This document provides an overview of laws governing business organizations in Indonesia. It discusses the main types of business entities recognized in Indonesia, including sole proprietorships, partnerships, corporations, and joint ventures. For each type of business entity, the document outlines how they are formed, governed, and their basic legal characteristics such as limited liability and ownership. It also discusses the process for setting up a business and company in Indonesia, as well as relevant regulations regarding foreign ownership of Indonesian businesses.
Squared. Essential Guide for New Businesses in UKmondayfriday
Before Starting Up
Many people dream of running their own business.
In recent years this has become a reality for some who have been made redundant.
Others may decide to start their own business
in search of independence, to work for themselves
and be rewarded for their efforts financially.
Whatever the reason for considering setting up
in business, a number of challenges exist.
Despite considerable effort and financing which
may be poured into a venture, there is always a
risk of business failure.
Before you start your business, take some time spent to think through your plans as
this will minimise the risk of failure.
Think about the possible downfalls of being
self-employed. Certainty of income, both in
terms of quantity and regularity, disappears,
whilst fixed outgoings, such as mortgage
repayments, remain. Consider the loss of other
company benefits such as life assurance cover,
a company pension, medical insurance, a company
car, regular hours and holidays.
Consider the views of your family and friends.
Their support is essential. It is important they
understand that the administrative and financial
requirements of running a business can be time
consuming and stressful.
Success in business depends on many factors;
most importantly you need to critically review all
aspects of the business proposition before
progressing too far.
For easy reference, we have carved this guide
into 10 parts:
Part 1 | Selecting a Legal Entity for Your
Business
Sole Proprietorship
Partnership
Limited Liability Partnership
Limited Company
Business Structure – The Pros and Cons
Part 2 | Registering with the Tax Authorities
H M Revenue & Customs
H M Revenue & Customs – NI Contributions Office
H M Revenue & Customs - VAT
Tax Calendar
Part 3 | Accounting & Bookkeeping
Accounting Records and Record Keeping
A Word About Accounting Software Systems
Internal Control
Part 4 | Value Added Tax
Registration
Taxable Persons and Supplies
Tax Rates
Input VAT
Penalties
VAT Checklist
Money Laundering Regulations
Part 5 | Payroll Taxes
Helpful Publications
Do You Have Employees?
The Operation of a PAYE Scheme
Real Time Information
Benefits in Kind
Payroll Software
Part 6 | Income Tax and Corporation Tax
Which Accounting Year Should I Choose?
Tax Returns
Companies
Sole Traders / Partnerships
Tax Credits
Child Benefits
Part 7 | Cash Planning and Forecasting
Starting the Analysis
Cash Collections
Disbursements
Part 8 | Obtaining Credit and Financing
Your Business
How Do I Get the Money?
Business Plan
Financing Alternatives
Debt Financing Sources
Equity Financing Sources
Venture Capital Companies
Part 9 | Insurance
Required Policies
Commercial Liability Insurance
Property Insurance
Business Interruption
Fidelity Guarantee
Directors & Officers Liability
Key Person Protection
Identifying a Key Person
When is Key Person Protection Needed?
Partnership Protection
Shareholder Protection
Fee Pro
Types of various business Organizations, includes Sole Proprietor, Partnership, Societies, Joint Stock Companies, Hindu Undivided Family Business in India
Squared. Essential Guide for New Businesses in UKmondayfriday
Before Starting Up
Many people dream of running their own business.
In recent years this has become a reality for some who have been made redundant.
Others may decide to start their own business
in search of independence, to work for themselves
and be rewarded for their efforts financially.
Whatever the reason for considering setting up
in business, a number of challenges exist.
Despite considerable effort and financing which
may be poured into a venture, there is always a
risk of business failure.
Before you start your business, take some time spent to think through your plans as
this will minimise the risk of failure.
Think about the possible downfalls of being
self-employed. Certainty of income, both in
terms of quantity and regularity, disappears,
whilst fixed outgoings, such as mortgage
repayments, remain. Consider the loss of other
company benefits such as life assurance cover,
a company pension, medical insurance, a company
car, regular hours and holidays.
Consider the views of your family and friends.
Their support is essential. It is important they
understand that the administrative and financial
requirements of running a business can be time
consuming and stressful.
Success in business depends on many factors;
most importantly you need to critically review all
aspects of the business proposition before
progressing too far.
For easy reference, we have carved this guide
into 10 parts:
Part 1 | Selecting a Legal Entity for Your
Business
Sole Proprietorship
Partnership
Limited Liability Partnership
Limited Company
Business Structure – The Pros and Cons
Part 2 | Registering with the Tax Authorities
H M Revenue & Customs
H M Revenue & Customs – NI Contributions Office
H M Revenue & Customs - VAT
Tax Calendar
Part 3 | Accounting & Bookkeeping
Accounting Records and Record Keeping
A Word About Accounting Software Systems
Internal Control
Part 4 | Value Added Tax
Registration
Taxable Persons and Supplies
Tax Rates
Input VAT
Penalties
VAT Checklist
Money Laundering Regulations
Part 5 | Payroll Taxes
Helpful Publications
Do You Have Employees?
