Definition of Corporation

According to Section 2 of the Philippines' Revised Corporation Code, "a corporation is

an artificial being, created by operation of law, with the right of succession and the
powers, attributes, and properties expressly authorized by law or incidental to its
existence."

The above definition shows the following characteristics of a corporation:

A corporation is a man-made being. A corporation has a personality that is distinct from

that of its stockholders. It has the ability to incur liabilities and own assets in its own
right. It has the ability to enter into contracts, sue and be sued, and exercise powers and
rights expressly granted by law.

A corporation is formed by the operation of the law. It cannot be established solely

through the agreement of the parties, as in the case of a partnership. The state,
specifically the Securities and Exchange Commission, must grant authority for it to exist.

A corporation has the right to succeed to its assets. A corporation is a type of business
in which ownership is represented by stock shares. Stockholders are the people who
own these shares. The stocks can be fully transferred from one stockholder to another
or to anyone who was not previously a stockholder.

A corporation has the powers, attributes, and properties expressly granted by law or
that are incidental to its existence. A corporation may only exercise powers granted by
law and those that are incidental or essential to its existence. A corporation engaged in
agriculture, for example, has the right to purchase and own agricultural lands because
doing so is required to pursue the goals for which it was formed.

Distinctions Between Partnership and Corporation

Partnership

1.The result of a simple partnership agreement.

2.It is possible that only two people will organize the event.

3.From the execution of the partnership contract, the acquisition of legal personality
begins.
4.May exercise any power granted by the partners as long as it is not in violation of the
law, morals, good customs, public order, or public policy.

5.The number of partners limits the ability to raise capital.

6.General partners are liable indefinitely. They are personally liable for the firm's debts
owed to third parties.

7.If an interest is shared with others, the consent of other partners is sought.

8.Because there are several reasons for dissolving a partnership, such as the death or
insolvency of a partner, it is very likely that it will have a shorter life.

9.Mutual agency exists. The partners have the authority to bind the partnership to any
contract that falls within the scope of its business.

10.Any or all of the partners may dissolve the partnership at any time.

Corporation

1.As a result of the operation of the law.

2.Any individual, partnership, association, or corporation, acting alone or in collaboration with

others, but no more than fifteen, may organize (15).

3.From the date of the Securities and Exchange Commission's issuance of the certificate of
incorporation, the company gains corporate existence and legal personality.

4.Can only exercise powers expressly granted by law or powers incidental to its existence.

5.The ability to raise capital is limited by the profitability with which stockholder funds are
employed.

6.Creditors of the corporation cannot seize the stockholders' personal assets. Stockholders are
only liable for the number of shares they have subscribed for.

7.Stock shares can be transferred without the consent of other stockholders.

8.Unless its articles of incorporation state otherwise, it has perpetual existence.

9.There is no such thing as mutual agency. A stockholder does not have the authority to bind
the corporation to contracts. His only right is to vote at stockholders' meetings. The board of
directors has the authority to conduct business and manage the company's affairs.
10.Can only be dissolved with the state's permission.

Similarities Between Partnership and Corporation

Both are set up for legal reasons.

Both have separate and distinct legal personalities from the individuals who comprise them.

Both operate through agents.

Profits are distributed to those who contribute capital in both cases.

Both are subject to taxation.

Advantages of Corporation

1.A larger sum of money. A corporation can easily raise and assemble capital from the
combined investments of many stockholders.

2.Liability is limited. Creditors of a corporation may make a claim against the corporation's
assets but not against the personal property of its stockholders.

3.Stock transferability A stockholder has the right to transfer and dispose of his shares of stock
at any time, without the consent of other stockholders or the corporation.

4.Existence is maintained. Unless its articles of incorporation state otherwise, a corporation has
perpetual existence under the Revised Corporation Code. ama

5.The legal entity. The corporation is legally capable of acting as a legal entity.

6.Management has been centralized. A corporation's management is centralized in the board of

directors.

7.Typical design. The Revised Corporation Code of the Philippines governs the formation,
organization, management, and dissolution of corporations.
 Disadvantages of Corporation

1.Controlled and supervised by the government. Corporations are formed by meeting the
requirements of corporation laws. As a result, corporations are subject to increased government
regulation.

2.Excessive taxation. Corporations are taxed at a high rate based on their income. If a portion of
this income is distributed to stockholders as dividends, the dividends are considered personal
income of the stockholders.

3.It is more expensive to organize than it is to organize a partnership.

4.Formation is difficult. The formation and organization of a corporation is relatively complicated.

5.The stockholder has no say in how the business is run.

