From paid to an individualstockholder is subject to 10% final

withholding tax. A stockholder who is employed by the

corporation receives remuneration, which is subject to personal
income tax (0-32%).

Partnership to 5.Consider the materiality of the income tax that individualpartners

file and pay on or before April 15. Most partners are taken by surprise
by the amount of income tax they are required to pay. This is because
the professional fees paid to a general professional partnership are not

Corporation subject to withholding tax.Service fees paid to an architectural

corporation are subject to withholding tax. Come April,corporations
have manageable income tax to pay or none at all because clients have
already withheld the taxes at the time of their payment during the year.
Many practicing architects ask which is more
In terms of who pays lesser taxes, a corporation has no advantage
advantageous for their business setup By over a partnership. Both pay almost the same level of taxes given the
Charlie Casas same market condition or factors. It is in the timing of the payment of
taxes,however,that partnerships have an advantage from the point of
liguidity within the taxable year because the payment of taxes is due at
a later date. On the other hand,in a corporation, 15% of taxes are
rior to the enactment of Republic Act 9266 in 2004,otherwise known as already withheld from the time of payment. It's like the corporation is
"An Act to Regulate the Practice of Architecture in thePhilippines," paying in advance the taxes within the year.
architects did not have the option of practicing through a
corporation.They were limited to two types of business 6.There are more requirements and expenses in
organizations:single proprietorship and partnership. establishingacorporation.For instance,a treasurer-in-trust account
must be set up before the corporation can be registered with the
RA 9266 allows a corporation to engage in the practice of SEC.Aside from the SEC approval,just like in the partnership,the
architecture.However,at least 75% of its outstanding capital stock must be company still needs to obtain approval from the Professional
owned by licensed architects, while not more than 25% can be owned by Regulation Commission before it can operate.Additional tax has to be
licensed allied professionals. paid in the setup ofa corporation-that is, the original issue of shares is
subject to documentary stamp tax of 0.5% of the par value of the issued
Ifyou are now under a partnership,what factors must you consider to
help you decide whether to change the existing setup to a corporation? shares.
The following may be key to your decision:
7.A corporation is required to hold annual stockholders' meetings,and
1.In a partnership, when the partnership assets are notsufficient to pay is subject to administrative fines for failure to do so.
the company's obligations, the creditorsmay proceed against the
In a nutshell,the positive aspects of a corporation are: 1) continuity;2) it
personal assets of the partners.Ina corporation, creditors can claim
shields the personal assets of its stockholders from the obligations of the
against the personal assets of shareholders only to the extent oftheir
corporation; 3) corporate governance standards and procedures are more
unpaid subscriptions to the capital of the corporation. clearly defined by lawand regulations.
2.The resignation or death of a partner dissolves thepartnership. A
corporation continues despite changes in the circumstances of its
shareholders. If you want the business to continue so that your heirs or an
anointed competent professional (who must be a licensed architect) can
run the company and preserve your name,investment and legacy, then the
corporation legal structure is what you want. The Author
3.A partner's interest in a partnership is non-transferable.In Charlie T. Casas is Treasurer and COO of
Casas+Architects,Inc.He worked with
acorporation,unless there are transfer restrictions in the articles of SGV for five years as Audit in Charge,
incorporation and by-laws, a shareholder may transfer his shares of stock and for 23 years worked with various
to qualified individuals by endorsing the certificate of stock. local and international banks as a senior
executive officer specializing on
corporate depository and cash
4.A general professional partnership is not subject to tax. Rather,the
management services. Casas is a CPA
partners are taxed individually on their distributie share of the net income and an SEC certified investment
at the rate of 0-32%.In contrast, a corporation is taxed on its net income at company representative of the
a lower rate of 30%.However, cash dividends Philippines.He graduated from the
Universityof Santo Tomas in 1981 and
1982, earning his college degrees in AB
and BSC in Commerce, major in
Accounting.
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