Laws on Partnership and Corporation PDF

LEGAL ASPECTS IN TOURISM AND HOSPITALITY LAWS ON PARTNERSHIP AND CORPORATION 3 Kinds of Business Ownership 1. Sole proprietorship 2. Partnership 3. Corporation SOLE PROPRIETORSHIP  A sole proprietorship is the oldest,simplest, and most prevalent fo...

LEGAL ASPECTS IN TOURISM AND HOSPITALITY LAWS ON PARTNERSHIP AND CORPORATION 3 Kinds of Business Ownership 1. Sole proprietorship 2. Partnership 3. Corporation SOLE PROPRIETORSHIP  A sole proprietorship is the oldest,simplest, and most prevalent form of business enterprise. It is unorganized business owned by one person. The sole proprietor is personally liable for all the debts and obligations of the business. Advantages of Sole Proprietorship  Sole enjoyment of profit  Cheaper fees paid to the government  Low capitalization Disadvantages of Sole Proprietorship  Personally liable to all debts and obligations of the business.  Burdensome because all decisions and undertakings are to be carried out by him alone.  Limited ability to raise capital.  The existence of the business depends upon death, illness, condition or to the will of the propietor. PARTNERSHIP Art. 1767 of the New Civil Code provides,  “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 exercise of a profession.”  A partnership exist when two or more persons agree to place their money, effects, labor, and skill in lawful commerce or business, with the undertaking that there shall be a proportionate sharing of the profits and losses among them. Essential Requisites of Partnership 1. There must be a valid contract 2. There should be contribution of either money, property, or industry to a common fund 3. The business, object or purpose of the partnership must be lawful 1 LAWS ON PARTNERSHIP AND CORPORATION– LATH 311  4. The purpose of the partnership is for profit and with the intention of dividing the same among the partners 5. There must be two or more persons with legal capacity to enter in the contract of partnership. Example Scenario of Partnership Jose, Pedro, and Senti were classmates during their college years. On December 15, 2014, Jose approached the two and discussed the possibility of the establishing a restaurant business to which the two agreed. Thereaftter, the 3 executed a contract of partnership (Article of Partnership) which states among others that Pedro will contribute 50,000.00 pesos, Jose, will contribute kitchen untensils and Santi who finished culinary will be the chef. They also agreed that any profits obtained in the business will be divided in 60%-30%-10% for Pedro, Jose, and Santi resepctively. Their business’ name is Star Bright Company. Delectus Personae  The doctrine of Delectus Personae means no one can become a partner without consent of all partners. The consent of all the partners in the partnership must be obtained to enable them to join the parnership. Partnership has Juridical Personality Art. 1768, The partnership has a juridical personality separate and distinct from that of each of the partners.  Once the partners formed the partnership, the partners actually created or formed a new person, and that new person is the partnership itself. It should be remembered that there are two kinds of person in law, one is natural person or human being and the second is a juridical person which is separate and distinct from that of each of the partners. As consequence, the partnership may through the representation of the partners buy or sell properties or enter into different conractual obligations. Classifications of Partnership  GENERAL PARTNERSHIP- Are partnership where all the partners are general partners who are liable to the extent of their separate property after the partnership asset have been exhausted.  LIMITED PARTNERSHIP- A partnership with one or more general partners and one or more limited partners. In limited partnership, the general partner will be held liable beyond his contribution. A limited partner is however liable only to he extent of his contribution. 2 LAWS ON PARTNERSHIP AND CORPORATION– LATH 311 Classifications of Partners  CAPITALIST PARTNER- is one who contributes capital (property or money) a.) A capitalist partner is not exempt to any losses. Any stipulation to the contrary is void. b.) A capitalist partner cannot engage in another business which is of the same kind of business of the partnership, unless there is a stipulation to the contrary.  INDUSTRIAL PARTNER- is one who contributes industry or skills. a.) An industrial partner cannot engage in business for himself, unless the partnership expressly permits him to do so, and if he should do so, the capitalist partners may either exclude him from the firm or avail themselves of the benefits which he may have obtained there from, with a right to damages in either case. b.) As for the profits, the industrial partner shall receive such share as may be just and equitable under the circumstances. c.) Industrial partner while he is not liable for losses, may however be liable for any liabilities incurred by the partnership from their creditors. Should he industrial partner pays, he has the right to be reimbursed for any payment he made.  CAPITALIST-INDUSTRIAL PARTNER- is a partner who contributed both capital and industry.  GENERAL PARTNER- is a partner who is liable beyond the extent of what he has contributed.  LIMITED PARTNER- is a partner in a limited partnership and is liable only to the extent of what he has contributed.  