CORPORATION

It is an artificial being created by operation of law

having the rights of succession and the powers,
attributes, and properties expressly authorized by
law incident to tits existence

CHARACTERISTICS OF A CORPORATION
Separate legal entity
Created by operation of law
Right of succession
Powers, attributes, properties authorized by law
Ownership divided into shares
Board of directors
ADVANTAGES OF A
CORPORATION
The power of succession enables the corporation
to enjoy a continuous existence.
The corporate existence enables to it obtain a
strong credit line
Large business undertakings are made possible
because many individuals invest their funds in the
enterprise.
Limited liability of investors
Transfer of shares is effected without the consent of
the othr shareholders
Its smooth operation is guaranteed due to
centralized management
DISADVANTAGES OF A CORPORATION
Difficult to organize due to complicated legal
requirements and high costs in its organization.
Limited liability of shareholders may weaken
credit capacity.
Subject to rigid governmental control
Subject to more taxes
Centralized management restricts a more active
participation in the conduct of corporate affairs.
CLASSES OF CORPORATIONS
As to Membership Holdings
Stock corporation
Non-stock corporation
As to Purpose
Private corporation
Quasi-public corporation
As to Compliance of Law
De jure corporation
De facto corporation

As to Law of Creation
Domestic corporation
Foreign corporation
As to Membership
Open corporation
Closely held corporation



COMPONENTS OF A
CORPORATION

Incorporators
Corporators/Shareholders
Members
Promoters
Subscribers
Underwriters
ORGANIZING A CORPORATION
Promotion
Incorporation
Draft the articles of incorporation and by-laws nd
have them notarized by a notary public
File the documents with SEC.
Pay the required fees
SEC issues the certificate of incorporation
Commencement of the Business








ARTICLES OF
INCORPORATION
Name of the corporation
The purpose or purposes of the corporation
The place of the principal office
The term of existence
Names of the directors
Authorized share capital
Amounts of subscription to the authorized shares
Total amount on thee subscription
BY LAWS
Date, place and manner of calling the annual
shareholders meeting
The manner of conducting meetings
The circumstances which may permit the calling of
special meetings with shareholders
Manner of voting and use of proxies
Directors term of office
Authority and duties of directors
Authority and responsibilities of officers
Manner of selecting officers
Procedure for amending the articles of incorporation
Procedure for amending the by laws


CORPORATE RECORDS
Books of accounts
Minutes of all meetings
Minutes of all meetings of shareholders
Stock and transfer book
Shareholders journal
Shareholders ledger
Subscribers ledgers

CLASSES OF SHARE CAPITAL

Share capital ordinary
Share capital preference

Both may be issued as:
Par value share capital
No-par but with stated value share capital
No par, no stated value share capital

Par Value Share
P1,000








Par Value Share
P1,000









Par Value Share







P1,000

Par Value Share








P1,000


Par Value Share








P1,000


SHARE CAPITAL -
PREFERENCE
Issued with a par value and a dividend rate.
Have priority as to distribution of dividends or
assets incase of liquidation.

CLASSES OF SHARE CAPITAL-
PREFERNCE
Cumulative
Non-cumulative
Participating
Non participating
Convertible
Redeemable
SHARE CAPITAL -ORDINARY
Represents residual ownership equity.
They carry the greater risk.
TWO METHODS OF RECORDING SHARE
CAPITAL TRANSACTIONS:
MEMORANDUM ENTRY METHOD
JOURNAL ENTRY METHOD
FIRST TRANSACTION: AUTHORIZATION
FROM SEC
EXERCISES
STARBRIGHT CORPORATION
Starbright Corporation is authorized to issue 50,000 shares at P100
par value.
Memorandum Entry
method Journal Entry method
The corporation is
authorized to issue 50,000
shares at P100 par value
Unissued share
Capital 5,000,000
Authorized
share capital
5,000,000

WHEN INVESTORS SUBSCRIBE TO SHARE
CAPITAL AND HAS NOT FULLY PAID FOR IT
YET, FOLLOWING ENTRY SHALL BE
PREPARED FOR BOTH METHODS:

Cash (paid portion) xxx
Subscription receivable xxx
(unpaid portion)
Subscribed share capital xxx

