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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
A sole proprietorship is a form of business organization with only one proprietary owner, a single individual who conducts business under his own name or a business name. (p.3, Commentaries and Jurisprudence on the Revised Corporation Code of the Philippines, Aquino, 2020)
A partnership is a business organization where two or more persons agree to contribute money, property, or industry to a common fund for the purpose of dividing profits among themselves. (Article 1767, Civil Code of the Philippines)
A corporation is an artificial being created by operation of law having the right of succession and the powers, attributes, and properties expressly authorized by law or incidental to its existence. (Section 2, Revised Corporation Code)
In the Philippines, there are several types of business organizations. The most common business organizations are sole proprietorship, partnership and corporation.
Other forms of business organizations include joint ventures, business trusts, joint accounts, and cooperatives.
Sole Proprietorship
A sole proprietorship is a form of business organization with only one proprietary owner, a single individual who conducts business under his own name or a business name. (p.3, Commentaries and Jurisprudence on the Revised Corporation Code of the Philippines, Aquino, 2020)
In sole proprietorship, business is established by only one person called the sole proprietor. The personal assets of the sole proprietor are held to answer for claims against the business since the business s considered as the extension of the owner.
Simply put, the assets and liabilities of the sole proprietorship are the assets and liabilities of the sole proprietor.
Jurisprudence says:
“A sole proprietorship is the oldest, simplest, and most prevalent form of business enterprise. It is an unorganized business owned by one person. The sole proprietor is personally liable for all the debts and obligations of the business.” (Excellent Quality Apparel, Inc. v. Win Multi Rich Business, Inc., G.R. N0. 175048, February 10, 2009)
Unlike other business organizations, a sole proprietorship does not have a juridical personality.
Jurisprudence says:
“A sole proprietorship does not possess a juridical personality separate and distinct from the personality of the owner of the enterprise. The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual and requires its proprietor or owner to secure licenses and permits, register its business name, and pay taxes to the national government. The law does not vest a separate legal personality on the sole proprietorship or empower it to file or defend an action in court.” (Excellent Quality Apparel, Inc. v. Win Multi Rich Business, Inc., G.R. N0. 175048, February 10, 2009)
Partnership
A partnership is a business organization where two or more persons agree to contribute money, property, or industry to a common fund for the purpose of dividing profits among themselves.
The law says:
“By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.
Two or more persons may also form a partnership for the exercise of a profession.” (Article 1767, Civil Code of the Philippines)
A partnership must have a lawful object or purpose, and must be established for the common benefit or interest of its partners. (Article 1770, Civil Code of the Philippines)
Jurisprudence says:
“Partnership is essentially a result of an agreement or a contract, either express or implied, oral or in writing, between two or more persons.” (Merian Santiago v. Sps. Edna and Bayani Garcia, G.R. No. 228356, March 09, 2020)
The law says:
“The following are juridical persons:
(1) xxx
(2) xxx
(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a juridical personality, separate and distinct from that of each shareholder, partner or member.” (Article 44, Civil Code)
According to Article 1768 of the Civil Code, a partnership has a juridical personality separate and distinct from that of each of the partners even in case of failure to comply with the requirements under the Civil Code, to wit:
“Every contract of partnership having a capital of three thousand pesos or more, in money or property, shall appear in a public instrument, which must be recorded in the Office of the Securities and Exchange Commission.” (Article 1770, Civil Code of the Philippines)
Corporation
A corporation is an artificial being created by operation of law having the right of succession and the powers, attributes, and properties expressly authorized by law or incidental to its existence. (Section 2, Revised Corporation Code)
Corporations, like partnerships and associates for private interest, are juridical persons to which the law grants a juridical personality, separate and distinct from that of each shareholder. (Article 44, Civil Code)
As a juridical person, a corporation may acquire and possess property of all kinds, as well as incur obligations and bring civil and criminal actions, in conformity with laws and regulations of their organizations. (Article 46, Civil Code)
Jurisprudence says:
“A corporation has a personality separate and distinct from the persons composing it, as well as from any other legal entity to which it may be related.” (Zambrano v. Philippine Carpet Manufacturing Co., G.R. No. 2224099, June 21, 2017)
One-Person Corporation
A One-Person Corporation is a corporation with a single stockholder. (Section 116, Revised Corporation Code)
The law says:
“A One-Person Corporation is a corporation with a single stockholder: Provided, That only a natural person, trust, or an estate may form a One Person Corporation.
Banks and quasi-banks, preneed, trust, insurance, public and publicly-listed companies, and non-chartered government-owned and -controlled corporations may not incorporate as One Person Corporations: Provided, further, That a natural person who is licensed to exercise a profession may not organize as a One Person Corporation for the purpose of exercising such profession except as otherwise provided under special laws.” (Section 116, Revised Corporation Code)
Due to its nature, a one-person corporation shall not be required to have a minimum authorized capital stock except as otherwise provided by special law. (Section 116, Revised Corporation Code)
In a one-person corporation, the single stockholder shall be its sole director and president. (Section 121, Revised Corporation Code) However, the single stockholder may not be appointed as the corporate secretary. (Section 122, Revised Corporation Code)
The law says:
“Section 121. Single Stockholder as Director, President. – The single stockholder shall be the sole director and president of the One Person Corporation.
Section 122. Treasurer, Corporate Secretary, and Other Officers. – Within fifteen (15) days from the issuance of its certificate or incorporation, the one-person corporation shall appoint a treasurer, corporate secretary, and other officers as it may deem necessary, and notify the Commission thereof within five (5) days from appointment.
The single stockholder may not be appointed as the corporate secretary.
A single stockholder who is likewise the self-appointed treasurer of the corporation shall give a bond to the Commission in such a sum as may be required: Provided, That the said stockholder/treasurer shall undertake in writing to faithfully administer the one-person corporation’s funds to be received as treasurer, and to disburse and invest the same according to the articles of incorporation as approved by the Commission. The bond shall be renewed every two (2) years or as often as may be required.” (Sections 121 and 122, Revised Corporation Code)
Read also: Types of Businesses: Their Advantages and Disadvantages
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