Republic Act 6938 and the Philippine Cooperative Code

Cooperative Under Republic Act 6938

• An association must be organized primarily for economic activities, where members have a common bond or interest, to be classified as a cooperative.
• A cooperative differs from other organizations primarily through its member-ownership structure, emphasizing democratic governance and shared benefits.

Characteristics of a Cooperative

• Cooperatives are member-owned, ensuring that decisions are made democratically.
• They focus on providing services or promoting the collective well-being of their members rather than accumulating profits.
• A characteristic NOT associated with cooperatives is operating for exclusive profit purposes.

Sole Proprietorships

• A primary advantage of a sole proprietorship includes complete control over business decisions and profits.
• A significant disadvantage is the personal liability for all business debts and obligations, exposing personal assets to risk.

Partnerships

• General partnerships consist of two or more individuals managing a business, sharing responsibilities, profits, and liabilities equally.
• In a limited partnership, there are general partners who manage the business and limited partners who only contribute financially and have limited liabilities.
• Limited partnerships offer the advantage of personal asset protection for limited partners, reducing financial risk.

Limited Liability Companies (LLCs) vs. Corporations

• An LLC provides liability protection for its owners, shielding personal assets from business debts, while corporations also offer limited liability but involve more formalities and requirements.

Disagreements in Partnerships

• Limited partnerships may face disagreements due to the differing levels of involvement and investment, leading to conflicts between general and limited partners.

Types of Corporations

• S corporations enable profits to be passed directly to owners, avoiding corporate income tax and allowing personal tax treatment of business income.

Disadvantages of Cooperatives

• Compared to corporations, cooperatives may face challenges in raising capital due to their member-focused nature and ethical commitments, which might limit outside investment options.