The Operation of a PAYE Scheme
Real Time Information
Benefits in Kind
Payroll Software
Part 6 | Income Tax and Corporation Tax
Which Accounting Year Should I Choose?
Tax Returns
Companies
Sole Traders / Partnerships
Tax Credits
Child Benefits
Part 7 | Cash Planning and Forecasting
Starting the Analysis
Cash Collections
Disbursements
Part 8 | Obtaining Credit and Financing
Your Business
How Do I Get the Money?
Business Plan
Financing Alternatives
Debt Financing Sources
Equity Financing Sources
Venture Capital Companies
Part 9 | Insurance
Required Policies
Commercial Liability Insurance
Property Insurance
Business Interruption
Fidelity Guarantee
Directors & Officers Liability
Key Person Protection
Identifying a Key Person
When is Key Person Protection Needed?
Partnership Protection
Shareholder Protection
Fee Pro
Types of various business Organizations, includes Sole Proprietor, Partnership, Societies, Joint Stock Companies, Hindu Undivided Family Business in India
Discussion of Basic Forms of Business Organization. (Owbership)
Organization → represents a group of people who work together for the achievement of common objective
Post your response to the following focus questionsDescribe a sol.pdffootsmart1
Post your response to the following focus questions:
Describe a sole proprietorship and discuss its advantages and disadvantages.
Describe a partnership and discuss its advantages and disadvantages.
Describe a corporation and discuss its advantages and disadvantages.
Describe an S corporation and discuss its advantages and disadvantages.
Solution
Broadly speaking for conducting any type of Business activity we require to have a Business
entity. If the Business entity is owned and operated and managed by a single paerson then such
Business entity is called a sole Proprietorship. It is most simple and subjected to least terms &
conditions governing the business activities. The main disadvantages includes personal liability
of the owner/ propreitor, which is unlimited. A single person being at the helm of affairs poses
limitations on the development and growth of the business. Propreitorship has its death with the
death of the owner.
A Partnership as the word suggest is that form of Business entity which is owned by two or more
persons and formed under an agreement signed by all owners for some common purpose/ goal
and or objectives. A partnership firm is more complicated than the sole propreitorships, two or
more persons as owners may give advatages of sharing resources, knowledge, skills which are
essential for setting up of businesses of sizes unmanageable by a single person. Pooling diversity
of partners helps in the development and growth of the Business entity. Like sole propreitorship,
the partners under partnerships may be subjected to unlimited liabilities under or arising out of
the business activities of the Partnership firm. There are additional set of rules & regulations
under the law of the land governing the partnership firms.
The third and the most prefered form of business entity is an incorporated firm called corporation
and or company. A corporation/ company is different from its owners. This form of business
entity draws difference between the owner and management of the business entity. Unlike the
earlier set ups of Sole Propreitor and Partnership, the business activies are conducted neither by
sole owner nor by partners but managers who are considered to be having different identity than
the business entity which is also considered as a legal person. A corporation can be sued and it
can also sue others in the court of law.A corporation comes into existence with its incorporation
documents such as Memorandum of Understanding, Articles of Associations, Delegation of
Powers etc. These documents required for giving birth to the corporation varies from state to
state, nation to nation, lews of the land under whose jurisdiction it falls. The main advantage of a
corporation is to give limited liability to its owners who are called share holders and its business
activities are conducted by the professionals having required qualifications and skills. Just like its
birth, its death is not related to that of its share holders (owners).
What are the different Legal entities under which business can be carried on ...Kronus Law Associates
Thinking to start your own business in India, then this presentation is for you. This presentation will apprise you about basic features of different legal entities under which you can carry on your business and also advantages & disadvantages of carrying on business under them.
1Business Structure and Financial Statem.docxdrennanmicah
1
Business Structure and Financial Statements
Business Structure and Financial Statements
If you want to be your own boss and grow in the business world, then opening a business would be the best option. Anyone can choose to do this, but everyone involved must know there options and the essential documentation needed. The person selecting to pursue opening a business would want to go through some of the disadvantages and advantages of each type of structure they could choose. The options include sole proprietorship, partnership, LLC, and corporations. Once a person has selected the right structure for there business then it is essential to know how to operate it legally through proper documentation. Financial statements are needed for record keeping for the company to track their assets, financial ability, income and more.
Advantages and Disadvantages of Legal Categories
Business structure is a general word that is used to describe groups of organizations which are legally registered under law following a given jurisdiction and characterized legally under certain category to conduct commercial activities (Rogers, 2012). There are several business structures which operate under law to carry our business activities to satisfy the demand and supply of goods and services for consumers. The most common business types are sole proprietorship, partnerships, corporations and limited liability companies (Garzon, 2014).
