|



 

 When organizing a
new business, one of
the
most important
decisions to be made
is
choosing the j
 

 jjj




j 
is the practice of
starting new
organizations or
revitalizing mature
organizations,
particularly new
businesses generally in
response to identified
opportunities.




j j  jjj

þ    
  rather than simply generating an

income stream that replaces traditional employment, a successful
entrepreneurial venture creates substantial wealth, typically in
excess of several million dollars of profit.
þ 
  
  while a successful small business
can generate several million dollars of profit over a lifetime,
entrepreneurial wealth creation often is rapid; for example, within
5 years.
þ j the risk of an entrepreneurial venture must be high;
otherwise, with the incentive of sure profits many entrepreneurs
would be pursuing the idea and the opportunity no longer would
exist.
þ   entrepreneurship often involves substantial
innovation beyond what a small business might exhibit. This
innovation gives the venture the competitive advantage that
results in wealth creation. The innovation may be in the product or
service itself, or in the business processes used to deliver it.
 ãorms of Business Organizations
(
  j

þ
our j regarding the size and nature of your business.
þ The 
 you wish to have.
þ The j
 
 you are willing to deal with.
þ The jjj j
   j j.
þ   j of the different ownership structures.
þ
 

 
jj of the business.
þ Whether or not you need to
j 
j  
jjj
þ
our 

 jj  j  of the business for
yourself.
þ The
jj

j  jj j from business
liabilities.
þ re their 

j 

j 
j that will be part of
the business.
 

 
j j
These firms are 


j, usually the individual who has
day to day responsibility for running the
business. Sole proprietors own all the
assets of the business and the profits
generated by it. They also assume
"complete personal" responsibility for all of
its liabilities or debts.  j 
 
 j   
jjj
 dvantages of a Sole
Proprietorship

þ asiest and least expensive form of ownership

to organize.
þ Sole proprietors are in complete control, within
the law, to make all decisions.
þ Sole proprietors receive all income generated
by the business to keep or reinvest.
þ Profits from the business flow through directly
to the owner's personal tax return.
þ The business is easy to dissolve, if desired
 ]isadvantages of a Sole
Proprietorship
þ nlimited liability and are legally responsible
for all debts against the business.
þ Their business and personal assets are 100%
at risk.
þ ave almost be ability to raise investment
funds.
þ re limited to using funds from personal
savings or consumer loans.
þ ave a hard time attracting high caliber
employees, or those that are motivated by the
opportunity to own a part of the business.
þ mployee benefits such as owner's medical
insurance premiums are not directly deductible
from business income (partially deductible as
an adjustment to income).
 

j j
mn a Partnership, two or more
people share ownership of a
single business. Like
proprietorships, the law does not
distinguish between the business
and its owners. The Partners
should have a legal agreement
that sets forth how decisions will
be made, profits will be shared,
disputes will be resolved, how
future partners will be admitted to
the partnership, how partners can
be bought out, or what steps will
be taken to dissolve the
partnership when needed.
dvantages of a Partnership
þ Partnerships are relatively
easy to establish; however
time should be invested in
developing the partnership
agreement.
þ With more than one owner,
the ability to raise funds may
be increased.
þ The profits from the business
flow directly through to the
partners' personal taxes.
þ Prospective employees may
be attracted to the business if
given the incentive to become
a partner.
]isadvantages of a Partnership
þ Partners are jointly and individually liable for
the actions of the other partners.
þ Profits must be shared with others.
þ Since decisions are shared, disagreements
can occur.
þ Some employee benefits are not deductible
from business income on tax returns.
þ The partnership have a limited life; it may end
upon a partner withdrawal or death.
lassifications of Partnerships
 ccording to object:

j 

j  ± contribution by partner of all present
property or of all profits.

*niversal partnership of all present property

ll contributions become part of the partnership fund.

*niversal partnership of all profits

ll that the partners may acquire by their industry or
work during the existence of the partnership and the use of
whatever the partners contributed at the time of the
institution of the contract belong to the partnership.





j  The object of the partnership is

determinate²its use or fruit, specific undertaking, or the
exercise of a profession or vocation.
 ccording to   
þ

. ll partners are liable to the
extent of their separate properties.

þ  
. The limited partners are liable
only to the extent of their personal
contributions. mn a limited partnership, the
law states that there shall be R
R
one
general partner.
 r | 

þ



One who is liable
to the extent of his separate
property after all the assets of the
partnership are exhausted.

þ  


. One who is liable
` 
to the extent of his capital
contribution.

þ   j 

. One who

contributes money or property to the
common fund of the partnership.

þ 
j
 

One who
contributes his knowledge or
personal service to the partnership.
þ ‰  

 One whom the partners has appointed
as manager of the partnership.

þ 


One who is designated to wind up or
settle the affairs of the partnership after dissolution.

þ 
  

 One who does not take active part in the

business of the partnership and is not known as a partner.

þ  

 One who does not take active part in the
business of the partnership though may be known as 
partner.