Powers of Corporation

The Revised Corporation Code of the Philippines provides the following powers and
capacity of Corporation:

1.Suing and being sued in its corporate name;

2.Unless otherwise specified in the certificate of incorporation, the company will be in existence
in perpetuity.

3.Adopting and employing a corporate seal;

4.To amend its articles of incorporation in accordance with the Code's provisions;

5.Adopting bylaws that are not in violation of the law, morals, or public policy, and amending
them in accordance with the Code;

6.To issue or sell stocks to subscribers and to sell treasury stocks in the case of a stock
corporation; to admit members to the corporation in the case of a nonstock corporation;

7.To buy, receive, take, or grant, hold, convey, sell, lease, pledge, or mortgage real or personal
property, including securities and bonds issued by other corporations.

8.To form a partnership, a joint venture, a merger or a consolidation, or any other commercial
agreement with natural or legal persons;
9.To make reasonable donations, including those for the general good or for hospital, charitable,
cultural, scientific, civic, or similar purposes;

10.To establish pension, retirement, and other plans for its directors, trustees, officers, and
employees; and
11.To exercise any other powers that may be necessary or necessary to carry out its stated
purposes in its articles of incorporation.

Types of
Corporation
As to Purpose

Public Corporation. Those which are formed for political or governmental

purposes such as municipalities and cities.
Yaong mga nabuo para sa mga layuning pampulitika o pamahalaan tulad
ng mga munisipalidad at lungsod. owned and operated by a government,
established for the administration of certain public program s

Private Corporation. Those which are formed for private purposes.

Quasi-public Corporations. Those engaged in rendering public services such as
bus, electric, water, telephone, etc. companies.
Yaong mga nabuo para sa mga pribadong layunin.
Mga Quasi-public Corporation. Yaong mga nakikibahagi sa pagbibigay ng
mga pampublikong serbisyo tulad ng mga kumpanya ng bus, kuryente,
tubig, telepono, atbp.
A private corporation, also called a closely-held company, is a business that is
generally owned by a small group of investors.

As to Holdings

Stock Corporation. Private corporations the ownership of which is divided into shares of
stocks. Stock corporations are those which have capital stock divided into
shares and are authorized to distribute to the holders of such shares,
dividends, or allotments of the surplus profits on the basis of the shares
held.

Nonstock Corporation. Private corporations whose funds come from the fees of its
members.A Non-Stock Corporation is basically a corporation that does not
issue shares of stock. It can be formed as either a for-profit or non-profit
corporation. Since the Non-Stock Corporation has no shareholders, it is
owned by its members – meaning a member-owned corporation that does
not issue shares of stock. Ang pagkakaiba nito sa stock corp, Yung stock
corporation ay may authorized capital stock and yung non stock naman it
has no authorized capital stock.

As to Law of Creation

Domestic Corporation. Those created under the Philippine laws.

Foreign Corporations. Those which are formed under

foreign laws. As to Membership

Close Corporation. One in which the shares of stock are owned by members of
immediate family.
Open Corporation. One in which all the members or corporators have the right to
vote in the election of directors and other officers.

Special Corporations

Corporations created by special laws or charter and are governed by the

provisions of the special law or charter creating them or applicable to them.

Educational Corporations. Incorporated schools, colleges, or other institutions of

learning governed by the Board of Trustees which consists of five (5) to fifteen (15)
trustee members. This could be stock or nonstock corporation.

Religious Corporations. Corporations formed for religious purposes.

Corporation Sole. Incorporated by one (1) person who maybe the chief
archbishop, bishop, priest, minister, rabbi, other presiding elder of such religious
denomination, sect, or church.
Religious Societies. Religious organization of a religious denomination,
sect, or church incorporated for the administration of its affairs, properties, or
estate.

One Person Corporation. A corporation with single stockholder. Only natural person,
trust, or estate may form a One Person Corporation. The following may not form One
Person Corporation: banks and quasi banks, preneed trust, insurance, public and
publicly listed companies, non-chartered government-owned and controlled
corporation, natural person who is licensed to exercise a profession for the purpose
of exercising such profession.
EXPLAINEDDD

Characteristics of a One Person Corporation

It is not required to have a minimum authorized capital stock.

It must submit its articles of incorporation. However, it is not required to
submit its corporate bylaws. ama
Letters “OPC” is shown either below or at the end of its corporate name.
The single stockholder is the sole director and president of the One Person
Corporation.

Organization of a Corporation EXPLAINED

A formal process is undertaken when a corporation is brought into being.

Generally, these steps consist of: (1) planning and promoting; (2) incorporation; (3)
commencement of the business operation.