Every type of business structures has their advantages and disadvantages. The two simplest are Sole Proprietorship and Partnerships. Sole Proprietorship is when you plan to operate the business alone. Advantages to this are that it is low cost and has little legal requirement to start it up. There are also simple taxes at the end of the year. The disadvantages of this are that you are reliable for everything and work alone. There are no protections to personal assets, so if there is significant debt that will not be able to be paid back, lenders can come back and take everything. A Partnership is an arrangement between two parties that states they are co owners of the business. Some advantages to this that there are no legal formalities and no business taxes. Also, it can be less stressful as you have a partner to collaborate with ideas and business plans. There is also combined capital when starting up which can be very helpful. Some disadvantages can include the share of profits, more liabilities, the risk of joint responsibilities and delay in decision making. There also is the possibility of disagreement to different elements like person work ethic, personality, and how they would run the business.
The more advanced business structures are Partnerships and Limited Liability Corporations(LLC). Corporations has more advantages than disadvantages because it is a fully functioned business organization that has many workers. There is no liability to the employee except everyone must comply to all policies and guidelines.
How to Make a Field invisible in Odoo 17Celine George
It is possible to hide or invisible some fields in odoo. Commonly using “invisible” attribute in the field definition to invisible the fields. This slide will show how to make a field invisible in odoo 17.
Palestine last event orientationfvgnh .pptxRaedMohamed3
An EFL lesson about the current events in Palestine. It is intended to be for intermediate students who wish to increase their listening skills through a short lesson in power point.
Synthetic Fiber Construction in lab .pptxPavel ( NSTU)
Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
The French Revolution, which began in 1789, was a period of radical social and political upheaval in France. It marked the decline of absolute monarchies, the rise of secular and democratic republics, and the eventual rise of Napoleon Bonaparte. This revolutionary period is crucial in understanding the transition from feudalism to modernity in Europe.
For more information, visit-www.vavaclasses.com
Acetabularia Information For Class 9 .docxvaibhavrinwa19
Acetabularia acetabulum is a single-celled green alga that in its vegetative state is morphologically differentiated into a basal rhizoid and an axially elongated stalk, which bears whorls of branching hairs. The single diploid nucleus resides in the rhizoid.
Macroeconomics- Movie Location
This will be used as part of your Personal Professional Portfolio once graded.
Objective:
Prepare a presentation or a paper using research, basic comparative analysis, data organization and application of economic information. You will make an informed assessment of an economic climate outside of the United States to accomplish an entertainment industry objective.
Embracing GenAI - A Strategic ImperativePeter Windle
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
TESDA TM1 REVIEWER FOR NATIONAL ASSESSMENT WRITTEN AND ORAL QUESTIONS WITH A...
lf1-mod-1
1. 1
MODULE:
LAW ON BUSINESS ORGANIZATIONS
Operated by
Name :
Student No. :
Phone :
BACHELOR OF SCIENCE IN BUSINESS
ADMINISTRATION
Major in Entrepreneurship
Program
2. 2
TABLE OF CONTENTS
AT A GLANCE 2
ORGANIZATIONAL MEANING 3
BUSINESS ORGANIZATIONS 4
GOVERNING REGULATIONS 5
- SOLE PROPRIETORSHIPS
- PARTNERSHIPS
- CORPORATIONS
- OTHERS
JOINT VENTURES 19
BUSINESS ORGANIZATIONAL FORMS IN INDONESIA 20
SETTING UP BUSINESS ACTIVITIES AND COMPANY IN INDONESIA 29
ACTIVITY SHEETS 36
3. 3
LAWS ON BUSINESS ORGANIZATIONS
LAW ON BUSINESS ORGANIZATIONS regulates the forms of organization pursuing
economic activities and their registration. The forms of organization pursuing economic
activities are business organizations and other forms determined by Law:
1) the individual entrepreneur;
2) the general partnership (“GP”);
3) the limited partnership (“LP”);
4) Corporations, in some places the joint stock company (“JSC”), the limited liability company
(“LLC”);and foreign company branch.
At a Glance
What Is the Meaning of Business Organization?
A business organization is an individual or group of people that collaborate to achieve certain
commercial goals. Some business organizations are formed to earn income for owners. Other
business organizations, called nonprofits, are formed for public purposes. These businesses often
raise money and utilize other resources to provide or support public programs.
Organization Meaning
The best way to derive the meaning of the term "business organization" is to focus on each word
separately. Organization is a broader term, as it includes businesses and other groups of people
not organized for commercial purposes. Clubs and sports teams are examples of non-business
organizations. Organizations have a specific structure and hierarchy. People and systems create a
culture within the organization and guide its operation. Different organizations have different
policies, work flows and objectives.
