Types of Business Ownership in the Philippines

Starting your own business takes great determination, resources, and time. And aside from getting the necessary business permits and finding capital, you also need to decide what kind of business you’ll set up. Now in the Philippines, there are three common types of businesses: sole proprietorships, partnerships, and corporations. Let’s take a look at each of them below.

Sole Proprietorship

Simply put, sole proprietorships are businesses owned by just one guy. He or she will have full authority regarding business decisions and operations. He or she will also enjoy its assets as well as take responsibility for its liabilities. In short, sole proprietors call all the shots in the business, reap all its profits, and shoulder its losses. And since the owner and the business are considered by law as one taxpayer, they will share the same TIN.

Partnership

Meanwhile, partnerships involve two (sometimes more) individuals agreeing to co-own a business. There are two types of business partnerships: general partnership and limited partnership. In a general partnership, the principal players must take responsibility for all the liabilities and debts their business incurs. In a limited partnership, the partner’s responsibilities are only limited to the amount of capital they contributed. In any case, both types of partnership are considered as judicial persons come tax-paying time.

Corporation

Corporations are owned by multiple people (also known as shareholders). These shareholders can either be real or judicial persons, and their identities are separate from that of the business they own. A business needs 15 people to be considered a corporation, with the minimum contributed capital being Php 5,000.00. Assets and liabilities reaped by the incorporators would depend on the amount of capital they put in. there are two types of corporations: stock and non-stock. Stock corporations focus on earning profit for its shareholders, whereas non-stock corporations are only created to undertake public functions (charities, foundations, etc.). Foreigners and expats can also form business corporations in the Philippines provided they meet all the legal requirements. And like partnerships, corporations are considered as judicial person when computing its taxes.

The Takeaway

By knowing the types of business ownerships allowed in the Philippines, you’ll be able to better prepare yourself should you ever decide to start a venture of your own. Each of these business types has its own advantages and disadvantages; it’s up to you to determine which among them would suit you best.