Planning and Promoting

In planning stage, the objectives of forming a corporation is usually specified.

Some are formed to carry a new business while others are formed to take and develop
the activities of one or more predecessor companies.
Promotion includes the selection of a place wherein the business is to be
legally located, determination of capital structure, choosing the methods of raising
funds, drafting the by-laws, etc.

Incorporation

Incorporation includes the preparation of the articles of incorporation and filing

such to the Securities and Exchange Commission.
To form a corporation, an application has to be filed with the Securities and
Exchange Commission. The application should contain the Articles of Incorporation, a
sworn affidavit by the association’s treasurer that at least twenty five percent (25%) of
the entire number of the authorized shares are subscribed, and that at least twenty five
percent (25%) of the subscription has been paid up.
 After the required fees have been paid and if the application is approved, the
SEC issues a certificate of incorporation.

The incorporators then hold a meeting to elect a board of directors and adopt
the by-laws which will govern the administration of the corporation. The by-laws then,
will be submitted to the SEC within one month from the issuance of the certificate of
incorporation. The board of directors elects the corporate officers.

Commencement of the Business Operation

Following the incorporation, the company is legally ready to do business.

However, in some cases, before the active operation begins, several preparations are
made such as raising enough capital, construction of the necessary facilities, hiring of
employees, etc.

Articles of Incorporation

The Articles of Incorporation contains the rights and restrictions conferred by the
government upon the corporation. The following information is usually included in the
articles of Incorporation:

The name of the corporation;

The nature of the business and the purposes for which it is formed; ama
The location of the principal office of the corporation;
The term of existence;
The names and addresses of its incorporators;
The number of authorized capital stock, amount of par value, if there is any, the
classes of shares to be issued;
The names and addresses of the directors chosen;
The names and addresses of its subscribers and members and the amount and
number of subscriptions;
The total amount paid on the subscriptions and the amount paid by each subscriber;
Other necessary and required data.

Corporate By-Laws

By-laws are rules of action adopted by the corporation to govern the conduct of
its affairs. By-laws include the following matters:

1.The time, place, and manner of calling the stockholders’ meeting;

2.The circumstances which may permit the calling of meetings and rules of
conducting such meetings;
 3.The manner and qualifications of voting;
4.The number of directors;
5.The duties and powers of directors
6.The length of office of directors;
7.The manner of appointing corporate officers;
8.The powers and duties of corporate officers;

The compensation and length of office of corporate officers;

Rules and regulations to govern the acts of directors and officers.

Corporate Books and Records

1.Minutes Book. This book contains a narrative record of the minutes of the
corporation's board of directors and stockholders' meetings.
2.Stock and Book. This record contains the names of all stockholders, as well
as their paid and unpaid accounts, as well as the dates of payments, sales, and
transfers of shares, as well as the date of transfer.
3.Stockholder’s Ledger. If the company has a large number of stockholders, the
general ledger contains a controlling account called Ordinary Share (Common
Stock), and a subsidiary stockholder's ledger is kept. Each stockholder's account
shows the number of shares he owns, his certificate number, the date he bought
them, and the date he sold them.
4.Subscriber’s Ledger. This is a subsidiary for the subscription receivable that shows
each subscriber's individual subscription.
5.Subscription Book. This book contains the printed blank subscription.
6.Stock Certificate Book. This book contains blank share certificates that have been
printed.
7.Accounting Records. All records required for managerial purposes, such as journals,
ledgers, and other business records, are included in this category.

Components of a Corporation

1.Corporators. Those who made up the corporation, whether they were

stockholders or members.
2.Incorporators. Those who formed and composed the corporation, as well as
executed and signed the articles of incorporation.
3.Stockholders or shareholders. Owner of shares of stock in a stock corporation.
4.Members. Corporators of a non-stock corporation.
 5.Promoters. Persons who bring about the formation and organization of a
corporation by gathering interested parties in the enterprise, obtaining their
subscriptions, and thus bringing in capital to the corporation.
6.Subscribers. Individuals who have agreed to accept and pay for a
corporation's original unissued shares. When their subscriptions are accepted,
they become stockholders.

Stockholder’s Rights

The stockholder has the following basic rights:

1.The right to vote for directors to represent in the management of the business.
2.The right to share in the profits in the form of dividends declared by the board of
directors.
3.The right to share in the distribution of the remaining assets of the business upon
its liquidation after all the creditors have been paid.
4.The preemptive right or the right of the stockholders to subscribe for additional
shares when the corporation decides to increase the amount of outstanding shares.
5.The right to sell their shares.