Business Meaning
All businesses have commercial objectives. For-profit businesses sell products or services to
generate revenue and earnings. Success depends on the ability to gain more in revenue than is
4. 4
spent on fixed and variable expenses. Nonprofit businesses must bring in enough revenue to pay
employees and cover the costs to administer or support programs. Any money they have left over
after expenses is put back into the organization.
System View
Definitions of organizations typically emphasize the systematic approach used to achieve goals.
Businesses typically begin with a hierarchy that establishes structure and order in communication
and workflow. Business leaders work to establish a business mission, vision, values, objectives
and strategies. These establish the direction for the organizational system. People, processes and
policies are used to fulfill the mission and strategies. The effectiveness of a business organization
often relates to the ability of leaders to get all departments and employees to work together
toward company objectives.
Organizational Culture
An organizational culture reflects the shared values within the organization that impact employee
morale, communication and, ultimately, success. Companies use formal processes and activities
to influence culture, such as social activities to promote teamwork. However, much of an
organization's unique culture evolves through informal channels. For example, a company's
culture can be affected by the way employees communicate during lunch, breaks and other
informal encounters.
BUSINESS ORGANIZATIONS
After deciding to start a business (and the particular business to pursue), one of the important
issues is the form of business entity that will serve as the vehicle in pursuing the business. You
may say that the next important issue is the source of funding, which is correct, but that issue
will be discussed much later. Right now, let’s focus on the forms of business.
The choice of the form of business or business organization depends on various factors. In
certain business, like banks, the law requires that the business entity must be a corporation. A
small business, like your friendly sari-sari store, is better off as a sole proprietorship, although it
could also be converted to another form of business if the circumstances require that shift.
Sole proprietorship
5. 5
Also referred to as “single proprietorship,” a sole proprietorship is the most simple form of
business and the easiest to register, through the Bureau of Trade Regulation and Consumer
Protection (BTRCP) of the Department of Trade and Industry (DTI). It is owned by an individual
who has full control/authority of its own and owns all the assets, as well as personally answers
all liabilities or losses. The fact that it is run by the individual means that it is highly flexible and
the owner retains absolute control over it.
The problem, however, is that a sole proprietor has unlimited liability. Creditors may proceed not
only against the assets and property of the business, but also after the personal properties of the
owner. In other words, the law basically treats the business and the owner as one and the same.
This uniform treatment also has important tax implications. Partnerships and corporations may
lessen their tax liability through a myriad of business expenses and other tax avoidance
techniques. These tax deductions may not be applicable to a sole proprietorship.
Also, the potential growth and reach of a sole proprietorship pale in comparison with that of a
corporation.
Partnership
A partnership consists of two or more persons who bind themselves to contribute money or
industry to a common fund, with the intention of dividing the profits among themselves. The
most common example of partnerships are professional partnerships, like in the case of law firms
and accounting firms. Just like a corporation, it is registered with the Securities and Exchange
Commission (SEC).
A partnership, just like a corporation, is a juridical entity, which means that it has a personality
distinct and separate from that of its members. A partnership may be general or limited. In a
general partnership, the partners have unlimited liability for the debts and obligation of the
partnership, pretty much like a sole proprietorship. In a limited partnership, one or more general
partners have unlimited liability and the limited partners have liability only up to the amount of
their capital contributions. Unlike a corporation, which survives even when a
member/stockholder dies or gets out, a partnership is dissolved upon the death of a partner or
whenever a partner bolts out.
Corporation
A corporation is a juridical entity established under the Corporation Code and registered with the
SEC. It must be created by or composed of at least 5 natural persons (up to a maximum of 15),
technically called “incorporators.” Juridical persons, like other corporations or partnerships,
cannot be incorporators, although they may subsequenTly purchase shares and become corporate
shareholders/stockholders.
6. 6
The liability of the shareholders of a corporation is limited to the amount of their capital
contribution. In other words, personal assets of stockholders cannot generally be attached to
satisfy the corporation’s liabilities, although the responsible members may be held personally
liable in certain cases. For instance, the incorporators may be held liable when the doctrine of
piercing the corporate veil is applied. The responsible officers may also be held solidarily liable
with the corporation in certain labor cases, particularly in cases of illegal dismissal.
The biggest businesses take the form of corporations, a testament to the effectiveness of this
business organization. A corporation, however, is relatively more difficult to create, organize and
manage. There are more reportorial requirements with the SEC. Unless you own sufficient
number of shares to control the corporation, you’ll most likely be left with no participation in the
management. The impact of these concerns, however, is minimized by the army of lawyers,
accountants and consultants that assist the corporation’s management.
GOVERNING REGULATIONS… AT A GLANCE
SINGLE PROPRIETORSHIP
Proprietorship, concept:
The establishment, management and operations of this form of business organization is not
governed by a special law, unlike in the case of corporations.
