Chapter 1 · Business Organizations and the Regulatory Framework

A · Supplemental Illustration Center

Visual guides

1. The four business organizations — at a glance

Feature	Sole Proprietorship	Partnership	Corporation	Cooperative
Governing law	Business Name Act / DTI	Civil Code Art. 1767	Revised Corp. Code RA 11232	Coop. Code RA 9520
Legal identity	None (owner = business)	Separate juridical person	Separate juridical person	Separate juridical person
Owner liability	Unlimited	Generally unlimited (general partners)	Limited	Limited to share capital
Registration	DTI + LGU + BIR	SEC + LGU + BIR	SEC + LGU + BIR	CDA + LGU + BIR
Return to owners	Owner keeps all profit	Share in net income	Dividends	Patronage refunds
Continuity	Ends with owner	Easily dissolved	Perpetual existence	Up to 50 years (extendable)

2. Who regulates whom — Philippine regulatory bodies

DTI

Business name registration for sole proprietorships (valid 5 years, renewable).

SEC

Registers and supervises corporations and partnerships; requires annual AFS and GIS.

LGU

Barangay Clearance and Mayor's / Business Permit — ALL businesses; renewed annually.

BIR

Tax registration and collection — ALL businesses; BIR-registered invoices and books of accounts.

CDA

Registration and supervision of cooperatives.

SSS · Pag-IBIG · PhilHealth

Mandatory employee contributions — all businesses with employees.

3. Two size frameworks — SEC vs BIR (do not confuse them)

SEC — by total assets / liabilities (sets the PFRS tier)

Entity	Assets	Liabilities
Micro	< ₱3M	< ₱3M
Small	₱3M–₱100M	₱3M–₱100M
Medium	>₱100M–₱350M	>₱100M–₱250M
Large	> ₱350M	> ₱250M

BIR — by gross sales (net of VAT) (tax administration only)

Taxpayer	Gross sales
Micro	≤ ₱3M
Small	>₱3M–<₱20M
Medium	₱20M–<₱1B
Large	₱1B and above

Watch out: the SEC looks at what you own and owe; the BIR looks at what you sell. A business can be a Small Entity (SEC) yet a Medium Taxpayer (BIR) at the same time.

4. PFRS tier decision tree

Q1 — Is the entity publicly accountable (listed, issuing securities, or fiduciary for outsiders such as a bank)?

Yes → Full PFRS. Stop.

Q2 — Large entity? (assets > ₱350M or liabilities > ₱250M)

Yes → Full PFRS (publicly accountable).

Q3 — Medium? (assets >₱100M–₱350M or liab >₱100M–₱250M)

Yes → PFRS for SMEs (may opt for Full PFRS).

Q4 — Small (₱3M–₱100M) or Micro (<₱3M)?

Small → PFRS for Small Entities (may opt up to SMEs).

Micro → PFRS for Small Entities or Tax Basis.

B · Interactive Workspaces

Practice tools — on-screen, no spreadsheets

Tool 1 · SEC / BIR / PFRS Classifier

Enter an entity's profile to see its SEC entity size, the PFRS tier it must apply, and its BIR taxpayer class.

Publicly accountable?

Total assets (₱)

Total liabilities (₱)

Gross sales, net of VAT (₱)

Tool 2 · Unadjusted Trial Balance Balancer

Type each account's balance in its normal column. Footings and the balance check update live.

Account	Debit (₱)	Credit (₱)
Cash
Accounts Receivable
Supplies
Service Equipment
Accounts Payable
Ben, Capital
Service Revenue
Salaries Expense
Totals	0.00	0.00

Tool 3 · Corporation Registration Compliance Tracker

The book's step-by-step corporate registration sequence. Tick each step as you complete it.

Step 1 — Draft Articles of Incorporation and Corporate By-Laws Step 2 — Reserve the Corporate Name on the SEC online portal Step 3 — Submit to SEC (Articles, By-Laws, Treasurer's Affidavit); pay fees; receive Certificate of Incorporation Step 4 — Secure Barangay Clearance and Mayor's Permit (LGU) Step 5 — Register with the BIR — BIR Form 2303 and books of accounts Step 6 — Register employees with SSS, Pag-IBIG, and PhilHealth Step 7 — Optional, publicly listed companies only: PSE registration and SRC compliance (not counted toward completion)

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C · Online-Exclusive Assessment

Quiz 1 · Concept check · 20 items

Ten online-exclusive multiple-choice items — new scenarios testing the chapter's outcomes. Submit for an instant score and a rationale on every item.

Quiz 2 · Business type identification — online drill

Twelve businesses you won't find in the book's Test Material No. 1. For each, choose Service, Merchandising, or Manufacturing — auto-scored with a one-line rationale. (The book's own test materials stay exclusive to the printed copy.)