THE CORPORATION CODE

OF THE
PHILIPPINES
68.)

Introduction
Different forms of business organization.
With the development of business enterprise, there has been
a gradual evolution in the form of business organization. Various
influences and considerations enter into the of the busi-
ness form for any particular business enterprise.
Individual proprietorship. — The primitive form of business
is, of course, that of the individual proprietor. The individual, as
a rule, operates a small business, usually with the limited capital,
and is responsible alone for its success or failure.
(2) Partnership. — The partnership is the first step towards
a wider field of operation and a more complex organization.
Often, it is a family affair. The business of the individual grows
too large for his sole management and he takes his son or some
other member of the family into partnership. In other cases, two
men in the same business unite their capital in order to secure ad
equate capital for the conduct of their business.
Whatever the motive and the circumstances, the partnership
is almost invariably a larger business unit than the proprietor-
ship. It is common in retail trade, in the professions, and to a
limited extent, among manufacturing establishments. As a form
of business organization, it is losing ground.
(3) Joint stock company. — The joint stock company is a form
of business organization at one time frequent in connection with
 THE CORPORATION CODE THE PHILIPPINES
2

larger enterprises, which, so far as the United States is concerned, is

now almost extinct. This form of company was highly popular in
England during the seventeenth and early eighteenth centu- ries.
The joint stock company can be best considered as a com-
bination of the partnership in that it is formed under a contract
and requires no special sanction from the State. The members are
liable, jointly and severally, for all the company's debts. It resem-
bles the corporation in control and management. The members
do not control the company but choose a board of directors who
were the authorized agents and managers. Thus, while mem-
bership in the company might change thru death or transfer of
membership interest, the company is not dissolved.
(4) Cooperative association. — It represents another form of
business organization which proved more popular in Europe
than in America. This form of organization is not of sufficient
interest or importance to the business world to require consider-
ation in this text.
(5) Business trust. — Another form of business organization
less widely known is the business trust, sometimes called
the "Massachussets The main feature of this form of
organization is that it is formed by a contract and that the title to
property and the conduct of business is in the hands of trustees
who act for a large group of beneficiaries.
(6) Corporation. — It is now the dominant form of organiza-
tion in modern business. The corporation is a creature of law and
all its rights, powers, and duties are derived from In
some forms of business of a public or quasi-public nature like
that of public utilities, railroads, insurance companies, and bank-
ing institutions, it is almost the exclusive form of business orga-
nization. In other fields of enterprise, the corporation competes
with other forms of business organization.

depends entirely upon the ownership of shares rather than on the

agreement of the associates as in the partnership. The death of a "partner" does not dis-
solve the firm. The trustees (managers) have a legal title to its property and act as prin-
cipals for the shareholders who have all the legal status of a cestui que trust (beneficiaries).
It bears such a close resemblance to a corporation that it is or has been frequently con-
sidered as a corporation. (Chester Rohlich, Organizing Corporate and Other Business
Enterprises [1953], p. 155.) But it is not a corporation.
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