Sole Proprietorship vs. One Person Corporation: Which is Right for Your Business?
Starting a business in the Philippines is an exciting journey—filled with promise, potential, and the thrill of turning your vision into reality. But before you can take off, one of your very first and most important decisions is choosing the right legal structure.
For solo entrepreneurs, two of the most common options are:
Sole Proprietorship, registered through the Department of Trade and Industry (DTI), and
One Person Corporation (OPC), registered with the Securities and Exchange Commission (SEC).
Both structures offer distinct advantages and limitations. Your best choice will depend on your business goals, risk tolerance, and long-term plans. Here's a side-by-side breakdown to help you decide.
Sole Proprietorship:
Simple and Straightforward
A sole proprietorship is the simplest form of business ownership. It’s owned by one individual, and legally, there’s no separation between the owner and the business. You are the business.
Registration: Through the DTI
To register a sole proprietorship, you’ll need to:
Secure a business name through the DTI Business Name Registration System
Obtain a barangay clearance and mayor’s permit
Register with the BIR (Bureau of Internal Revenue) for tax purposes
The process is generally fast and inexpensive.
Pros of Sole Proprietorship:
Easy Setup: Fewer steps, lower costs, and faster approval
Full Control: You make all decisions and keep all profits
Minimal Compliance: Fewer reports and regulatory filings than corporations
Lower Initial Cost: No need for Articles of Incorporation or legal services
Cons of Sole Proprietorship:
Unlimited Liability: You’re personally liable for all debts and legal obligations
Limited Funding Options: Harder to raise capital from banks or investors
Business Continuity Issues: The business typically ends if the owner passes away
One Person Corporation (OPC):
Limited Liability and Growth Potential
Introduced under the Revised Corporation Code of 2019, an OPC is a type of corporation with only one stockholder, who also serves as the sole director and president. It offers a more formal structure and limited liability protection, separating your personal assets from your business obligations.
Registration: Through the SEC
To set up an OPC, you’ll need to:
Reserve a corporate name via the SEC Electronic Simplified Processing of Application for Registration of Company (ESPARC)
Submit Articles of Incorporation with details about the single stockholder
Appoint a nominee and alternate nominee in case of death or incapacity
Register with the BIR and secure local government permits
Pros of OPC:
Limited Liability: Your personal assets are protected
More Credible: Corporations are often taken more seriously by banks, clients, and investors
Easier Access to Capital: Corporations can access more financing options
Continuity: The business can continue beyond the life of the owner, through the nominee
Scalability: The structure supports expansion, partnerships, and future conversions
Cons of OPC:
More Complex Setup: More documentation and longer registration time
Higher Initial Costs: Fees and legal assistance may be required
Stricter Compliance: Must submit annual financial statements, general information sheets, and tax filings to the SEC and BIR
Potentially Higher Taxes: Depending on income and allowable deductions, corporations may be subject to higher overall tax burdens than individual taxpayers
Quick Tips:
Risk-Averse? Choose an OPC for liability protection.
Tight Budget? A sole proprietorship is cheaper to start.
Planning to Scale? An OPC offers better long-term flexibility.
Need to Start Fast? A sole proprietorship is quicker to set up.
Need Help Navigating Business Registration?
Choosing the right business structure is a foundational decision—one that can shape the future of your enterprise.
At Aboveboard, we offer expert, transparent consulting services to help you navigate every step of the registration and compliance process. Whether you’re leaning toward the simplicity of a sole proprietorship or the structure and security of an OPC, our team is here to guide you.