Right now, you already decided that you want to start your own business. For some, they are also finish with your business plan. Another important issue you need to face is to answer what form of business enterprise should you choose.
In the Philippines, you can start a business with either sole proprietorship, a partnership, or a corporation. The basic features of each business formation are discussed in detail below.
Sole Proprietorship
This type of business formation is solely own by an individual, known as sole proprietor.
This is the common and easiest business to start. The profit and control is fully enjoyed by the sole proprietor but personally owes and answers all liabilities or suffer losses.
The major disadvantage is that personal assets of the owner is not safe in case the business can’t pay its liabilities.
If you’re a first timer in business, you will like this business formation because of its minimal registration fees and monitoring requirements.
If you’re interested in starting a business as a sole proprietorship, you should check this article How to Register a Sole Proprietor Business in the Philippines
Partnership
This type of business formation is started by two (2) or more persons, that bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves.
The profit and control will depend on the agreement of each partners.
Like the sole proprietor, financial obligation of the business is passed to the partners.
A partner can make or break your business so choose your partner wisely. If you know someone whom you can trust, know how to compromise, and have the same vision like yours, starting a partnership may work for you.
Want some quick tips about choosing whom you should trust, please check this article “Ways to Decide Who You Can Trust” in my next post.
Corporation
This type of business formation is started by a minimum of five (5) incorporators.
Corporations are juridical persons with personality separate and distinct from the stockholders.
This is the safest form of business enterprise to start because financial obligation of your business will not extend to the personal assets of stockholders. This means that liabilities to the creditors are only limited to the capital contribution of the stockholders.
The disadvantage is that you need to prepare yourself for additional fees and requirements.
But if you plan to include investors, creditors, franchisee to your business or you expect to employ lots of employees, incorporating your business is a good decision your future self will thank you for.
If you’re interested in incorporating your business, you should check the article on How to Register a Corporation in the Philippines
If you have questions regarding tax, accounting, and business registrations, you can contact us here.
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