Uploaded by Vaillete Courtney Sarra

SARRA AC16Ar ACCA103(Partnership Formation)

Vaillete Courtney Jo Sarra
Homework (Partnership Formation)
A partnership may be formed in any of the following ways:
1. Individuals with no existing business form a partnership.
 An existing partnership may admit a new partner with the consent of all the
partners. Welcoming a new partner forms a new partnership and a new
agreement covering partners' interests, profit and loss sharing, and other
considerations. It is due to the fact that admitting a new partner dissolves
the original partnership and cancels the old agreements made.
2. Conversion of a sole proprietorship to a partnership.
a. A sole proprietor and an individual without an existing business form a
 An individual who has no business of his own may join another
individual who is already operating his own business. In this type
of formation, the sole proprietor's assets and liabilities are
transferred to the newly formed partnership. Typically, the
revaluation of some of the assets is agreed upon by the partners
before the transfer.
b. Two or more sole proprietors form a partnership.
 The accounting procedures described in the preceding section are
also applicable when two or more businesses join together to form
a partnership. There should be an agreement on the determination
of the partners' interest in the partnership. It is also important that
the partners agree on the values of the assets to be assigned and
the liabilities to be assumed by the partnership. Books of one of the
sole proprietors may be used for the newly formed partnership, or
a new set of books may be opened.
3. Admission or retirement of a partner
Basic Financial Accounting and Reporting Made Easy by Win Ballada
Additional Information:
One Person Corporation
 It is a corporation with a single stockholder, a natural person, trust, or
estate. Natural persons refer to licensed professionals; banks, quasi-banks,
preneed, trust, insurance, public and publicly-listed companies; and nonchartered GOCCs may not incorporate as a one-person corporation unless
provided under special laws.
 It is a company with just one stockholder. This single stockholder is also the
sole incorporator, director, and president. This single stockholder’s liability
is limited to the extent of their assets, combining the best of both worlds
between a sole proprietorship and a limited liability company.
 Characteristics:
a) There is no minimum authorized capital stock required, unless
otherwise provided by special law;
b) The name of the corporation will include the suffix “OPC”;
c) There are no by-laws required;
d) The single stockholder shall be the sole Director and President of
the corporation;
e) The single stockholder may be a self-appointed Treasurer;
f) Instead of regular or special meetings, only written resolutions by
the single stockholder are required;
g) There is no requirement for a Board of Directors;
h) There is limited liability, unlike in sole proprietorship;
i) The single stockholder is required to designate a nominee and an
alternate nominee in case of the temporary or permanent
incapacity or death of the single stockholder.
 Prohibited to form an OPC:
a) Banks, non-bank financial institutions, quasi-banks;
b) Pre-need, trust, insurance companies;
c) Public and publicly-listed companies;
d) Non-chartered government-owned-and-controlled corporations
(GOCCs); and
e) A natural person who is licensed to exercise a profession, except as
otherwise provided under special laws.
 Advantages:
a) Limited liability (only the legal entity of the company is liable for
its debts, rather than the director as a person)
b) Perpetual existence (despite bankruptcy, transfer of shares, change
of director, etc.)
c) Complete control of the business (more like a sole proprietorship
rather than a traditional corporation with a board of directors)
d) No minimum capital requirements (unless stated by law)
e) An existing corporation can restructure as an OPC (if a single
stockholder acquires all shares of the company)
 Disadvantages:
a) More complex than a sole proprietorship (due to more
administration requirements)
b) Some limitations on foreign ownership (a foreigner cannot
incorporate an OPC in an industry included on the Foreign
Investments Negative List)
c) Tax obligations are subjective on a case-to-case basis (most sole
proprietorships only pay 8% income tax, while the corporate
income tax rate is 30% — however, there are many more tax
benefits that come with a corporation)
Section 10 of the Revised Penal Code
ARTICLE 10. Offenses Not Subject to the Provisions of this Code.
 Offenses which are or in the future may be punishable under special laws are not
subject to the provisions of this Code. This Code shall be supplementary to such laws,
unless the latter should specially provide the contrary.