Business Guide

Types of Business in the Philippines Different classifications of business 1. Service business – this provides intangible goods or services to customers. It usually generates profit by charging for labor or other services rendered to consumers, government or other companies. Below are examples of service businesses: • • • • • • • • • • • • • • •

Firms which offer professional services, such as accounting, legal, engineering, business consulting, customer service and architecture Transportation companies, such as airlines, shipping, land tours and forwarders Entertainment, such as artists and movie houses Hotels and restaurants Apartments Banks, lending companies and other financial institutions Telecommunication companies Event planners Medical and dental services Security and janitorial services Media, blogging and advertising Website developers Graphic designers Business process outsourcing (BPO) companies and others

2. Merchandising business – this purchase products from other businesses or manufacturers and sell them to customers. Merchandising companies usually have merchandising inventories in their current assets account. They usually generate profit by providing markup price on their goods available for sale. These businesses include retailers and trading companies such as the following: • • • • •

Grocery stores Department stores Distributors Real estate dealers Car dealers

3. Manufacturing business – this converts raw materials, labors and overhead into finished products that are available for sale to customers. Manufacturing firms includes the following companies: • • • •

Car manufacturers Wine and soft drinks producers Electronic parts manufacturers Producers of drugs and other medical products

4. Other businesses. This includes businesses that can’t be classified as service, merchandising or manufacturers. Examples are agriculture and mining companies. These companies are engaged in producing or exploration of raw or natural materials, such as plants and minerals. Types of business according to ownership structures 1. Proprietorship – is a business that is owned by a single individual who has full control and authority in running this kind of business. The owner, called proprietor, owns all the assets and is solely responsible for all the liabilities of the company. He or she enjoys all the profits but also suffers all losses of this business. The proprietor and his proprietorship business/businesses is

considered as one taxpayer, sharing a single TIN (Taxpayer Identification Number) for tax purposes. A sole proprietorship must apply for a business trade name and be registered with the Department of Trade and Industry. 2. Partnership – is a business that is owned by two or more individuals or partners. Under the Civil Code of the Philippines, a partnership is considered as juridical person, having a separate legal personality from that of its owners (partners). Partnerships may either be general partnerships, where the partners have unlimited liability for the debts and obligation of the partnership, or limited partnerships, where one or more general partners have unlimited liability and the limited partners have liability only up to the amount of their capital contributions. A partnership with more than three thousand pesos (P3,000.00) capital must register with Securities and Exchange Commission (SEC). Partnerships are generally treated like corporations for income tax computation purposes. 3. Corporation – is a business that is owned by its shareholders (natural or juridical persons). A corporation is composed of juridical persons established under the Corporation Code and regulated by the SEC with a personality separate and distinct from that of its stockholders. The liability of the shareholders of a corporation is limited only to the amount of their share capital. It consists of at least five to 15 incorporators, each of whom must hold at least one share and must be registered with the SEC. Minimum paid up capital is P5,000. A corporation in the Philippines can either be stock or non-stock company regardless of nationality. a. Stock Corporation – This is a corporation with capital stock divided into shares and authorized to distribute to the holders of such shares dividends or allotments of the surplus profits on the basis of the shares held. b. Non-stock Corporation. This is a corporation organized principally for public purposes such as foundations, charitable, educational, cultural, or similar purposes and does not issue shares of stock to its members.