Corporation

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CORPORATION According to Batas Pambansa 68 (B.P. 68) or the Corporation Code of the Philippines, “a corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence.”

A corporation enjoys certain legal rights and powers just like a natural person but these rights and powers are separate from its shareholders, directors, etc. In other words, a corporation is a juridical person with a separate legal personality.

The basic structure of a corporation is simple. Because the positions and responsibilities are properly laid out, a corporate functions efficiently. The projects of corporations usually encompass a larger scope than that of handled by sole proprietorships or partnerships. With more people involved and a larger pool of resources from combined investments of the members, a corporation is the most “able” architectural firm in terms of delivering a wide range of services.

Having said that, a corporation has a bigger public responsibility (corporate social responsibility or CSR). The function of a corporation becomes public. A corporation is comprised of five to fifteen (5 – 15) natural persons, all of legal age and a majority of which are residents of the Philippines. Each of these incorporators also has to own at least one (1) capital share of the corporation.

According to R.A. 9266 or the Architecture Act of 2004, Article IV, Section 37 – b, “registered and licensed architects shall compose at least seventy-five percent (75%) of the owners, shareholders, members, incorporators, directors, executive officers. . . .” of an architectural firm. The member with the largest shares in the firm is called the ‘principal architect.’

Section 11 of the Corporation Code of the Philippines, “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.” But a corporation can practically last forever because its registration is renewable for periods of not exceeding 50 years. The renewal has to be made at least 5 years before the original expiry date of its registration.

Structure

In its simplest form, the corporate organizational structure consists of the following levels:


Shareholders: who own shares of the business but do not contribute to the direct management of the corporation, other than by electing the directors of the corporation and voting on major corporate issues. Directors: who may be shareholders, but as directors do not own any of the business. They are responsible, jointly as members of the board of directors of the corporation, for making the major business decisions of the corporation, including appointing the officers of the corporation. Officers: who may be shareholders and/or directors, but, as officers, do not own any of the business. Officers (generally the president, vice president, secretary, and treasurer) are responsible for day-to-day operation of the corporate business. Employees: are those who make the business run. They carry out the various tasks associated with the company's mission. Employees report to the officers of the company.







Classes of Corporation

There are two (2) classes of corporation namely, stock and non-stock. The former has capital stocks divided into shares. Non-stock corporations is one where no part of its income is distributable as dividends to its members, trustees, or officers. Examples of these are charitable, religious, educational and civic service corporations. Corporators in a stock corporation are called stockholders or shareholders. Incorporators in a non-stock corporation are called members.

Advantages: 1. Ease of acquiring large amount of capital. 2. Flexibility/ transferability of ownership. Selling ownership of a corporation is simply a matter of selling shares. 3. Limited liability of stockholders. The liability of an owner for the corporation’s debts and obligations is limited to the owner’s investment in the company. 4. Permanency. A corporation can theoretically live forever as long as it remains profitable.

5. Legal entity. A corporation can be sued, make contracts, and secure title to property in its own name. 6. Credibility. A business with an Inc. or Corp. extension after its name sounds more credible.

Disadvantages: 1. Organizational expense. 2. Government restrictions and reports. All types of annual special reports, which frequently become burdensome and costly, must be prepared. 3. Lack of personal interest. All who work for a corporation assume the role of employees even though they may own stock in the organization. 4. Lack of secrecy. A corporation is duty-bound to make an annual report to each stockholder. 5. Double taxation.

Registration process Agencies involved and their roles AGENCY Department of Trade and Industry (DTI) Securities and Exchange Commission (SEC) Cooperative Development Authority (CDA) Local Government Unit (LGU) WHAT This is where you register if your enterprise is a single proprietorship. The agency will issue a certificate of registration of business name. If your enterprise is a partnership or a corporation, this is where you will register. It will issue a certificate of registration.

If your set-up is a cooperative, register with this body. The agency will issue the certificate of registration. You register with the municipality or city where you will set up your business. This office will issue the business permit. You register with the specific barangay in the municipality or city where you will operate your business. This office will issue the barangay clearance.

Barangay Hall

Bureau of Internal Revenue (BIR)

You register your business with this office and apply for your business’s taxpayer identification number (TIN), registration of books of accounts, authority to print You register your business as an employer, yourself as a self-employed or as employee, and your workers as employees. This office will issue an SSS number for your business, for yourself, as well as for your workers. If you employ five workers or more, register your business with this agency. The DOLE is asked to promote gainful employment opportunities, protect workers and promote their welfare, develop human resources, and maintain industrial peace. RA 7742 requires all SSS members earning at least P4,000 a month to register with this agency. HDMF administers the Pag-Ibig Fund. The New National Health Insurance Act (RA 7875) as amended by RA 9241 requires all employers of the government and private sectors and their employees to register with this agency. PhilHealth manages and administers the government health care system.

