From a legal point of view, there are four ways to From a legal point of view, there are four
four ways to
form a business.
1. Sole Proprietorship
This is generally the simplest way to set up a
business. A sole proprietorship is owned by a
single individual who is singly responsible for
running the business and is accountable for all
debts and obligations related to the business. The
sole proprietor enjoys exclusive control and
decision-making as well as gets all the profits
earned but he also shoulders all losses and has
unlimited liability which means payment of his loans
will extend to his personal assets.
2. Partnership
A partnership is an agreement in which two or
more persons combine their resources in a
business with a view to making profit. A partnership
agreement is drawn up and profits are divided
among the partners according to the terms of
agreement. There are two types of partnership:
a. The general partnership. All owners share the
management of the business and each is
personally responsible for and must assume the
consequences of the actions of the other partners.
All general partners have unlimited liability which
means loan payments will extend to their personal
property.
b. The limited partnership. Some members are
general partners who control and manage the
business and may be entitled to a greater share of
the profit while other partners are limited and
contribute only capital, take no part in control or
management, and are liable for debts to a specific
extent only.
3. Corporation
A corporation is a legal entity that is separate
from its owners, the shareholders. No shareholders
are personally liable for the debts, obligations, or
acts of the corporation. Directors and officers can
bear liability for their involvement with the
corporation. The legal entity of the corporation
gives it an individual identity of its own.
Corporations normally can exist for a life of 50
years, which is renewable for another 50 years.
Owners have limited liabilities. However,
corporations are burdened by heavy taxes.
4. Cooperative
A cooperative is entity organized by people with
similar needs to provide themselves with goods or
services or to jointly use available resources to
improve their income.
Cooperative members have an equal say in
decision-making with one vote per member
regardless of number of shares held, there is open
and voluntary membership and surplus earning is
returned to the members according to the amount
of their patronage.
(P1,500,001- P15,000,000-small business;
P15,000,001-P60,000,000-medium business;
P60,000,000 up large scale business.)
form a business.
1. Sole Proprietorship
This is generally the simplest way to set up a
business. A sole proprietorship is owned by a
single individual who is singly responsible for
running the business and is accountable for all
debts and obligations related to the business. The
sole proprietor enjoys exclusive control and
decision-making as well as gets all the profits
earned but he also shoulders all losses and has
unlimited liability which means payment of his loans
will extend to his personal assets.
2. Partnership
A partnership is an agreement in which two or
more persons combine their resources in a
business with a view to making profit. A partnership
agreement is drawn up and profits are divided
among the partners according to the terms of
agreement. There are two types of partnership:
a. The general partnership. All owners share the
management of the business and each is
personally responsible for and must assume the
consequences of the actions of the other partners.
All general partners have unlimited liability which
means loan payments will extend to their personal
property.
b. The limited partnership. Some members are
general partners who control and manage the
business and may be entitled to a greater share of
the profit while other partners are limited and
contribute only capital, take no part in control or
management, and are liable for debts to a specific
extent only.
3. Corporation
A corporation is a legal entity that is separate
from its owners, the shareholders. No shareholders
are personally liable for the debts, obligations, or
acts of the corporation. Directors and officers can
bear liability for their involvement with the
corporation. The legal entity of the corporation
gives it an individual identity of its own.
Corporations normally can exist for a life of 50
years, which is renewable for another 50 years.
Owners have limited liabilities. However,
corporations are burdened by heavy taxes.
4. Cooperative
A cooperative is entity organized by people with
similar needs to provide themselves with goods or
services or to jointly use available resources to
improve their income.
Cooperative members have an equal say in
decision-making with one vote per member
regardless of number of shares held, there is open
and voluntary membership and surplus earning is
returned to the members according to the amount
of their patronage.
(P1,500,001- P15,000,000-small business;
P15,000,001-P60,000,000-medium business;
P60,000,000 up large scale business.)