Finance and Its Legal

Environment
Legal Forms of Business
Corporation
• An artificial being created by operations
of law having the rights of succession
and the powers, attributes and
properties expressly authorized by law
or incident to its existence.
Classification of corporation as to:
A. Nature of Capital
1. Stock Corporation
-One whose capital is divided into
shares for purposes of voting and
distribution of dividends.
2. Non-stock Corporation
-No part of the income is distributed
as dividends to its members.
Classification of corporation as to:
B. Purpose
1. Public Corporation
-Organized for the purpose of
carrying out the purpose of the
state
2. Private Corporation
-Established for business/ profit,
charitable, and professional
purposes
Classification of corporation as to:
C. State/Country
1. Domestic
-Organized under Philippine
Laws.
2. Foreign
-Organized under laws of
another country other than the
Philippine Laws.
Classification of corporation as to:

D. Types of Stocks
1. Close corporation
-Limited to selected persons or
members of the family.
2. Open corporation
-Open to any person who wish to
invest or become stockholders.
Components of the corporation
1. Corporators
-All persons composing the corporations
whether they are stockholders or members.
2. Incorporators
-Corporators mentioned in the articles of
incorporations.
3. Stockholders
-Natural or juridical persons owning at least
one share of stock of a corporation
4. Members
-Corporators in a non-stock corporation.
Similarities between a corporation and
partnership
1. Each has a juridical personality
2. They can be organized only where there is a law
authorizing their organization
3. They can act only through agents
4. They are composed of an aggregate of individuals
5. They distribute their profits to those who contribute
capital
6. Both are subject to income tax
Legal Forms of Business
Corporation
– Advantages
• Limited liability
• Specialized management due to presence of
corporate officers
• Ownership is transferable
• Continuous existence of the business even
after withdrawal or death of an owner
• Separate legal entity from owners
• Possible tax advantages and other incentives
• Easier to raise capital
Legal Forms of Business
Corporation
– Disadvantages
• Closely regulated and monitored by the
Securities and Exchange Commission
• Most expensive form of business organization to
organize
• Corporate charter restrictions
• Extensive record keeping necessary
• Double taxation of dividends
• Possible conflict between shareholders and
executives
• Limited range of business, dependent on
corporate charter
Legal Forms of Business
Cooperative
• A voluntary organization composed of small
producers and consumers join together to form
business enterprise.

• In the Philippines, Cooperatives are registered

in the Cooperative Development Authority.
Principles of Cooperative
1. Voluntary and open membership
2. Democratic member control
3. Member economic participation
4. Autonomy and Independence
5. Concern for the community
Legal Forms of Business
Cooperative
• Advantages
• Owned and controlled by members
• Democratic control
• Limited liability
• Profit distribution
• Dividends are in proportion to a members
use of cooperative services
• Highly encouraged by the government
Legal Forms of Business
Cooperative
 Disadvantages
 Possible development of conflict between
members
 Numerous members tend to diminish ones
share in the total dividends
 Longer decision making process than
corporations due to more votes to count
 Requires members to participate for success
 Extensive record keeping necessary
 Less incentives for members to invest
additional capital
Legal Forms of Business
5. Other legal forms:
a. Joint venture
-regarded as a particular partnership established for a
specific undertaking
-Bringing together several partners to engage in a
business activity which is normally very specialized
b. Joint stock
-The capital is divided into small units permitting a
number of investors to contribute varying amounts,
profits are divided between stockholders in proportion to
the number of shares they own. It is similar to
corporation.