MANAGING PARTNER- is a partner who manages the business of the Partnership. If there is no managing partner appointed, all of the partners shall manage. Distribution of Profits Under article 1797 of the civil code, the profit of the partners shall depend upon the agreement of the partners, in case they failed to stipulate, the parties share in the profit shall be in proportion to what he may have contributed. Distribution of Losses The rule on distribution of losses are the same as the rule above to the effect that, the share of the partner in the losses shall be that share agreed upon. However, if they do not agree as to how much would be their share in the losses, then the share of each partner on the losses shall be in proportion to what he may have contributed. However, note that the industrial partner shall not be liable for losses. 3 LAWS ON PARTNERSHIP AND CORPORATION– LATH 311 CORPORATION A corporation is an artificial being created by oeration of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence. Attributes of Corporation  It is an artificial being  It is created by operation of law  Has a right of succession  It has express and implied powers Doctrine of Corporate Entity  A corporation acquires juridical personality from the time the Securities and Exchange Commission (SEC) issued a Certificate of Incorporation. Once juridical personality is required, the corporation becomes separate and distinct from the person who establishes the same. This is called doctrine of corporate entity.  Therefore considering that a corporation is a person, it can acquire properties in its own name. The property so acquired by the corporation is not the property of the Board of Directors, its officers or stockholders regardless of the amount or shares given by them in corporation. Advantages of Corporation  It has strong legal personality;  Free transferability of shares;  Centralized Management (there is a board);  Limited liability; and  It may last long Disadvatages of Corporation  The process of forming corporation is complicated;  It is always subject to the control and regulation of the government; and  The operation is costly. Common Classification of Corporation 1. Stock Corporation - is one which has capital stock and is divided into shares and authorized to distribute to holders thereof of such shares in the form of dividends or allotments of the surplus profits on the basis shares held. 2. Non-Stock Corporation - is one which does not issue stocks and does not distribute dividend to their members. 4 LAWS ON PARTNERSHIP AND CORPORATION– LATH 311  3. Private Corporation - is one which is established by private individuals for private purposes and ends. 4. Public Corporation - is one created by law and for public purpose. 5. Corporation de Jure - is one which organized in strict compliance of all the requirements of the laws for its incorporation. 6. Domestic Corporation - is one that is formed or organized in accordance to the laws of the Philippines. 7. Foreign corporation - is one that is formed or organized under any laws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in its own country. 8. Non-profit Corporation - by prescription is one which was not formed formally, meaning, no SEC registration, but has been recognized by immemorial usage as a corporation 9. Corporation Sole - is a corporation established for the purpose of administering and managing, as trustee, the affairs, property and temporalities of any religious denomination, sect or church. 10. Eleemosynary Corporation - is one that is organized for charitable purposes. Components of Corporation 1. INCORPORATORS are the persons who originally formed the corporation. Their names apear in the Articles of Incorporation. The following are the requisites in order to become an Incorporator 2. CORPORATORS are those that composes that corporation, the board of directors, or board of truestees, stock holders or members including corporaion. 3. STOCKHOLDERS AND MEMBERS stockholders are person own or holders of shares of stock in a stock corporation. Members on other hand, are those who compose the non stock corporation. 4. CORPORATE OFFICERS are the officers named in the articles of incorporation or in the by-laws of the corporation. Under section 25 of the Corporation code the officers are: a. President who must be director of the corporation b. Treasurer, who may or may not be a director c. Secretary who shall be a resident and citizen of the Philippine and d. Such as other officers as may be provided for in the by-laws. Any two or more positions may be held concurrently by the same person, except that no one shall act as president and secretary or as president and treasurer at the same time. 5. DIRECTORS AND TRUSTEES The Board of Directors is the governing board in a stock corporation. Whereas, the Board of Trustees is the governing board in a non-stock corporation. The board exercise the powers of the corporations 5 LAWS ON PARTNERSHIP AND CORPORATION– LATH 311 Powers of the Corporation The powers of the corporations are classified into three, namely; 1. EXPRESS POWERS or the powers expressly granted by law to he corporation such as those mentioned in Section 36 of the Corporation Sode. The powers of the corporation may also expressly contain in the articles of Incorporation and its By laws. 2. INCIDENTAL POWERS are powers which a corporation can exercise as incident to itts corporate existence. Example: Power of succession, power to adopt and amend it by laws 3. IMPLIED POWERS these are the powers which are necessary to execute the express powers granted to a corporation. Corporate Term A corporation shall exist for a period not exceeding fifty(50) years from the date of incorporation unless sooner dissolved or unless said period is extended. The corporate term as originally stated in the articles of incorporation maybe extended for. 6 LAWS ON PARTNERSHIP AND CORPORATION– LATH 311