Types of Business Structures
The Three Main Forms
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Key Takeaways
- Sole Proprietorship: Simplest, but has unlimited personal liability.
- Partnership: Shared control, general partners have unlimited liability.
- Corporation: Harder to establish, but provides limited liability and easier capital generation.
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Business Structure Simulator
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Sole Proprietorship
A business owned and run by one person.
Key Features
- Registered with DTI
- Owner's personal assets are at risk
- Profits taxed as personal income
Attribute Comparison
Liability Protection
Unlimited Personal LiabilityOwner Control
Complete ControlEase of Setup
Easiest & CheapestProfessional Liability Note: Regardless of business structure, the individual civil engineer remains personally liable for the technical accuracy of signed and sealed plans under Art. 1723 of the Civil Code.
Joint Ventures in Construction
Example
Scenario: The Megaproject Partnership
Company X (a large local contractor) and Company Y (an international firm specializing in tunneling) form a joint venture to bid on a new subway system project in Metro Manila.
Application: This is a common and highly effective use of a Joint Venture. Company X provides local knowledge, labor, and equipment, while Company Y provides specialized technical expertise that Company X lacks. The JV is typically formed for this single specific project, pooling resources and sharing risks.
Forms of Business: Sole Proprietorships
Example
Scenario: Unlimited Liability Risk
Engr. Z runs a structural design firm as a sole proprietorship. A building designed by Engr. Z collapses due to a major design error, causing millions of pesos in damages.
Application: Because Engr. Z operates as a sole proprietorship, there is no legal distinction between the business and his personal assets. If the firm cannot pay the damages, Engr. Z's personal assets (house, car, savings) can be seized to satisfy the debt. This highlights the severe risk of unlimited liability for sole proprietors in high-risk professions like civil engineering.