STOCK CERTIFICATES ARE NOT YET ISSUED
UNTIL THEY ARE FULLY PAID

On July 15 five incorporators subscribed to 12,500 shares at par
and paid 25% of the subscription
MEMORANDUM
JOURNAL ENTRY
METHOD
Subscription
Receivable- 937,500
Cash 312,500
Subscribed share
-capital
1,250,000
Subscription
Receivable 937,500
Cash 312,500
Subscribed share
-capital
1,250,000

August 1 M. Elcee subscribed to 10,000 shares at par
MEMORANDUM
JOURNAL ENTRY
METHOD
Subscription
Receivable 1,000,000
Subscribed share
capital
1,000,000
Subscription
Receivable 1,000,000
Subscribed share
capital
1,000,000

When investors make a full payment for the
subscription, stock certificates are issued to them
immediately
Aug. 2 Issued 200 shares for P20,000 cash
MEMORANDUM
JOURNAL ENTRY
METHOD
Cash 20,000
Share capital-
20,000
Cash 20,000
Unissued Share
capital - 20,000
Collected the subscription of Ms. Elcee.
MEMORANDUM
JOURNAL ENTRY
METHOD
Cash 1,000,000
Subscription
receivable
1,000,000
Subscribed share
Capital- 1,000,000
Share capital
1,000,000

Cash 1,000,000
Subscription
receivable-
1,000,000
Subscribed share
Capital 1,000,000
Unissued Share
capital
1,000,000

PAYMENTS IN THE FORM OF NON-CASH
ASSETS SHALL BE RECORDED USING FAIR
MARKET VALUE
Received a piece of land from Ms. Mariebic in exchange for 5,000
shares. Fair market value of the land was P500,000.
MEMORANDUM
JOURNAL ENTRY
METHOD
Land 500.000
Share capital
500,000
Land 500.000
Unissued Share
capital
500,000

Issued 50 shares to Ms. Jina for promotional services rendered
during the formation of the corporation.
MEMORANDUM
JOURNAL ENTR,Y
METHOD
Organization Cost 5,000
Share capital-
5,000
Organization cost 5,000
Unissued Share
capital 5,000
Subscriptions for 1,000 shares were received from Ms. Akino .
Received 20% downpayment, balance in four equal monthly
installments starting Nov. 1.
Cash 20,000
Subscription
Receivable 80,000
Subscribed share
Capital
100,000

Cash 20,000
Subscription
Receivable 80,000
Subscribed share
Capital
100,000
Collected half of the balance of the incorporators subscription .
Cash 468,750
Subscription
receivable
468,750



Cash 468,750
Subscription
receivable
468,750

Collected the first installment on the
September 15 subscripions


Cash 20,000
Subscription
Receivable 20,000


Cash 20,000
Subscription
Receivable 20,000
Collected the other half of the incorporators subscriptions
and issued the corresponding stock certificates
Cash 468,750
Subscription
receivable 468,750
Subscribed share
Capital- 1,250,000
Share capital
1,250,000
Cash 468,750
Subscription
receivable 468,750
Subscribed share
Capital- 1,250,000
Share capital
1,250,000
Collected the second installment on
the Sept. 15 subscription


Cash 20,000
Subscription
receivable 20,000



Cash 20,000
Subscription
receivable 20,000
FRANKIE CORPORATION
Frankie Corporation
was authorized to
issue 50,000 shares
at P100 par value.
Unissued share
capital 5,000,000
Authorized
share capital
5,000,000
No. of
shares
Total
amount

25%
Agatha 2,500 P250,000 P62,500
Prescilla 2,500 P250,000 P62,500
Kaye 2,500 P250,000 P62,500
Airel 2,500 P250,000 P62,500
Jhun 2,500 P250,000 P62,500
Total 12,500 P1,250,000 P312,500
Cash 312,500
Subscription
Receivable 937,500
Subscribed share
capital
1,250,000 The incorporators
Subsribed 2,500
Shares and paid 25%.

