OWNERSHIP AND

ORGANIZATION
MODULE 5
 THINGS TO CONSIDER IN SELECTING
THE BEST LEGAL FORM OF
ORGANIZATION:
• OWNERSHIP – How many owners will be there be? Will their ownership be equal?

• MANAGEMENT – Will the owners also manage the firm?

• FINANCING – How much money is needed to start or purchase the business and what sources
might provide it?

• LIABILITY – Is it desirable to separate the assets of the business from the personal assets of the
owners?

• INCENTIVES – Will the business be able to provide the incentive necessary to attract the
managerial talent needed for growth and success?

• TAXATION – What legal form will minimize the total tax load imposed on the business?

• RENTATION OF INCOME – Which form will provide the maximum income?

• PROTECTION – Will the asset values developed in the business over time be preserved if key
persons become unavailable because of illness or death?
SOLE PROPRIETORSHIP
The sole proprietorship or single proprietorship is a
form of business organization initiated, organized, owed or
capitalized, and managed by a single person.
As defined, the entrepreneur is the capitalist, the
manager, and administrator, and in the beginning of the
business, he practically does everything for the business.
SOLE PROPRIETERSHIP

ADVANTAGES DISADVANTAGES
• Easily created and • Unlimited liability.
terminated.
• Capital Limitation.
• Direct, undiluted action.
• Perils of Individual.
• All rewards to owners.
• Limited skills and
• Flexibility.
capabilities of the sole
• Minimum regulation and
owner.
Taxation.
PARTNERSHIP

Is association of two or more business

partners who co-own a business for the business
for the purpose of making a profit. In a partnership
the co-owners(partners) share the assets,
liabilities, and profits of the business according to
the terms of the partnership agreement.
TYPES OF PARTNERS
1. General partner. 6. Managing
partner.
2. Limited partners. 7. Industrial
3. Silent partners. partner.
4. Dominant partner. 8. Secret partner.
5. Capitalist partner. 9. Nominal
partner or
partner by estoppel.
10. Liquidating
partner.
PARTNERSHIP

ADVANTAGES DISADVANTAGES
• Pooling of resources. • Unlimited liability.

• Ability to obtain capital. • Tenuous existence.

• Simplicity and incentive. • Independence on

management harmony and
• Limited regulation and
coordination.
taxation.
• Problems in share
liquidation.
CORPORATION
A corporation is an artificial being, invisible,
intangible, and exists only in contemplation of law. Its
owners are the stockholders who can sell their interests in
the corporation without affecting the continuity of its
operations because the life of the corporation is dependent
or distinct from that of the owners or stockholders.
CORPORATION

ADVANTAGES DISADVANTAGES
• Limited liability. • Legal formality and cost.

• Legal entity. • Cost and time involved in

the incorporation process.
• Ready transferability of
ownership. • Taxation.

