TOUR 80

BSHM 80- –LEGAL

Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

1 | Module 2 – Forms of Business Organization

TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

After the completion of this module, students will be able to:

1. define business organization;

2. identify the different forms of business organizations and;
3. manage legal requirements for business

Pre-test
I. Identification

Direction: Read the statement carefully. Write your answer on the space provide before
each number

______ 1. It is an enterprise which distributes or provides services where other members

of the community need and are able and willing to pay for it.
______ 2. A person who contributes capital and manages the business
______ 3. It is the most-simple form of partnership
______ 4. A government agency where you will register if your enterprise is a single
proprietorship.
______ 5. It is represented by shares of stock that can be transferred between owners
, or stockholders
II. Enumeration
What are the three forms of business organization?
1. _________________________________
2. _________________________________
3. _________________________________
III. Decode the following acronyms
1. LP- _____________________________________________________________
2. LLP- ____________________________________________________________
3. HDMF- _________________________________________________________
4. SEC – ___________________________________________________________
5. PhilHealth - ______________________________________________________

2 | Module 2 – Forms of Business Organization

TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

Before you proceed, let us assess your knowledge about forms of

business organization. Don’t worry, this will be a non-graded test.

If you are done. Check your answer by referring to the answer

key in the last page of this module
What is your score? Don’t worry if you were not able to get all
the correct answer, this will be a non-graded test. Just read the
following lesson to learn more about tourism and hospitality
marketing

Module 2 – Forms of Business Organization

In this lesson, you will learn about the three main types of business organizations: sole
proprietorship, partnership, and corporation. We'll also discuss the advantages and
disadvantages of each

Business Organization

A business is an enterprise which distributes or

provides services where other members of the
community need and are able and willing to pay for it.

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

Purpose of Business Organization

 People need to work together to accomplish goals

 Goals are too large, too complex, too expensive to be achieved without
cooperation
 By working together, people can produce more & better goods and services

Forms of Business Organization

There are three basic forms of business ownership: sole proprietorship, partnership and
corporation. Each of these forms of business organization has advantages and
disadvantages in such areas.

1.

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

Characteristics of Sole Proprietorship

Advantages and Disadvantages of Sole Proprietorship

Limitations of Sole Proprietorship

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

2.

Characteristics of a Partnership

Advantages and Disadvantages of Sole Proprietorship

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

Limitations of Partnership

Types of Partnerships

There are three main types of partnerships. Each type has its own advantages and
disadvantages.

6. General Partnership (GP)

General partnerships (GP) are the most simple form of partnership. They are the easiest
to form and the cheapest to maintain. They are simpler than corporations and even other
types of partnerships. A general partnership is formed immediately when partners begin
business activities. There is no official paperwork required. Only general partners exist in
a GP.

The low upkeep cost is mainly due to the fact that there is no official state filing needed to
create such a partnership. This means there are no filing-related costs. Similarly, there are
few ongoing requirements. For example, it is not necessary to hold an annual general
meeting.

Additionally, GPs are easy to dissolve. They can be broken up at any time.

While this arrangement is simple, there are some major disadvantages. All partners in a
GP are general partners. This means that they face potentially unlimited liability in this
arrangement, as GPs are not separate legal entities.

Additionally, all partners are fully liable for the actions of any of the other partners. Finally,
the business is dissolved if any of the partners declare bankruptcy or pass away.

Fortunately, there are ways to prevent dissolution in the case of bankruptcy or death. A
partnership agreement usually accompanies this type of business arrangement. Partners
can include clauses that state that the business will continue after the death of a partner
and that provide a process whereby the interests of the deceased will be distributed to the
remaining partners.

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

7. Limited Partnership (LP)

Limited partnerships (LP) are a form of partnership that provides more protection for
partners. In an LP, there is at least one general partner that manages operations and takes
on unlimited liability. The remaining partners are limited partners, who hold financial stakes
in the business but are not personally liable for the business.

Limited partners share the profits of the company but can only lose as much as they have
invested in the business.

8. Limited Liability Partnership (LLP)

Limited liability partnerships (LLP) are an extension of a GP. An LLP is

essentially a GP where all partners are protected from the actions of other
partners. Essentially, all partners have limited liability. This is different from an LP
where there must be at least one partner with unlimited liability.

LLPs maintain their flow-through taxation status, which makes them very similar
to limited liability companies (LLC).

