of accounts and accountable forms. 0-0-0 weno