Social Security System (SSS)

Department of Labor and Employment (DOLE) Home Development Mutual Fund (HDMF)

Philippine Health Insurance Corp. (PhilHealth)

Some enterprises, by nature of their operations, are required to secure a special clearance, license, or permit from some other government agencies. The following table will guide you about some of the types of businesses that require a special certificate or permit and the agencies that issue them. TYPE OF BUSINESS Animals and animal products, registration of veterinary drugs and animal facilities Aquatic animals, importation, Fishpond lease agreement Fertilizer products and registration of pesticide products Fiber and fiber products processing and trading Film and television production, export and import, booking, etc. WHAT AND WHERE Registration certificate - Bureau of Animal Industry Permit - Bureau of Fisheries and Aquatic Resources (DA-BFAR) Registration certificate - Fertilizer and Pesticide Authority (DA-FPA) Registration certificate; commodity clearance - Fiber Development Authority, (DA-FIDA) Registration certificate - Movie & Television Review and Classification Board (MTRCB)

Food, chemicals, health related business Flour processing, Grains wholesaling & retailing, milling, warehousing, exporting, importing, indenting, packaging, threshing, corn shelling, mechanical drying Meat plant accreditation for meat & meat products, slaughterhouse operations

Registration certificate – Bureau of Food and Drugs, Dept. of Health (DoH-BFAD)

License – National Food Authority (DA-NFA)

Accreditation certificate, Registration certificate – National Meat Inspection Commission (DA-NMIC) Registration certificate – Bangko Sentral ng Pilipinas, Dept. of Finance (DoF-BSP) Permit - Bureau of Plant Industry (DA-BPI) Registration certificate – DA-BPI Registration certificate - Phil. Overseas; Employment Administration, Dept. of Labor (DOLE-POEA); Registration certificate – Bureau of Local Employment (DOLE-BLE) Permit - Dept. of Education (DepEd); Commission on Higher Education (CHEd); Registration and accreditation certificate Technical Education Skills Development Authority (DOLE-TESDA) Permit – Philippine National Police, Dept. of Interior & Local Government (DILG-PNP)

Pawnshop & lending investor Plants & plant products: nursery accreditation Seed certification and phytosanitary certificate Recruitment or placement agency for foreign employment Recruitment or placement agency for local employment Schools & educational institutions: Educational institution (nursery, primary, elementary, secondary levels); Tertiary level; Technical-vocational education, training program registration and accreditation Security agency business Service and repair shops for: Motor vehicles; automotive & heavy equipment; engine & engineering works, & machine shops; electronics, electrical, air conditioning & refrigeration; office & data processing equipment; medical & industrial equipment; appliances or devices; and private emission centers Sugar trading, muscovado converting & trading, processing or manufacturing sugar-based products for export Telecom business

Accreditation license: Bureau of Trade Regulation and Consumer Protection, (DTIBTRCP); DTI regional offices

Registration certificate – Sugar Regulatory Administration (DA-SRA) License – National Telecommunication Commission, Dept. of Transportation & Communication, (DOTC-NTC)

Tourism-related projects Transportation: Land transport service; Sea transport service

Registration and accreditation certificate – Dept. of Tourism (DOT) Land Transport Franchise & Regulatory Board (DOTC-LTFRB); Maritime Industry Authority (DOTC-MARINA) Optical Media Board (formerly Videogram Regulatory Board), Office of the President (OPOMB)

Video production, sales and rental

SEC REGISTRATION Steps in registering your corporation: 1. Verify/reserve proposed name with the Name Verification Unit. 2. Draw up the Articles of Incorporation and By-laws in accordance with the Corporation Code. Blank forms are also available from the CRMD. 3. If required, get endorsements from other government agencies. In addition, the CRMD obtains clearances from other SEC departments whenever these are deemed appropriate. 4. Deposit paid-up capital / contribution (for foundations only) in the bank. 5. Present 6 sets of the accomplished forms and documents for pre-processing at the CRMD. Only complete application documents are accepted for processing. All documents executed outside the Philippines must be authenticated by the appropriate Philippine embassy or consulate in the area concerned. 6. Pay the filing fees to Cashier. 7. Claim the Certificate/License from the Releasing Unit, Records Division upon presentation of the official receipt issued for payment of filing fee. 8. The documentary stamp tax on the original issuance of shares of stock must be filed and paid with the Bureau of Internal Revenue (BIR) or Authorized Agent Bank (AAB). After SEC registration, go to different government offices to obtain permits and licenses relating to your business.

Resources: Architecture Act of 2004, The. Retrieved from http://www.ops.gov.ph/records/ra_no9266.htm.

Corporation Code of the Philippines. Retrieved from http://www.usig.org/countryinfo/laws/Philippines/Philippines%20Corporation%20Cod e.pdf Gutierrez, H.; Jose Pura, Jr. and Rolando Garcia. Business Organization and Management. Quezon City: R. M. Garcia Publishing House. 1994. Business Registration Guide. Retrieved from http://www.business.gov.ph/web/guest/businessregistrationguide Corporations FAQs Retrieved from http://www.findlegalforms.com/articles/faq/corporationsfaqs What is the organizational structure of the corporation? Who runs it? Retrieved from http://business-law.freeadvice.com/business-law/corporations/organizational_structure.htm A Citizen’s Manual for the REGISTRATION OF CORPORATIONS & PARTNERSHIPS Pamphlet No.2 28 II 2002

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