However, resort to general laws governing civil obligations and contracts or business and
commercial transactions may be made.
As a general rule, foreigners may put up single proprietorship business in the Philippines in
industries where the constitution and the laws do not impose any restriction or limitation on
ownership equity.
In the event that non-Philippine nationals are not allowed to form single proprietorship business
in a particular industry, he may still proceed with his business venture through other forms of
business organizations such as corporation, partnership or joint venture.
Single proprietorship, how formed; registration requirement:
A single proprietorship is the simplest form of business organization in the Philippines. It is not
encumbered by the strict regulatory laws and rules imposed upon corporations and partnerships.
7. 7
Government registration of a single proprietorship business is simple. It is made through the
Bureau of Trade Regulation and Consumer Protection of the Department of Trade and Industry
[DTI].
Single proprietorship, liability of proprietor:
The single proprietor has unlimited liability in the sense that creditors of his business may
proceed not only against the assets and property of his business but after his own personal assets
and property. Creditors with whom he had incurred personal debts may also run after the assets
and property of his single proprietorship business.
Simply put, the law does not make any distinction between his personal affairs and his business
transactions. Before the eyes of the law, they are one and the same, his business being a mere
extension of his person.
PARTNERSHIP
Partnership, nature:
Within the context of Philippine law, a "partnership" is treated as an artificial being created by
operation of law with a legal personality separate and distinct from the partners thereof. It
proceeds from the concept that persons may be allowed to pool their resources and funds to
engage in the pursuit of a common business objective without necessarily organizing themselves
into a corporation, upon which the law imposes a much higher form of regulation, limitation and
standards. Philippine partnerships operate under the concept of unlimited liability and unless
otherwise agreed upon by the partners, each one of them acts as manager and agent of the
partnership and consequently, their acts bind the partnership.
Partnership, governing law:
Unlike corporations whose governing law is a special law - the Corporation Code of the
Philippines, partnerships in the Philippines are governed by and covered under Articles 1767 to
1867 of the Civil Code of the Philippines [circa 1950]. These are the provisions of law which
govern all aspects of partnerships - from their creation, formation, existence, operation and
management to their dissolution and liquidation, including the obligations of the partners to one
another, to the public or third persons and to the government.
Partnership, how formed; registration requirement:
8. 8
Partnerships are required to be registered with the Securities and Exchange Commission [SEC].
Registration is done by filing the Articles of Partnership with the SEC. The Articles of
Partnership set forth all the terms and conditions mutually agreed by the partners thereto.
More specifically, the documents required are as follows:
[1] Proposed Articles of Partnership;
[2] Name Verification Slip;
[3] Bank Certificate of Deposit;
[4] Alien Certificate of Registration, Special Investors Resident Visa or proof of other types of
visa [in case of foreigner];
[5] Proof of Inward Remittance [in case of non-resident aliens].
It bears noting that corporations are not allowed by law to become partners in a partnership.
Partners, liability:
As a general rule, the liability of partners in a partnership organization is unlimited in the sense
that the partnership creditors may run after them for any and all of their assets and property in
payment of the partnership debts. Should one of the partners defray all liabilities of the
partnership, he is entitled to be reimbursed by the other partners for their respective shares
therein.
In the case, however, of limited partnerships, the law allows the limitation of the liability of
certain partners to the extent of the amount contributed to the partnership.
Partnership, dissolution:
Philippine law allows the dissolution of partnership for any reason, provided such dissolution
does not amount to a breach of contract or is prejudicial to third parties. The death of a partner
or the unauthorized transfer of ownership of his share in the partnership [in case there is a
limitation to this effect] results in the dissolution thereof. In other words, any change in the
composition of the partnership, unless so allowed, will result in the dissolution thereof.
Consequently, the remaining partners may form a new partnership with less or more partners.
CORPORATION
9. 9
Corporation, definition:
Within the context of Philippine law, a "corporation" is treated as 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 [Sec. 2, Corporation Code].
Corporation, classes:
Corporations may be classified as follows:
[a] Stock corporations - [1] capital stock divided into shares; and [2]authorized to distribute
profits
[b] Non-stock corporations - organized not for profit
Corporation, kinds by method of creation:
[a] by special law or charter
[b] by being organized under the corporation code
Corporation, how organized:
Philippine corporate entities are organized as follows:
[a]Number of incorporators:
Incorporators are required to be not less than five [5] but not more than fifteen 15
[b] Residency requirement:
Majority of the incorporators are required to be residents of the Philippines.
[c] Qualifications:
All incorporators:
[1] must be natural persons
[2] must be of legal age
10. 10
A corporation or a partnership cannot be incorporators of a Philippine corporate entity. The only
way a corporation or a partnership may become stockholder of a Philippine corporation is by
acquiring a stock thereof but only after it shall have been duly incorporated.