þ 
 

One who takes active part in the business but

is not known to be a partner by outside parties.

þ  




j  | j

    

 who

j j j j
 

 


| 

þ dvantages versus 

 
j j
1. Brings greater financial capability to the business.
2. ombines special skills, expertise and experience of the
partners.
3. Offers relative freedom and flexibility of action in decision
making.

þ dvantages versus 

j
1. asier and less expensive to organize.
2. More personal and informal.

þ ]isadvantages
1. asily dissolved and thus unstable compared to a
corporation.
2. Mutual agency and unlimited liability may create personal
obligations to partners.
3. Less effective than a corporation in raising large amounts
of capital.
  
 
 

 |‰| | |
þ ‰ 

  partnership is created by mere agreement of
the partners while a corporation is created by operation of law.

Number of Persons. Two or more persons may form a partnership;

in a corporation, at least five (5) persons, not exceeding fifteen (15).

þ  

 
j  mn a partnership,
juridical personality commences from the execution of the articles of
partnership; in a corporation, from the issuance of certificate of
incorporation by the Securities and xchange ommission.

þ ‰   mn a partnership, every partner is an agent of the

partnership if the partners did not appoint a managing partner; in a
corporation, management is vested on the Board of ]irectors.
þ
    mn a partnership, each of the
partners except a limited partner is liable to the extent of
his personal assets; in a corporation, stockholders are
liable only to the extent of their interest or investment in
the corporation.

þ  of Succession. mn a partnership, there is no right of

succession; in a corporation, there is right of succession.
 corporation has the capacity of continued existence
regardless of the death, withdrawal, insolvency or
incapacity of its directors or stockholders.

þ 
j
j . mn a partnership, for any period of
time stipulated by the partners; in a corporation, not to
exceed fifty (50) years but subject to extension.
 

j
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 .
 TTRmBTS Oã  ORPORTmON
1.  corporation is an R
R
with a personality
separate and apart from its individual stockholders or
members.
2. mt is  R
  R
  Rï
mt can not come into
existence by mere agreement of the parties as in the
case of business partnerships.
3. mt enjoys the 

  ï
 corporation has
the capacity of continued existence regardless of the
death, withdrawal, insolvency or incapacity of the
individual stockholders or members. The transfer of
ownership of shares of stock does not dissolve the
corporation.
4. mt has the powers, attributes and properties expressly
authorized by law or incident to its existence.
 dvantages of a orporation
1. The corporation has the legal capacity to act as
a legal entity.
2. Stockholders have limited liability.
3. mt has continuity of existence.
4. Shares of stock can be transferred without the
consent of the other stockholders.
5. mts management is centralized in the board of
directors.
6. Stockholders are not general agents of the
business.
7. Greater ability to acquire funds.
]isadvantages of a orporation
1.  corporation is relatively
complicated in formation
and management.
2. There is a greater degree
of government control
and supervision.
3. mt entails a relatively high
cost of formation and
operation.
4. mt is subject to heavier
taxation than other
forms of business
organizations.
 lassification of orporations

þ  j
 
 j  
a. Stock corporation ± capital is in the form of capital
stock divided into shares.
b. Non stock corporation ± one where no part of its
income is distributed as dividends to its members
þ  j
 

jj
a. Public corporation ±  corporation formed or
organized for the government of a portion of the
state (e.g., provinces, cities, municipalities).
b. Private corporation ±  corporation created for
private aim, benefit or purpose.
þ j  

    




a. Parent corporation ± has controlling interest
in another corporation
b. Subsidiary corporation ±  corporation
controlled by another corporation known as
a parent corporation.
þ 

    
a. ]omestic corporation ±  corporation
organized under the laws
b. ãoreign corporation ±  corporation
organized under foreign laws
þ 

 



  


 j 

j 
a. lose corporation ± stock ownership is
limited to selected persons or members of a
family not exceeding 20 persons.
b. Open corporation ± the stock is available for
subscription or purchase by any person.
 omponents of a orporation
s 


jare those who compose a corporation
whether as stockholders or members, at any time. This
term includes incorporators, stockholder or members
 


j are stockholders or members
mentioned in the articles of incorporation as originally
forming and composing the corporation and are
signatories to said articles of incorporation. They must
be R R
persons (i.e. human beings) as
distinguished from R  
R
beings (e.g., a corporation
or a partnership).
V



j   
j  

j



j 

 
  


j



j
3.  

jor shareholders are corporators in a
stock corporation.
4. Members are corporators of a non stock corporation
5. j

jare persons who have agreed to take and
pay for original, unissued shares of a corporation.
6. 
 
jare persons who bring about or cause to
bring about the formation and organization of a
corporation.
7. 


 
jare usually investment bankers who
have²
± agreed, alone or with others, to buy at stated terms an entire or
a substantial part of an issue of securities; or
± guaranteed the sale of an issue by agreement to buy from the
issuing corporation any unsold portion at a stated price; or
± agreed to use his best efforts to market all or part of an issue;
or
± offered for sale stock he has purchased from a controlling
stockholder.