Tirol, C.

BUSINESS ORGANIZATION CHARTS

Sole Proprietorship Corporation

Neither a creature of statute nor contract; does not A creature of statute/contract.
involve complexity or expense required of
business associations.
Unorganized business owned by a person Organized business of a group of persons
No separate legal personality; owner has unlimited Has a separate legal personality distinct from
personal liability for all the debts and obligations, persons in corporation.
and all actions are enforced against him. SP can’t
file an action separate from proprietor.

Only available methods of obtaining funds are Contributions obtained from components
personal contributions and loans from financial
institutions or private sources (limited by potential
of business, credit standing, extent of properties
for collateral)
Totally dependent on life of proprietor. If he dies, Death of one member of a corporation does not
business operation may cease. He will have to rely necessarily dissolve the corporation.
on his heirs or other interested persons to ensure
the business will continue after his death.

Joint Accounts Partnerships

Juridical personality No juridical personality Has personality distinct from partners
Business name No commercial name common to Can adopt a partnership name
all participants can be adopted
Management Only ostensible partner manages General partners are all managers in
and transacts business in his own partnership
name and under his individual
liability
Parties in case Only ostensible partner can be All general partners may be liable
sued by and is liable to persons even up to extent of their
transacting with the former personalities and may therefore be
sued by third persons
 Tirol, C.

Partnership Corporation
Manner of creation By mere agreement Commences only from issuance of
a Certificate of Registration of SEC
or passage of a special law
Number of organizers 2+ persons At least 5 persons
Powers Subject to what partners More restricted in its powers
agreed upon because of its limited personality
Authority Mutual agency; each can bind Stockholders are not agents in
the partnership absence of express authority
Transfer of interest Interest in partnership cannot Corporate shares are freely
be transferred without consent transferable without content of
of other partners other stockholders
Liability May be liable beyond their Liability of stockholders and
investment members for corporate obligations
is limited to their investment
Rights of Succession No right of succession; death There is a right of succession
of general partner dissolves
partnership
Juridical personality

Groups of persons

Capitals derived from components

Similarities
Distribution of profits

Both act only through agents

Organized only where there is law authorizing such

Advantages of Corporations Disadvantages of Corporations

1. The capacity to act as a legal unit 1. Prone to “double taxation”

2. Limitation of or exemption from individual 2. Subject to greater governmental regulation
liability of shareholders and control
3. Continuity of existence 3. May be burdened with an inefficient
4. Transferability of shares management if stockholders cannot
5. Centralized management of board of organize to oppose management
directors 4. Limited liability of stockholders may at times
6. Professional management translate to limited liability to raise creditor
7. Standardized method of organization, and capital
finance 5. Harder to organize compared to other
8. Easy capital generation business organizations
6. Harder or more complicated to maintain
7. “Owners” or stockholders do not participate
in day-to-day management