[d] Subscription requirement:
All incorporators must subscribe to at least one (1) share of stock of the corporation being
organized.
Corporation, minimum subscription:
The law requires that the total capital stock to be subscribed at the time of incorporation should
at least be twenty five percent [25%] of the authorized capital stock of the corporation being
organized.
Corporation, minimum paid-up capital:
The paid-up capital of a Philippine corporation must not be less than PhP5,000.00. Thus, it is
required that at least twenty five percent [25%] of the subscribed capital stock should be fully
paid up but the amount of which should not be less than said PhP5,000.00.
Corporation, incorporation documents:
The following incorporation documents are required:
[a] Articles of Incorporation;
[b] By-laws;
[c] Treasurer's Affidavit which should state compliance with the authorized subscribed and paid-
up capital stock requirements.
[d] Bank Certificate that the paid-up capital portion of the authorized capital stock has been
deposited with the issuing bank.
There are "express lane" forms available at the Securities and Exchange Commission [SEC] for
certain specified corporate business organizations.
11. 11
Corporation, where filed:
The incorporation documents should be filed with the Securities and Exchange Commission
[SEC] of the Philippines.
Corporation, what should be stated:
[a] the name of the corporation which must not be identical or deceptively or confusingly similar
to any existing corporation;
[b] the purpose of the corporation;
[c] principal office of the corporation;
[d] the term or life of the corporation which should not exceed fifty [50] years. This corporate
lifetime may, however, be extended for another fifty [50] years but the extension must not be
effected earlier than five [5] years before the expiration of its term.
Corporation, limitation on foreign equity holdings:
The equity requirements should be strictly observed and followed in certain areas of business
where the constitution and the laws of the Philippines impose limitation on foreign holdings.
Generally, however, foreigners may invest as much as one hundred percent [100%] equity in
areas not covered by the Negative List under the Foreign Investments Act.
The following provisions thereof may serve as guide:
List A : Includes those reserved to Philippine nationals by the Constitution of the Philippines.
[a] exploitation of natural resources [100% domestic equity]
[b] operation of public utilities [60% domestic equity]
[c] mass media [100% domestic equity]
[d] educational institution [70% domestic equity]
[e] labor recruitment [65% dom. equity]
[f] retail trade [100% dom. equity]
12. 12
[g] rural banking [100% dom. equity]
List B : Includes those regulated by law [a] defense-related activities
[b] manufacture and distribution of dangerous drugs
[c] nightclubs, bathhouse and similar activities
[d] small and medium-sized domestic market enterprises with paid-in equity capital of less than
US$500,000.00
[e] export enterprises utilizing new materials from depleting natural resources with paid-in
equity of less than US$500,000.00Corporation, when corporate existence commences:
The corporate life or existence of a Philippine corporation commences from the time a
Certificate of Incorporation is issued in its favor by the Securities and Exchange Commission
[SEC].
Corporation, effect of non-use:
[a] A corporation is deemed dissolved if the corporate charter granted in its favor expires by
non-use for a period of at least two [2] years from issuance thereof.
[b] A corporation is deemed suspended or its franchise revoked if it has been duly organized but
it failed to operate for a period of five [5] years.
Corporation, its organization:
A Philippine corporation is organized by electing members to its Board of Directors, by electing
the corporate officers thereof and/or by setting up an Executive Committee.
Board of Directors, qualifications:
The members of the Board of a Philippine corporation must possess the following qualifications:
[1] owner or holder of at least one [1] share of capital stock;
[2] majority of the members must be residents of the Philippines;
[3] they must be elected by the owners/holders of at least the majority of the outstanding capital
stock.
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Board of Directors, corporate acts:
For validity and legality of the corporate acts of the Board of Directors, a meeting should be fully
convened and the same must be attended by at least a majority of its members. Any and all
corporate acts must be duly approved by a majority of the members of the Board except when
otherwise provided by Philippine laws or by the By-laws of the corporation.
c] mass media [100% domestic equity]
[d] educational institution [70% domestic equity]
[e] labor recruitment [65% dom. equity]
[f] retail trade [100% dom. equity]
[g] rural banking [100% dom. equity]
List B : Includes those regulated by law.
[a] defense-related activities
[b] manufacture and distribution of dangerous drugs
[c] nightclubs, bathhouse and similar activities
[d] small and medium-sized domestic market enterprises with paid-in equity capital of less than
US$500,000.00
Corporation, when corporate existence commences:
The corporate life or existence of a Philippine corporation commences from the time a
Certificate of Incorporation is issued in its favor by the Securities and Exchange Commission
[SEC].
Corporation, effect of non-use:
[a] A corporation is deemed dissolved if the corporate charter granted in its favor expires by
non-use for a period of at least two [2] years from issuance thereof.cralaw
[b] A corporation is deemed suspended or its franchise revoked if it has been duly organized but
it failed to operate for a period of five [5] years.