When shares are issued in excess of par value,
the amount in excess is called Share Premium
Organization Cost 4,000
Cash 4,000

Cash 240,000
Share capital 200,000
Share premium 40,000

Prescilla P250,000 P62,500 P187,500
Cash
187,500
Subscription
Receivable
187,500

Subscribed share
Capital 250,000
Share capital
250,000
Cash
187,500
Subscription
Receivable
187,500

Subscribed share
Capital 250,000
Share capital
250,000
Total
amount Payment
25%
Balance
Agatha P250,000 P62,500 P187,500
Truck 480,000
Subscription
receivable
187,500
Share capital
200,000
Share premium
92,500

Subscribed share
Capital 250,000
Share capital
250,000

Truck 480,000
Subscription
receivable
187,500
Share capital
200,000
Share premium
92,500

Subscribed share
Capital 250,000
Unissued
Share capital
250,000
Subscription receivable 187,500
Subscribed share
capital
150,000
Share premium
37,500
Organization cost
10,000
Share capital
10,000
Organization cost
10,000
Unissued
Share capital
10,000
Subscription
receivable 180,000
Subscribed
Share capital
150,000
Share premium
30,000
Subscription
receivable 180,000
Subscribed
Share capital
150,000
Share premium
30,000
Kaye P250,000 P62,500 P187,500
Merchandise
Inventory 187,500
Subscription
Receivable
187,500

Subscribed share
Capital
250,000
Share
capital
250,000
Merchandise
Inventory 187,500
Subscription
Receivable
187,500

Subscribed share
Capital
250,000
Unissued share
capital
250,000
Cash 90,000
Subscription
Receivable
90,000
Cash 90,000
Subscription
Receivable
90,000
Cash 220,000
Share capital
200,000
Share premium
20,000
Cash 220,000
Unissued Share
capital
200,000
Share premium
20,000
Cash 90,000
Subscription
Receivable
90,000

Subscribed share
Capital 150,000
Share capital
150,000
Cash 90,000
Subscription
Receivable
90,000

Subscribed share
Capital 150,000
Unissued Share
capital
150,000


Land 350,000
Share capital
300,000
Share premium
50,000
Land 350,000
Share capital
300,000
Share premium
50,000
Total
amount
Paymen
t
25%

Balance
Amiel P250,000 P62,500 P187,500
Jhun P250,000 P62,500 187,500
Total P500,000 P125,000 P375,000
Cash 375,000
Subscription
receivable
375,000
Subscribed share
Capital 500,000
Share capital
500,000
CAVITE CORPORATION
2009
June 1 The corporation is authorized to issue
400,000 shares of 9% preference shares with
P40 par value and 500,000 ordinary shares
with par value of P30.
Aug. 5 Subscription receivable-ordinary 10,080,000
Cash 2,520,000
Subscribed share capital-
ordinary 9,000,000
Share premium-ordinary 3,600,000
Received subscription for 300,000
shares @ P42 receiving 20% down
payment

August 7
Land 210,000
Buildings 250,000
Equipment 50,000
Merchandise inventory 110,000
Mortgage payable 41,000

Accounts payable 11,000
Interest payable 550
Share capital ordinary 495,000
Share premium ordinary 72,450
Issued 16,500 shares in exchange for
the business of Andrew..




9 Cash 810,000
Subscriptions receivable preference
4,590,000
Subscribed share capital preference
4,800,000 Share premium preference
600,000
Received subscription for 120,000 shares @ P45.
Sept. 1 Cash 5,040,000
Subscription receivable ordinary
5,040,000
Received the amount due on this
date from ordinary subscribers


Oct. 1 Cash 2,295,000
Subscription receivable-
preference 2,295,000
Received the amount due this date
from preference shareholders

Oct. 6 Cash 489,600
Subscription
receivable- ordinary 1,142,400
Subscribed share
capital-ordinary 1,440,000
Share premium-
ordinary 192,000
Nov. 1 Cash 26,400
Share capital preference 24,000
Share premium preference 2,400
Dec. 1 Cash 7,335,000
Subscription receivable-ordinary 5,040,000
Subscription receivable-preference 2,295,000
Amounts due on this date were
collected from the preferred and
ordinary subscribers.

Subscribed share capital ordinary 9,000,000
Share capital ordinary 9,000,000
Issued ordinary shares of stocks to
shareholders


Subscribed share capital preference 4,800,000
Share capital preference 4,800,000
Issued shares of stocks to preference
Shareholders.
Cash 350,000
Subscription receivable-preference 1,050,000
Subscribed share capital preference
1,400,000
Subscriptions were received for 35,000
Preference shares at par with a 25% down
payment