Corporation
3.  is a legal entity in the same sense that a person is
,has designated rights, responsibilities, and privi
leges.
 are organized differently from proprietorships an
d partnerships. The owner of the corporation is no
t connected to one individual or a small group o
f individuals
 Ownership of a corporation is represented by
shares of stock that can be transferred between o
wners, or stockholders

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

Advantages and Disadvantages of a Corporations

Basic Legal Requirements to Start A Corporation

Securing Business Permits and Business Registration (sources: Board of Investment,

Department of Trade and Industry) Doing business in the Philippines, either as single
proprietorship, partnership or corporation, calls for licenses or permits from government.
An investor or businessman needs to obtain a business license in the locality where he
will establish his business, as well as register his business with the Department of Trade
and Industry in case of sole proprietorship, or with the Securities and Exchange
Commission in the case of partnerships and corporations.

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

Business Registration Guide Following are the government agencies

that a start-up business needs to register with:

AGENCY WHAT
This is where you register if your enterprise is
Department of Trade and Industry (DTI) a single proprietorship. The agency will issue
a certificate of registration of business name.

Securities and Exchange Commission (SEC) If your enterprise is a partnership or a

corporation, this is where you will register. It
will issue a certificate of registration.

Cooperative Development Authority (CDA) If your set-up is a cooperative, register with

this body. The agency will issue the certificate
of registration.

Local Government Unit (LGU) You register with the municipality or city
where you will set up your business. This
office will issue the business permit.

Barangay Hall You register with the specific barangay in the

municipality or city where you will operate
your business. This office will issue the
barangay clearance.

Bureau of Internal Revenue (BIR) You register your business with this office and
apply for your business’s taxpayer
identification number (TIN), registration of
books of accounts, authority to print

Social Security System (SSS) You register your business as an employer,

yourself as a self-employed or as employee,
and your workers as employees. This office
will issue an SSS number for your business,
for yourself, as well as for your workers.
Department of Labor and Employment If you employ five workers or more, register
(DOLE) your business with this agency. The DOLE is
asked to promote gainful employment
opportunities, protect workers and promote
their welfare, develop human resources, and
maintain industrial peace.

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

Home Development Mutual Fund (HDMF) RA 7742 requires all SSS members earning
at least P4,000 a month to register with this
agency. HDMF administers the Pag-Ibig
Fund.

Philippine Health Insurance Corp. The New National Health Insurance Act (RA
(PhilHealth) 7875) as amended by RA 9241 requires all
employers of the government and private
sectors and their employees to register with
this agency. PhilHealth manages and
administers the government health care
system.

Securing Locational Clearances / Business Permits from Municipality /

City Offices where the Business will be set-up

All businesses are required to secure a mayor's permit or municipal license from the
municipality or city where they are located. Various cities and municipalities have different
registration procedures. The following are the general requirements:

Where to File

1) Concerned Municipal or City Government Office

2) Municipal/City Hall (View Directory) Requirements A) Mayor's/ Business Permit

Requirements
A) Mayor's/ Business Permit
1) Renewal:
a) Latest Mayor's Permit
b) Barangay Clearance
c) Community Tax Certificate with Gross Receipt
d) Financial Statement (Partnerships and Corporations
e) BIR Clearance
f) SSS Clearance
g) ECC (or CNC)
h) Sanitary Permit 2)

Additional Requirements for New Business:

a) DTI Registration
b) SEC Registration (Partnerships and Corporations)
c) Building Permit and Occupancy Permit (for newly constructed)
d) Zoning Clearance

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

B) Building Permit & Occupancy Permit

1) Building Permit (4 copies each):
a) Barangay Clearance
b) Building Plan
c) Bill of Materials
d) Tax Declaration
e) Land Title
f) Building & Sanitary Permit Application Form
2) Fire Safety Certificate a) Certificate of Completion
3) Occupancy Permit

Registration of Business Name/Single Proprietorship

The Department of Trade and Industry (DTI) administers the registration of business
names.
A business proprietor who wishes to start his/her own business needs to register with the
DTI. Business name registration is compulsory and must be completed before the
business starts operating. By registering the business name with the DTI, the proprietor is
assured that no other individual or group may legally use the business name anywhere in
the Philippines

Requirements Single Proprietorship

1) Registration fee of Php 300.00
2) Two (2) copies 2 x 2 recent pictures of owner
3) Three (3) alternative names aside from the preferred name
4) Three (3) pieces documentary stamps
5) Application forms duly filled-up and signed by owner

Cooperative, Corporation & Partnership

1) Registration fee of Php500.00
2) SEC Certificate (photocopy)
3) Articles of Cooperation

4)By-laws (photocopy
5) Board Resolution authorizing signatory for and in behalf of the
cooperative/corporation/partnership
6) Documentary stamps (Php 15.00)
7) Two (2) copies 2 x 2 pictures of authorized signatory (optional)
8) Application forms fully filled-up and signed
9) If an alien, he must submit the following:
a) Alien Certificate of Registration;

