Starting a business in the Philippines means choosing the right type of organization. Two of the most common are partnerships and corporations. But what’s the difference, and why does it matter? Both partnerships and corporations are recognized under Philippine law. The Civil Code covers partnerships,1 in comparison to the Revised Corporation Code of the Philippines governs corporations.2
What is a Partnership?
A partnership is when two or more people agree to put money, property, or skills together to run a business and share profits.
- Minimum number of people: At least 2 partners
- Maximum: Up to 15 partners
- Management: Usually managed by the partners themselves
- Liability: Partners are personally responsible for debts. This means if the business cannot pay, creditors can go after the partners’ personal assets.
Example: In the case of Santiago v. Spouses Garcia.3 The Court ruled that mere sharing of gross returns does not automatically create a partnership. The intent to form a partnership must be clear and proven.
What is a Corporation?
A corporation is a business that has a separate legal personality from its owners (called stockholders). Think of it as a “legal person” that can own property, enter into contracts, and be sued.
- Minimum number of people: At least 2 incorporators (can be natural persons, partnerships, or even other corporations)
- Maximum: No specific maximum number of stockholders
- Management: Run by a Board of Directors elected by the stockholders
- Liability: Stockholders’ liability is limited only to the amount of money they invested. Their personal property is safe.
Why Does This Matter?
Choosing between a partnership and a corporation depends on your goals:
- If you want something small and simple, with close control, a partnership might be enough.
- If you want something big, long-term, and able to raise more money, a corporation is usually the better choice.
- The Civil Code of the Philippines, Article 1767-1867. ↩︎
- The Revised Corporation Code of the Philippines Rep. Act. No. 11232 (2019). ↩︎
- Santiago v. Spouses Garcia, G.R. No. 228356, March 15, 2021. ↩︎