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Corporation, its organization:
A Philippine corporation is organized by electing members to its Board of Directors, by electing
the corporate officers thereof and/or by setting up an Executive Committee.
Board of Directors, qualifications:
The members of the Board of a Philippine corporation must possess the following qualifications:
[1] owner or holder of at least one [1] share of capital stock;
[2] majority of the members must be residents of the Philippines;
[3] they must be elected by the owners/holders of at least the majority of the outstanding capital
stock.
Board of Directors, corporate acts:
For validity and legality of the corporate acts of the Board of Directors, a meeting should be fully
convened and the same must be attended by at least a majority of its members. Any and all
corporate acts must be duly approved by a majority of the members of the Board except when
otherwise provided by Philippine laws or by the By-laws of the corporation.
Board of Directors, self-dealing rule:
A self-dealing transaction of a member of the Board of Directors becomes voidable except under
the following circumstances:
[1] A quorum, [i.e., majority of the outstanding capital stock of the corporation] must be fully
established.
[2] When the presence of such director in the Board meeting is not necessary to constitute a
quorum;
[3] When his vote is not necessary for the approval of the contract or transaction
[4] When the terms of the contract are fair and reasonable and had been previously approved by
the Board of Directors.
Corporate Officers, general rule:
As a general rule, the corporate officers of a Philippine corporation consist of the President who
is required to be a member of the Board of Directors; the Corporate Treasurer; and the Corporate
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Secretary who is required to be both a resident and a citizen of the Philippines. Other corporate
officers may be designated under the By-laws of the corporation without getting afoul with the
law.The only limitation imposed by law on corporate officers is that no person can be the
President and the Corporate Secretary at the same time or the President and Corporate Treasurer
at the same time.
Corporate Officers, personal liability for damages:
A corporate officer of a Philippine corporation becomes personally liable for certain corporate
acts under the following circumstances:
[1] When he willfully and knowingly votes or assents to patently unlawful acts;
[2] When he is guilty of gross negligence or bad faith in the conduct of the corporate affairs; or
[3] When he acquires personal or pecuniary interest which is in conflict with his duty as such
officer.
Stockholders, limited liability:
The liability of stockholders in Philippine corporations is limited only to the extent of their
capital contribution thereto. Other properties, holdings or assets of stockholders are not within
the reach of corporate creditors. To discourage abuse of this privilege, the Securities and
Exchange Commission [SEC] imposes certain reportorial requirements which should be
complied with on a regular basis.
Stockholders, kinds of meetings:
The kinds of meetings involving the stockholders of a Philippine corporation are as follows:
[1] Regular meeting which is the equivalent of the annual stockholders' meeting required to be
duly provided under the By-laws;
[2] Special meeting which may be called anytime as may be necessary
Stockholders' meeting, requisites for validity:
In order to be valid, the stockholders' meeting should comply with the following requisites:
[1] A notice of such meeting must be served to the stockholders
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[3] Any and all acts of the stockholders in a meeting duly called and constituted, are deemed
valid if approved by a majority of the outstanding capital stock or at least two-thirds [2/3] vote in
certain cases specified under the law.
Corporation, dissolution:
As a general rule, the corporate existence of a Philippine corporation may last up to fifty [50]
years, renewable for another fifty [50] years. However, such lifetime may be shortened by a vote
of 2/3 of the outstanding capital stock thereof through the process called dissolution.
FOREIGN CORPORATION
Foreign investments, how made:
Foreign investments in the Philippines may be made under any of the following modes:
[1] By establishing a domestic branch office or operation;
[2] By establishing a Philippine representative office;
[3] By operating through a business association in the Philippines;
[4] By operating through a local subsidiary which may be owned entirely or partially by the
foreign business entity;
[5] By establishing joint venture arrangement with a local corporation or business organization;
[6] By establishing an affiliate in the Philippines.
Among the types of business organizations allowed under Philippine law, a corporation is the
most feasible mode of establishing business in the Philippines. The choice of a particular mode
of establishing corporate presence in the Philippines will depend to a great extent on the kind of
business in which a foreign investor wants to engage. Unless falling within the restricted
listwhere foreign ownership is limited to a certain percentage of equity, a foreign investor may
establish corporate presence in the Philippines directly, i.e., by establishing a branch office or by
creating a wholly-owned subsidiary.
Foreign corporation, governing law:
As far as domestic corporations are concerned, the governing law over their creation, formation,
management, dissolution and liquidation is the Corporation Code of the Philippines. This same
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law also governs the corporate relationships between the corporation and its shareholders, the
public, and the government.
