Do you know why people put up corporations?

Do you know why people put up corporations?

Do you know why people start companies? Why do most experienced business people prefer corporations as the mode of conducting business in the Philippines?

As a director or a stockholder, do you know what your company is and what it is capable of? How do you leverage its advantages?

If you’re not sure what a corporation is and what it can do for you, let’s fix that right now. A lot of people just jump on the bandwagon and put up companies. All the while, they have no idea of the powers waiting for them to use. They just copied everyone else they saw and did the same. What a shame.

Let’s fix this for you.

First off, let’s start with a proper understanding of what a corporation is.

Giving Birth

Putting up a corporation is the legal equivalent of giving birth to another person. When you put up a corporation, you are literally giving life to an entity outside of yourself, completely separate from you.

The Corporation Code defines it as: “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.”

For now, I want to emphasize the word artificial being (we’ll take up what the other terms mean later). Imagine Dr. Frankenstein channeling lighting from the storm and letting it surge into his creation in the laboratory. It walks, thinks and acts on its own after it gets the spark of life. Sure, it has you included in the papers, but for all legal purposes, it’s as if we are talking about another being.

So separate… it even has its own ID

Here are a few things that the company has to show you that it lives its own life.

After you give the corporation life, it gets its own birth certificate from the SEC called the Articles of Incorporation. To further show that it is separate, the company has to get their own business permits from City Hall.

Still not convinced? Employees hired by the company are their own. These people don’t work for you, the owner. They work for the company. Heck, as far as the government is concerned, it even has its own Tax Identification Number (TIN) with the BIR.

I tell you all of this to emphasize the point that once you put up a corporation, you should start thinking of it in terms of a separate person or entity. That goes for benefits (income) as well as responsibilities (taxes and liabilities under the law) as you will see in succeeding posts.

In the next post, I’ll discuss the different advantages of having the separate entity distinct from yourself (clue: you can’t get sued).

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