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About a Corporation Business

Updated on May 25, 2009


A corporation is 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


1.  A corporation is an artificial being with a personality separate and apart from its individual stockholders or members.

2.  It is created by operation of law. It can not come into existence by mere agreement of the parties as in the case of business partnerships.

3.    It enjoys the right of succession. A corporation has the capacity of continued existence regardless of the death, withdrawal, insolvency or incapacity of the individual stockholders or members. The transfer of ownership of shares of stock does not dissolve the corporation.

4.    It has the powers, attributes and properties expressly authorized by law or incident to its existence.


1.    The corporation has the legal capacity to act as a legal entity.

2.    Stockholders have limited liability.

3.    It has continuity of existence.

4.    Shares of stock can be transferred without the consent of the other stockholders.

5.    Its management is centralized in the board of directors.

6.    Stockholders are not general agents of the business.

7.    Greater ability to acquire funds.


1.    A corporation is relatively complicated in formation and management.

2.    There is a greater degree of government control and supervision.

3.    It entails a relatively high cost of formation and operation.

4.    It is subject to heavier taxation than other forms of business organizations.


Section 3 of the Corporation Code classified corporations into:

1.    Stock corporation. Corporations which have capital stock divided into shares and are authorized to distribute to the holders of such shares dividends or allotments of the surplus profits on the basis of the shares held.

2.    Non-stock corporation. A non-stock corporation is one where no part of its income is distributable as dividends to its members, trustees or officers. Any profit that a non-stock corporation may obtain as an incident to its operation shall, whenever necessary or proper, be used for the furtherance of the purpose or purposes for which the corporation was organized


1.    According to nationality:

A.   Domestic corporation. A corporation organized under the laws.

B.   Foreign corporation. A corporation organized under foreign laws.

2.    According to number of persons:

A.   Corporation aggregate. A corporation consisting of more than one corporator.

B.   Corporation sole or a religious corporation. A corporation which consists of only one member or corporator and his successors.

3.   According to whether for charitable purpose or not:

A.   Ecclesiastical corporation. Those organized for religious purposes.

B.   Eleemosynary corporation. Those established for public charity.

C.   Civil corporation. Those established for business or profit.

4.   According to their legal right to corporate existence:

A.   De jure corporation. A corporation existing in fact and in law. It is organized in strict conformity with the law.

B.   De facto corporation. A corporation existing in fact but not in law.

5.   According to degree of public participation with regard to stock ownership:

A.   Close corporation. A corporation whose stock ownership is limited to selected persons or members of a family not exceeding 20 persons.

B.   Open corporation. A corporation where the stock is available for subscription or purchase by any person.

6.   According to whether for public or private purpose:

A.   Public corporation. A corporation formed or organized for the government of a portion of the state (e.g., provinces, cities, municipalities).

B.   Private corporation. A corporation created for private aim, benefit or purpose.

7.   According to their relation to another corporation:

A.   Parent or holding corporation. A corporation which has the power to either directly or indirectly elect the majority of the directors of a subsidiary corporation.

B.    Subsidiary corporation. A corporation controlled by another corporation known as a parent corporation.


1.   Corporators are those who compose a corporation whether as stockholders or members, at any time. This term includes incorporators, stockholder or members. Note: A corporation or a partnership can be a corporator, but cannot be an incorporator. A partnership can be a corporator in a corporation but a corporation cannot be a general partner in a partnership.

2.   Incorporators are stockholders or members mentioned in the articles of incorporation as originally forming and composing the corporation and are signatories to said articles of incorporation. They must be natural persons (i.e. human beings) as distinguished from artificial beings (e.g., a corporation or a partnership). The Code specifies that five or more persons, not exceeding fifteen, may form a private corporation provided that they are of legal age, owners or subscribers to at least one share of capital stock and that the majority are residents of the country. Note: All incorporators (if they continue to be stockholders) are corporators of a corporation, but not ail corporators are incorporators.

3.   Stockholders or shareholders are corporators in a stock corporation.

4.    Members are corporators of a non-stock corporation.

5.   Subscribers are persons who have agreed to take and pay for original, unissued shares of a corporation.

6.   Promoters are persons who bring about or cause to bring about the formation and organization of a corporation.

7.   Underwriters are usually investment bankers who have—

*     agreed, alone or with others, to buy at stated terms an entire or a substantial part of an issue of securities; or

*    guaranteed the sale of an issue by agreement to buy from the issuing corporation any unsold portion at a stated price; or

*     agreed to use his best efforts to market all or part of an issue; or

*     offered for sale stock he has purchased from a controlling stockholder.


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