CORPORATION - 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 (New Corporation Code of the Philippines). A corporation is an entity created by law that is separate and distinct from its owners and its continued existence is dependent upon the corporate statutes of the state in which it is incorporated. Characteristics of a Corporation The characteristics that distinguish a corporation from proprietorships and partnerships are: 1. Separate legal entity – A corporation is an artificial being with a personality separate from that of its individual owners (i.e., the corporation has separate legal existence from its owners). 2. Created by operation of law – A corporation is generally created by operation of law. The mere agreement of the parties cannot give rise to a corporation. 3. Right of succession – A corporation continues to exist notwithstanding the withdrawal, death, insolvency or incapacity of the individual owners. Changes in the ownership structure do not dissolve a corporation this means that the corporation can have a continuous life. 4. Powers, attributes, properties expressly authorized by law – Being a creation of law, a corporation can only exercise powers provided by law and powers which are incidental to its existence. 5. Ownership divided into shares – Proprietorship in a corporation is divided into units known as shares of stocks. Ownership is shown in shares of capital stock, which are transferable units. 6. Board of Directors (BOD) – Management of the business is vested in a board of directors elected by the stockholders. The BOD is the governing body or decisionmaking body of the corporation. 7. The stockholders have limited liability. 8. It is relatively easy for a corporation to obtain capital through the issuance of stock. 9. The corporation is subject to numerous government regulations. 10. The corporation must pay an income tax on its earnings, and the stockholders are required to pay taxes on the dividends they receive: the result is double taxation.
Distinction between Partnerships and Corporations Partnership 1. Formed by at least two persons. 2. Starts with agreement among partners; may be formed orally. 3. Unlimited liability 4. Limited life 5. Transfer of equity of a partner needs the consent of all the partners. 6. Partner is an agent of the partnership. Classes of Corporation A. According to Purpose 1. Public – a corporation formed to render government service 2. Private – a corporation formed for a private purpose, aim or benefit. 3. Quasi-public – a private corporation which is given a franchise to perform functions of a public character. B. According to Law of Creation 1. Domestic – a corporation that is organized under Philippine laws. 2. Foreign – a corporation that is organized under the laws of other countries. C. According to Membership Holdings 1. Stock – a corporation in which the capital is divided into shares of stock and is authorized to distribute dividends to the holders of such shares. A stock certificate is a physical evidence of the shares of stock. Stock corporations are generally profit-oriented. 2. Non-stock - a corporation in which capital comes from fees or contributions given by individuals. No part of its income is distributed as dividends and any profit shall be used to further the purpose(s) of the corporation. Non-stock corporations are generally non-profit in nature. D. According to the Extent of Membership 1. Open – a corporation whose ownership is widely held by many investors. 2. Closely held or family – a corporation in which 50% or more of its stock is owned by five persons or less. Corporation Initially formed by at least five persons. Starts with the issuance of a certificate of incorporation issued by SEC Limited liability Unlimited life Stocks can be...