Pinoy Business Coach

In going around trying to help fellow Entrepreneurs, I have observed that very expensive mistakes could have been averted to the point that the businesses could have been saved if the right kind of structure or legal personality were selected.

There are several entities to select from.  What I recommend is that by default, when starting a business especially when you are in the 'alpha' phase of trying a viable idea, it would be best NOT to be registered for starters since you are still unsure if there is a certain demand for a product or service.  If you can prove that the business idea can give absolute good cash flow (which would take you 1-3 months) then it would probably be a good idea to select a legal personality and be registered.

 By default again, after proving the viability of a business idea, one can usually start using a "SOLE PROPRIETORSHIP".  This usually involves getting a Business name from DTI and getting a Mayor's Permit or a Business license.  In this kind of entity, everything is in your name.  Most people think this is a safe way to do business but then again, it depends on individual circumstance.  In this kind of entity, you are held liable and responsible for everything--including the mistakes and accidents caused by the availment of your products or services.

Most of the people I know (including myself) who lose a business or got into very expensive mistakes had PARTNERSHIPS as entities.  Some of them of which are "Verbal" Partnerships only.  What makes this form of entity dangerous is that you are not only liable by your actions but you are also responsible for the actions of your parter (which is way beyond your control).

There is also an entity called a CORPORATION. Most of the people I talk with about business think that a Corporation is for the "big time". A Corporation is basically a replica of yourself, it is a legal personality in itself.  How will this benefit you? It will protect you from liabilities, legal hoodlums and other dangers that your business would be exposed to.  If your Corporation becomes insolvent or bankrupt, then lenders go after the assets of the Corporation and not YOUR personal assets.

You do not have to be a San Miguel or an SM to become a Corporation. It is essentially just a legal document telling the public that you are Corporation.  Heck, you can even become a Corporation and run your business in your own backyard or from your living room. Gone are the days where you need a big office and a huge staff to be labeled a Corporation, Invisibility is the new name of the game.

Like I mentioned, it depends on your circumstances.  Those who want to expand and grow their businesses should be in a Corporation while those who prefer to be small, can and may stay as a Sole Proprietor.  For competent advice regarding your own situation it would be best to consult a competent and legal adviser.