As far as foreign corporations, however, are concerned, the law governing their creation,
formation, dissolution and liquidation is the law of the country where such foreign corporations
were organized or established. This is a principle of international law which is fully recognized
in Philippine jurisdiction. Further, Philippine corporation laws were basically patterned after
American corporation and enterprise laws. Consequently, it is no wonder that when unique
situations confront Philippine courts, resort to American laws and jurisprudence is made to
resolve them.
Foreign corporation, right to sue:
Whether a foreign corporation is possessed of the right to sue in the Philippines is determined as
follows:
[1] If the foreign corporation is transacting or doing business in the Philippines with a license, it
has the right to sue within the jurisdiction of the Philippines;
[2] If it is transacting or doing business without a license, it cannot sue;
[3] If it is not transacting or doing business in the Philippines, it can sue even if it is not
possessed of any license.
Foreign corporation, right to be sued:
A foreign corporation may be sued in the Philippines:
[1] If it is transacting or doing business in the Philippines with a license;
[2] If it is transacting or doing business in the Philippines without a license;
However, if it is not transacting or doing business in the Philippines and does not have any
license to so transact or do business in the Philippines, it cannot be sued in the Philippines for
lack of jurisdiction.
Foreign corporation, registration requirement; procedure; documentation:
Foreign corporations intending to operate in the Philippines through the modes allowed by law,
should register with the Philippine Securities and Exchange Commission [SEC]. Such
registration is necessary to give legal personality thereto. Consequently, duly-registered foreign
corporations are treated as artificial beings possessed of all rights, benefits and privileges
appurtenant to being a corporate citizen, such as the capacity to sue and be sued, and/or invoke
the protection of Philippine laws in all their business and commercial dealings.
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Procedure:
The procedure for the registration of a domestic or foreign corporation may be summed up as
follows:
First step. Determination of whether the corporation is going to engage or do business in an
industry where the Philippine constitution and laws impose restrictions as to foreign equity
ownership. If the restriction or prohibition is absolute in nature, the foreign corporation will not
be permitted to be set up in the Philippines. If the restriction or prohibition is not absolute, a
foreign corporation may be allowed to be set up in the Philippines but just the same, it must
comply with the strict foreign equity ownership limitation. In case there is no such limitation or
prohibition, absolute or otherwise, the foreign corporation may directly engage in business in the
Philippines under any of the permissible modes described above.
Second step. Confer with the proper government agency regulating or supervising the particular
industry where the foreign corporation desires to engage in. A certification from said
appropriate government agency that it is not so prohibited from engaging in a business falling
within that industry must be secured. Certain industries require this certification such as the
banking industry, insurance, etc.
Third step. Proceed with the filing of the application with the Securities and Exchange
Commission [SEC] which application must be accompanied by the said certification. The SEC
will then examine the documents submitted and consequently release the registration papers in
due time.
Documentation:
[A] In the case of existing foreign corporations intending to set up a branch or representative
office in the Philippines, the following documentation process shall be undertaken:
[1] Verification of the name of the corporation with the SEC [a name verification slip is issued
by the SEC for this purpose] to determine whether there is similarity in the corporate name with
any existing corporations registered with the SEC;
[2] A copy of the Board Resolution of the corporation duly certified by the Corporate Secretary
and/or members of the board, that the corporation is authorized to establish an office in the
Philippines and naming or designating therein its authorized agent in the Philippines;
[3] Duly audited financial statements covering the year immediately preceding the filing of the
application;
[4] Certified copies of the original Articles of Incorporation duly filed in the country of origin
[or so-called home country] and translated in English;
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[5] Verified proof of inward remittance such as bank certificate or credit advice.
[B] In the case of domestic corporations, the following documentation requirements should be
complied with:
[1] Copy of the proposed Articles of Incorporation;
[2] Name Verification Slip [issued by the SEC];
[3] Certificate of Deposit issued by a bank to show proof that the paid-up capital portion of the
authorized capital stock is duly deposited in said bank;
[4] Copy of the Alien Certificate of Registration, Special Investor's Resident Visa or other types
of visa;
[5] Proof of inward remittance which is required for non-resident aliens.
Foreign corporation, merger or consolidation with domestic corporation:
Philippine law allows one or more foreign corporations to merge or consolidate with one or more
domestic corporations in the Philippines. In the event, however, that the absorbed corporation is
the foreign corporation, the latter should file a petition for withdrawal of its license with the
Securities and Exchange Commission [SEC].
JOINT VENTURE
Joint venture, concept:
Joint venture, within the concept of Philippine law, is organized or established only for some
transient or temporary business objective. It is often characterized as being similar to a
partnership in the sense that there exists among the joint venturers, commonality of interest and
mutual right of control, not to mention the mode by which profits or losses are shared. Joint
ventures are usually resorted to by corporations - domestic or foreign-based - which are not
allowed to form partnerships or become partners in a partnership. Only individual, natural
persons are permitted to form partnerships.