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

b) Accomplished DTI Form No. 17 under R.A. 7042;

c) Written Appointment of Filipino Resident Agent Authority;
d) Authority to verify bank accounts/bank certificates of bank deposits;
e) Proof of inward remittance of foreign currency for non-resident alien and Bank
Certificate of Deposit for resident alien;
f) Copy of valuation report from Central Bank if investment includes assets other
than foreign exchange;
g) Certification from resident alien not seeking remittance of profit or dividends;
h) Clearance from other involved agencies as Dept. of Science & Technology,
Philippine National Police, etc.;
i) In case of alien retailer, latest permit to engage in retail business per R.A. 1180;
and
j) If corporation/partnership, SEC Certificate of registration & Certificate of
Authority from SEC

Where to Register
Department of Trade and Industry (DTI)
385 Industry and Investments Bldg. Sen. Gil Puyat Ave. Makati City 1200
Philippines
Tel No. (632) 895-3611
Fax No. (632) 895-6487
Email: [email protected]: www.dti.gov.ph
Visit the DTI Online Business Name Registration System:
www.bnrs.dti.gov.ph or the nearest regional/provincial DTI in your area.

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

Exercise 1
Compare sole proprietorship, partnership and corporation by describing its characteristics
citing its advantages and disadvantages using the given matrix below
Sole proprietorship Partnership Corporation

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

Before you proceed to the next module, it is time for us to know

how far you have learned in this module. Please answer the
following post-test.

Post-test
Identification

Direction: Read the statement carefully. Write your answer on the space provide before
each number

______ 1. It is an enterprise which distributes or provides services where other members

of the community need and are able and willing to pay for it. (business)
______ 2. A person who contributes capital and manages the business (proprietor)
______ 3. It is the most-simple form of partnership (general partnership)
______ 4. A government agency where you will register if your enterprise is a single
proprietorship. (DTI)
______ 5. It is represented by shares of stock that can be transferred between owners
, or stockholders (Ownership of a corporation)
II. Enumeration
What are the three forms of business organization?
1. _________________________________
2. _________________________________
3. _________________________________
III. Decode the following acronyms
1. LP- Limited Partnership
2. LLP- Limited Liability Partnership
3. HDMF- Home Development Mutual Fund
4. SEC –Securities and Exchange Commission
5. PhilHealth - Philippine Health Insurance Corp.

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

Activity 2

FOLLOW THE GIVEN FORMAT

BSHM 80
Subject: TOUR 80
Assignment # 2 Date:
Full Name: Course/Year/Section:
Gianina
Professor/Instructor: Reizel G.Nonieca
Viray P. Aquino

Guide question:
Submit list of tourism and hospitality business which are single, partnership and corporate
owned
 Give at least five tourism and hospitality business which are single, partnership
and corporate owned
 Make a short description in each tourism and hospitality business and nature of
business
 Follow the given format

Sole Proprietorship
Name of the tourism Description of the Nature of Number of years
and hospitality business business in the business
business
1.
2.
3.
4.
5.

Partnership
Name of the tourism Description of the Nature of Number of years
and hospitality business business in the business
business
1.
2.
3.
4.
5.

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

Corporation
Name of the tourism Description of the Nature of Number of years
and hospitality business business in the business
business
1.
2.
3.
4.
5.

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TOUR 80
BSHM 80- –LEGAL
Legal Aspects
ASPECTS in IN
Tourism and Hospitality
TOURISM AND HOSPITALITY

References

Bascos, M. (2020). Legal Aspects in Tourism and Hospitality. Edric Publishing House,
Manila. ISBN 978-621-8179-09-0

Cabulay, D.A, and Aldeguer, C.P.C. (2020). Legal Aspects in Tourism and Hospitality. Rex
Bookstore, Manila. ISBN 978-621-04-1233-8

https://mpm.ph/how-to-register-a-corporation

https://corporatefinanceinstitute.com/resources/knowledge/strategy/partnership/

http://invest.cfo.gov.ph/pdf/part2/securing-business-permits-and-business-
registration.pdf

Maranan et al (2019). Legal Aspects in Tourism and Hospitality. Mind

Shaper Publishing

Key to correction
Identification
1. Business
2. Business (proprietor
3. General partnership
4. Dept of Trade and Industry (DTI)
5. Ownership of a corporation
II. Enumeration
1. Sole proprietorship
2. Partnership
3. Corporations
III. Decode the following acronyms
1. Limited Partnership
2. Limited Liability Partnership
3. Home Development Mutual Fund
4. Securities and Exchange Commission
5. Philippine Health Insurance Corp.

18 | Module 2 – Forms of Business Organization