• Obtaining capital. • Potential loss of control by

founders of the corporation.
• Employee benefits.
COOPERATIVE
REPUBLIC ACT 6938, otherwise known as the
Cooperative Code of the Philippines, defined a cooperative as
a duly registered association of persons, with a common bond
of interest, who have voluntarily joined together to achieve a
lawful common social or economic end, making equitable
contributions to the capital required, and accepting a fair
share of the risks and benefits of the undertaking in
accordance with universally accepted cooperative principles.
PRINCIPLE OF COOPERATIVE
• Open and voluntary membership.
• Democratic control.
• Limited interest on capital.
• Division on net surplus.
• Cooperative education.
• Cooperation among cooperatives.
ADVANTAGES AND DISADVANTAGES OF
COOPERATIVE
• Tax privileges.
• Ability to provide direct benefits to its members and the entire
community it serves in the form of relatively cheaper products
and services consistent with its mission of providing services,
rather than existence for purely profit motives.
• Inequality of profit distribution.
• The pro-masses or pro-poor bias of the cooperatives appears
diametrically opposed to the entrepreneurs’ idea of servicing a
market niche that well- off enough to address its dream of profit.
GENERAL REQUIREMENT AND
PROCEDURE FOR REGISTRATION
Prospective entrepreneur must check with the
government agencies concerned for updated or
revised administrative rules and policies, as well as
recent legislative enactment that may have to be
complied with.
REGISTERING A SINGLE
PROPRIETERSHIP
• Register the business name with the Department
of Trade and Industry under the Bureau of
Domestic Trade.
• 2 pcs. 2X2 picture
• Application fee or registration fee of P110.00
REGISTERING A PARTNERSHIP
• Prepare partnership agreement
• File the partnership agreement with the SEC
• Pay filling fee
• Evaluation of the application by the lawyer and staff of
Corporate and Legal Department.
• Release of the approved registration is within 15 – 30
days.
REGISTERING OF CORPORATION
• Prepare Articles of Incorporation and By – laws, bank
certification
• File Articles of Incorporation and By – Laws with the SEC
• Pay registration fee
• Evaluation of application by lawyer and staff of
Corporate and Legal Department.
• Release of approved registration is within 15 – 30 days
REGISTERING A COOPERATIVE
• THE FOLLOWING DOCUMENTS SHALL BE FORWARDED TO CDA:
1. Four (4) copies of the economic survey with a general
statement describing briefly the structure, purpose,
economic feasibility, area of operation, size of membership,
and other pertinent data.
2. Four (4) copies of Articles of Incorporation together with
the bond of accountable officers.
3. Four (4) copies of By – Laws
4. Registration fee as prescribed by CDA
DEALING WITH LOCAL GOVERNMENT
UNITS
The paper or documents issued by DTI, SEC, and CDA upon
approval of the registration are instruments which are national in
character. After complying with the national agencies, there is the
Local Government Code which empowers the local government
units to take full administrative control of their respective
jurisdiction and make legislation, as well as ordinances ( including
tax/fees impositions) best fitting to the needs of the locality. And
this is where the business registrants is affected .
To be able to finally operate the business and open the
doors to the public, the entrepreneurs have to comply
with all the permits and clearance imposed by the local
government units. These are the following:
1. Mayor’s permit
2. Building permit
3. Sanitary permit
4. Cigar and liquor permit
5. NBI clearance
6. Barangay clearance
DEALING WITH OTHER GOVERNMENT
AND PRIVATE BODIES
Agencies like DENR and DepED may have to
be consulted for their requirements to the
registering organization. The entrepreneur’s own
neighborhood may likewise oppose a business
proposition within the village or subdivision.
HOW MUCH MONEY IS NEEDED?
There is no specific or mandatory provision in law in
putting up a sole proprietorship business. Unlike in partnership
and corporation, Securities and Exchange Commission requires
a bank certification attesting to the fact that indeed, the paid up
capital requirement as indicated in the incorporation papers is
deposited in the bank. Under the law, the minimum authorized
capital requirement for the corporation is one hundred
thousand pesos, and 25% of this must be subscribed, and at
least 25% of the subscribed capital must be paid up.
THE BEST FORM OF OWNERSHIP
The summary of the pros and cons of various
forms of business organization is shown below. It
would give the entrepreneur the chance to
evaluate his options.
PROPRIETORSHIP PARTNERSHIP CORPORATION

ADVANTAGES:

1. Simplicity in creation 1. Ease of establishment 1. Limited liability of

stockholders

2. Low cost to establish 2. Division of profits based 2. Ability to attract larger

on partnership agreement amount of capital

3. Owner receives all 3. Larger pool of capital 3. Ability to have

profits than proprietorship perpetual life

4. Owner retains all 4. Larger pool of talent 4. Ease of transfer of

decision-making authority than proprietorship ownership

5. No special legal 5. Ability to attract limited 5. Larger pool of skills,

restrictions partners talents, and knowledge

6. Little government 6. Potential for economies

regulations of scale operations
PROPRIETORSHIP PARTNERSHIP CORPORATION

DISADVANTAGES:

1. Unlimited personal 1. Unlimited liability of 1. Cost and time involved

liability general partners incorporation process

2. Limited skills and 2. Limited capability for 2. Subject to corporate

capabilities capital accumulation taxes

3. Limited access to 3. Difficulty in disposing 3. Potential for diminished

capital of partnership interests managerial incentives
without dissolving
partnership

4. Lack of continuity of 4. Lack of continuity 4. Legal restriction and

the business regulatory red tape

5. Potential for personal 5. Potential loss of control

and authority conflicts by founder(s)

6. Partners are bound by

law of agency
QUIZ TIME!!!!
1. Is an association of two or more business partners
who co-own a business for the purpose of making a profit.
2. A single proprietorship is a form of business
organization initiated, organized, owned or capitalized, and
managed by a single person.
3-6. Give the four types of ownership and organization.
7-10.Give at least four types of Partners.