It is sometimes difficult to decide whether to register as a sole proprietor or to find several incorporators to organize a corporation. Fortunately, under the SEC Revised Corporation Code (RCC) or RA 11232, which took effect on 23 February 2019, there is now a middle ground between these two business structures. A One Person Corporation (OPC) is an attractive option for those who want the benefits of a corporation (such as limited liability and lower tax rates at higher income brackets) while retaining full ownership and control of the business.
Let’s take a closer look at what each one offers.
What is a Sole Proprietorship?
A sole proprietorship is the simplest and most common type of business structure in the Philippines. It is owned and managed by one individual, with no legal distinction between the owner and the business. This means the owner has full control over operations and bears unlimited personal liability for any debts or obligations the business incurs.
What is a One Person Corporation (OPC)?
Introduced through the Revised Corporation Code of the Philippines (Republic Act No. 11232), a One Person Corporation (OPC) allows a single person to form a corporation without needing partners or shareholders. This business structure gives the owner limited liability, meaning the corporation is a separate legal entity from the individual. Your personal assets are typically protected in case of debts or legal issues.
However, an OPC requires a more formal setup than a sole proprietorship. You’ll need to file Articles of Incorporation with the Securities and Exchange Commission (SEC), appoint a nominee and alternate nominee (in case of the owner’s death or incapacity), and submit regular compliance documents like audited financial statements and General Information Sheets.
Table of One Person Corporation (OPC) vs. Sole Proprietorship
| Sole Proprietorship | One-Person Corporation | |
| Taxation | If the gross receipts or gross sales and other non-operating income of the year do not exceed PHP 3 million, it is qualified for a final tax of 8% of its gross sales less PHP 250,000.00. If the sole proprietorship’s gross sales exceed Three Million Pesos, or if it does not opt for the 8% tax rate, the graduated income tax rate will apply.
Self-employed and professionals may also opt for the graduated income tax rates of 0% to 35% on net taxable income plus 3% tax. A more straightforward tax rule applies to self-employed and professionals whose annual gross sales or income is above PHP 3 million. They simply have to follow the graduated income tax rate on the net taxable income plus VAT. |
Just like in the ordinary corporation, tax for an OPC is currently at 30%. |
| Liability | The liability extends to the owner’s personal properties as there is no legal distinction between the owner and the business. | Generally, OPC and its owner are treated as separate juridical personality; hence, the liability only stays within the company’s assets. |
| Succession | In the unfortunate event of the demise of the sole proprietor, the assets and liabilities of the business will be transferred to the children or heirs, and the license of the business will expire. Should the children/heirs wish to continue the business, they will need to secure a new business license. | Corporation perpetuity also applies to an OPC. The nominee successor will take over the business operation in the event of death or incapacity of the business owner until a proper turnover to the heirs is done. |
| Name | Can be the name of an individual or any made-up name. No label will be attached since this is not a separate entity.
Business Name is registered with the Department of Trade & Industry (DTI). |
Must have the label OPC at the end of the company name.
Registration of OPC is done with the Securities and Exchange Commission (SEC). |
So Which is Better for You?
Choosing between an OPC and a sole proprietorship depends on your goals, risk tolerance, and business structure.
- Go with a Sole Proprietorship if you want a simple, low-cost setup and you’re running a small-scale business with minimal legal risk. Registration is quicker and maintenance is easier, making it ideal for freelancers, small online shops, or traditional businesses like sari-sari stores or food stalls.
- Choose an OPC if you want personal asset protection, plan to grow your business, or want to establish credibility with corporate clients. It’s also the better option if you’re in a high-risk industry or seeking future investment and expansion.
For example, a graphic designer who works with a small team and has low overhead might be fine with a sole proprietorship. But someone running an import-export business dealing with large transactions may benefit more from the limited liability and formal structure of an OPC.
Final Thoughts
Both One Person Corporations and Sole Proprietorships have their advantages, and choosing the right one can help you set your business up for long-term success. Think about how much risk your business involves, how much you’re willing to spend on setup and compliance, and how you want to grow. If you need asset protection and see yourself scaling up in the future, an OPC might be worth the extra paperwork. But if you’re just starting small or want a simple structure with fewer reporting requirements, a sole proprietorship may be the better fit.
Are You Still Doubtful About Whether to be an Incorporator or a Sole Proprietor?
Registering a business in the Philippines can be challenging, with many decisions that can impact your long-term success. That’s where Triple i Consulting comes in. Our team of experienced lawyers and accountants offers comprehensive support throughout the registration process. We’ll guide you every step of the way to help you make informed decisions, building a strong foundation for your business.
Contact us today to schedule an initial consultation with one of our experts:
- Fill out the form below
- Call us at: +63 (02) 8540-9623
- Send an email to: info@tripleiconsulting.com
