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Corp. and Inc.

Ian Alfredo
Magno

(Editor’s note: This column should have been published on Saturday. Our apologies.)

 

PERHAPS many have already (at least once) come across a signage or print elsewhere depicting an establishment or business with the term “Inc.” or “Corp.” appended at the tip of its name.

Basically, “Corp.” is short for corporation and “Inc.” stands for incorporated.  As an entity, there practically exists no difference between the two.  Both denote an organization duly organized under existing laws, formed for the attainment of certain purposes.

Meanwhile, Section 1 of Batas Pambansa (BP) Blg. 68, otherwise known as the Corporation Code of the Philippines, categorically defines a corporation as an artificial being having the right of succession and the powers, attributes and properties expressly authorized by law to its existence.  It does sound technical.

Plainly, a corporation may be equated to a useful tool, sort of, that is created to pursue the common aspirations – whether it is for business, religious, educational or charitable – of the people who formed it, called incorporators.

Like any other tool, nevertheless, it could either do something good, if wielded properly; or damage, unfortunately, if handled poorly.  Thus, in order to protect the greater public – this being the paramount concern – from the actuations of this “tool,” the State has endowed it with a temporal, artificial personality; with which it may, like any other entity, be able to assume certain obligations and thus be held answerable for the legal consequences of its actions – as it is, in the first place, similarly endowed with the privilege of conducting its affairs in pursuit of its basic purpose or raison d’etre, namely either business, religious (or religio-business?), educational or charitable.

Yet why corporation?  Why go through the rigorous and relatively costly task of forming a corporation or incorporating a business if one may conduct business via any other form, say sole proprietorship or partnership for instance?

Apparently, there are certain advantages in a corporation over any other form of business or organization.  Among the known advantages of having a corporation as a legal format/entity for one’s organization or business are the following, to wit:

  1. Limited liability. A corporation is a stand-alone entity, which means that it has a legal personality that is separate and distinct from its incorporators or stockholders. As a stockholder for instance, one is not personally liable for the debt of the corporation.  Hence, the act of incorporating creates the effect of protecting one’s personal properties from debts, collection suits and other legal problems which may arise in the business.
  2. It has a practically perpetual life. A corporation has a maximum life of 50 years. Section 11 of BP 68 states that a corporation shall exist for a period not exceeding 50 years from the date of incorporation unless sooner dissolved or unless said period is extended.  Yes, it could be extended.  Hence, a corporation may actually outlive its incorporators or stockholders long after the latter’s demise.  Such is the attribute of succession, which gives a corporation continuous existence.  Thus, a corporation continues to exist unless sooner dissolved or merged with another corporation.
  3. It pays for its own tax liability. Since a corporation has a personality separate and distinct from its stockholders, the latter could not be held liable for the corporation’s taxes payable; and neither could the property of its stockholders be held liable for the corporation’s tax liability.  Of course, however, its owners would have to pay their individual taxes due on the money received from the corporation in the form of salaries, commissions or dividends.

 

(Ian Alfredo T. Magno is a lawyer based in Cagayan de Oro and is a legal officer at Philhealth. E-mail: ianalfredom@gmail.com)

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