Corporation, definition:
Within the context of Philippine law, a "corporation" is treated as
an artificial being created by operation of law, having the right of
succession and the powers, attributes and properties expressly
authorized by law or incident to its existence [Sec. 2, Corporation
Code].cralaw
Corporation, classes:
Corporations may be classified as follows:
[a] Stock corporations - [1] capital stock divided into shares;
and [2] authorized to distribute profits
[b] Non-stock corporations - organized not for profit
Corporation, kinds by method of creation:
[a] by special law or charter
[b] by being organized under the corporation code
Corporation, how organized:
Philippine corporate entities are organized as follows:
[a]Number of incorporators:
Incorporators are required to be not less than five [5] but not more
than fifteen [15].cralaw
[b] Residency requirement:
Majority of the incorporators are required to be residents of the
Philippines.cralaw
[c] Qualifications:
All incorporators:
[1] must be natural persons
[2] must be of legal age
A corporation or a partnership cannot be incorporators of a
Philippine corporate entity. The only way a corporation or a
partnership may become stockholder of a Philippine corporation is
by acquiring a stock thereof but only after it shall have been duly
incorporated.cralaw
[d] Subscription requirement:
All incorporators must subscribe to at least one (1) share of stock
of the corporation being organized.cralaw
Corporation, minimum subscription:
The law requires that the total capital stock to be subscribed at the
time of incorporation should at least be twenty five percent [25%]
of the authorized capital stock of the corporation being
organized.cralaw
Corporation, minimum paid-up capital:
The paid-up capital of a Philippine corporation must not be less
than PhP5,000.00. Thus, it is required that at least twenty five
percent [25%] of the subscribed capital stock should be fully paid
up but the amount of which should not be less than said
PhP5,000.00.cralaw
Corporation, incorporation documents:
The following incorporation documents are required:
[a] Articles of Incorporation;
[b] By-laws;
[c] Treasurer's Affidavit which should state compliance with the
authorized subscribed and paid-up capital stock
requirements.cralaw
[d] Bank Certificate that the paid-up capital portion of the
authorized capital stock has been deposited with the issuing
bank.cralaw
There are "express lane" forms available at the Securities and
Exchange Commission [SEC] for certain specified corporate
business organizations.cralaw
Corporation, where filed:
The incorporation documents should be filed with the Securities
and Exchange Commission [SEC] of the Philippines.cralaw
Corporation, what should be stated:
[a] the name of the corporation which must not be identical or
deceptively or confusingly similar to any existing corporation;
[b] the purpose of the corporation;
[c] principal office of the corporation;
[d] the term or life of the corporation which should not exceed fifty
[50] years. This corporate lifetime may, however, be extended for
another fifty [50] years but the extension must not be effected
earlier than five [5] years before the expiration of its term.cralaw
Corporation, limitation on foreign equity holdings:
The equity requirements should be strictly observed and followed
in certain areas of business where the constitution and the laws of
the Philippines impose limitation on foreign holdings.cralaw
Generally, however, foreigners may invest as much as one
hundred percent [100%] equity in areas not covered by the
Negative List under the Foreign Investments Act.cralaw
The following provisions thereof may serve as guide:
List A : Includes those reserved to Philippine nationals by the
Constitution of the Philippines.chanrobles virtual law library
[a] exploitation of natural resources [100% domestic equity]
[b] operation of public utilities [60% domestic equity]
[c] mass media [100% domestic equity]
[d] educational institution [70% domestic equity]
[e] labor recruitment [65% dom. equity]
[f] retail trade [100% dom. equity]
[g] rural banking [100% dom. equity]
List B : Includes those regulated by law.chanrobles virtual law
library
[a] defense-related activities
[b] manufacture and distribution of dangerous drugs
[c] nightclubs, bathhouse and similar activities
[d] small and medium-sized domestic market enterprises with
paid-in equity capital of less than US$500,000.00
[e] export enterprises utilizing new materials from depleting
natural resources with paid-in equity of less than US$500,000.00
Corporation, when corporate existence commences:
The corporate life or existence of a Philippine corporation
commences from the time a Certificate of Incorporation is issued in
its favor by the Securities and Exchange Commission
[SEC].cralaw
Corporation, effect of non-use:
[a] A corporation is deemed dissolved if the corporate charter
granted in its favor expires by non-use for a period of at least two
[2] years from issuance thereof.cralaw
[b] A corporation is deemed suspended or its franchise revoked if
it has been duly organized but it failed to operate for a period of
five [5] years.cralaw
Corporation, its organization:
A Philippine corporation is organized by electing members to its
Board of Directors, by electing the corporate officers thereof and/or
by setting up an Executive Committee.cralaw
Board of Directors, qualifications:
The members of the Board of a Philippine corporation must
possess the following qualifications:
[1] owner or holder of at least one [1] share of capital stock;
[2] majority of the members must be residents of the Philippines;
[3] they must be elected by the owners/holders of at least the
majority of the outstanding capital stock.cralaw
Board of Directors, corporate acts:
For validity and legality of the corporate acts of the Board of
Directors, a meeting should be fully convened and the same must
be attended by at least a majority of its members. Any and all
corporate acts must be duly approved by a majority of the
members of the Board except when otherwise provided by
Philippine laws or by the By-laws of the corporation.cralaw
Board of Directors, self-dealing rule:
A self-dealing transaction of a member of the Board of Directors
becomes voidable except under the following circumstances:
[1] When the presence of such director in the Board meeting is not
necessary to constitute a quorum;
[2] When his vote is not necessary for the approval of the contract
or transaction
[3] When the terms of the contract are fair and reasonable and
had been previously approved by the Board of Directors.cralaw
Corporate Officers, general rule:
As a general rule, the corporate officers of a Philippine corporation
consist of the President who is required to be a member of the
Board of Directors; the Corporate Treasurer; and the Corporate
Secretary who is required to be both a resident and a citizen of the
Philippines.cralaw
Other corporate officers may be designated under the By-laws of
the corporation without getting afoul with the law.cralaw
The only limitation imposed by law on corporate officers is that no
person can be the President and the Corporate Secretary at the
same time or the President and Corporate Treasurer at the same
time.cralaw
Corporate Officers, personal liability for damages:
A corporate officer of a Philippine corporation becomes personally
liable for certain corporate acts under the following circumstances:
[1] When he willfully and knowingly votes or assents to patently
unlawful acts;
[2] When he is guilty of gross negligence or bad faith in the
conduct of the corporate affairs; or
[3] When he acquires personal or pecuniary interest which is in
conflict with his duty as such officer.cralaw
Stockholders, limited liability:
The liability of stockholders in Philippine corporations is limited
only to the extent of their capital contribution thereto. Other
properties, holdings or assets of stockholders are not within the
reach of corporate creditors. To discourage abuse of this privilege,
the Securities and Exchange Commission [SEC] imposes certain
reportorial requirements which should be complied with on a
regular basis.
Stockholders, kinds of meetings:
The kinds of meetings involving the stockholders of a Philippine
corporation are as follows:
[1] Regular meeting which is the equivalent of the annual
stockholders' meeting required to be duly provided under the By-
laws;
[2] Special meeting which may be called anytime as may be
necessary
Stockholders' meeting, requisites for validity:
In order to be valid, the stockholders' meeting should comply with
the following requisites:
[1] A notice of such meeting must be served to the stockholders
[2] A quorum, [i.e., majority of the outstanding capital stock of the
corporation] must be fully established.cralaw
[3] Any and all acts of the stockholders in a meeting duly called
and constituted, are deemed valid if approved by a majority of the
outstanding capital stock or at least two-thirds [2/3] vote in certain
cases specified under the law.
Corporation, dissolution:
As a general rule, the corporate existence of a Philippine
corporation may last up to fifty [50] years, renewable for another
fifty [50] years. However, such lifetime may be shortened by a
vote of 2/3 of the outstanding capital stock thereof through the
process called dissolution.
CORPS and OTHER FORMS BUSINESS COMPARED
Sole proprietorship
With this type of business organization, you are the sole owner,
and fully responsible for all debts and obligations related to your
business. All profits are yours to keep. Because you are personally
liable, a creditor can make a claim against your personal assets as
well as your business assets in order to satisfy any debts.
Advantages:
Easy and inexpensive to register
Regulatory burden is generally light
You have direct control of decision making
Minimal working capital required for start-up
Some tax advantages if your business is not doing well (for
example, deducting your losses from your personal income, and a
lower tax bracket when profits are low)
All profits go to you directly
Disadvantages:
Unlimited liability (if you have business debts, claims can be made
against your personal assets to pay them off)
You are held financially responsible for business decisions made
by your partner(s); for example, contracts that are broken
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Corporation
Another type of business structure is a corporation. Incorporation
can be done at the federal or provincial/territorial level. When you
incorporate your business, it is considered to be a legal entity that
is separate from its shareholders. As a shareholder of a
corporation, you will not be personally liable for the debts,
obligations or acts of the corporation. It is always wise to seek
legal advice before incorporating.
Advantages:

Income is taxable at your personal rate and, if your business is Limited liability
profitable, this could put you in a higher tax bracket
Ownership is transferable
Lack of continuity for your business if you are unavailable
Continuous existence
Can be difficult to raise capital on your own
Separate legal entity
Partnership
Easier to raise capital than it might be with other business
A partnership is a non-incorporated business that is created structures
between two or more people. In a partnership, your financial
Possible tax advantage as taxes may be lower for an incorporated
resources are combined with those of your business partner(s),
business
and put into the business. You and your partner(s) would then
share in the profits of the business according to any legal Disadvantages:
agreement you have drawn up.
A corporation is closely regulated
In a general partnership, each partner is jointly liable for the debts
of the partnership. In a limited partnership, a person can contribute More expensive to set up a corporation than other business forms
to the business without being involved in its operations. A limited
liability partnership is usually only available to a group of Extensive corporate records required, including documentation
professionals, such as lawyers, accountants or doctors. filed annually with the government

When establishing a partnership, you should have a partnership Possible conflict between shareholders and directors
agreement in place. This is important because it establishes the
You may be required to prove residency or citizenship of directors
terms of the partnership and can help you avoid disputes later on.
Hiring a lawyer or other legal professional to help you draw up a
partnership agreement will save you time and protect your
interests.

Advantages:

Fairly easy and inexpensive to form a partnership

Start-up costs are shared equally with you and your partner(s)

Equal share in the management, profits and assets

Tax advantage if income from the partnership is low or loses

money (you and your partner(s) include your shares of the
partnership in your individual tax returns)

Disadvantages:

There is no legal difference between you and your business

Unlimited liability (if you have business debts, personal assets can
be used to pay off the debt)

Can be difficult to find a suitable partner

Possible development of conflict between you and your partner(s)