Forms of Business Organization with Advantage and Disadvantage (Hugot)

One of the first decisions that you will have to make as a business owner is how the business should be structured. All businesses must adopt some legal configuration that defines the rights and liabilities of participants in the business’s ownership, control, personal liability, life span, and financial structure. This decision will have long-term implications, so you may want to consult with an accountant and attorney to help you select the form of ownership that is right for you. In making a choice, you will want to take into account the following:

•Your vision regarding the size and nature of your business.
•The level of control you wish to have.
•The level of “structure” you are willing to deal with.
•The business’s vulnerability to lawsuits.
•Tax implications of the different organizational structures.
•Expected profit (or loss) of the business.
•Whether or not you need to re-invest earnings into the business.
•Your need for access to cash out of the business for yourself.
An overview of the four basic legal forms of organization: Sole Proprietorship; Partnerships; Corporations and Limited Liability Company follows.

1. Sole Proprietorship - This is a form of business which owned by one person. It is easy to set-up, and you don't have to think about your partner because you don't have and you solely own the business . The profit is all yours but then, if this business not grow and end to bankruptcy you are the one will shoulder all those problems. The sole proprietorship form is usually used by small businesses.

Advantages : 

• Walang sasalungat sa desisyon na gusto, kasi nga MAG-ISA ka lang.
• Kung gusto mo na tapusin, madali lang para sayo.

Disadvantages:

• Maaring dun mo nalang maigugol yung oras mo, at di mo namamalayan  na nawalan ka na pala ng oras sa ibang bagay dahil dun.
• Masakit kapag nalugi ang iyong negosyo dahil maaring buong buhay mo maapektuhan kasi dun mo nalang ginugol lahat, yun na nga lang yung meron ka, nawala pa.

2. Partnership - This is a form of business which owned by two or more person where they share ownership of a single business. The partners divide the profit of the business among themselves. They will decide how much time and capital each of them will contribute.

Advantages:

• Dahil partnership madali kayong makakapagpalago ng pondo para sa business, kasi may kahati ka, lagi mo tatandaan wag mo ibibigay lahat, magtira ka para sa sarili mo.
• kapag madaming skills yung nakuha mong partner, bonus na yun kasi magbebenifit yung business nyo, wag mo na pakawalan, ikaw din bahala ka baka maghanap yan ng ibang kapartner.

Disadvantages:

• May kahati ka na sa sa sahod, di mo na makukuha ng buo pero ang mahalaga nakinabang ka.
• Since magkapartner kayo, hidi mawawala ang pagtatalo, kailan ba nawalan ng pagtatalo ? lagi naman diba ? tiisin mo nalang masasanay ka din.
• Limited lang yung life nung partnership, kapag nawala yung kapartner mo, o kinuha nya yung bahagi nya sa buhay mo este sa negosyo nyo maaring di na ito mapatakbo ng maayos.

4. Corporation - A Corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A Corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.

Advantages:

• Shareholders have limited liability for the corporation’s debts or judgments against the corporation.
• Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.
• Corporations can raise additional funds through the sale of stock.
• A Corporation may deduct the cost of benefits it provides to officers and employees.
• Can elect S Corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.

Disadvantages:

• The process of incorporation requires more time and money than other forms of organization.
• Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
• Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible from business income; thus this income can be taxed twice.

(source of some info: http://www.kcsourcelink.com/learning-center/starting-a-business/register-and-license-your-business/forms-of-business-organization)