To do this, you will need to obtain a copy of “BIR Form 1901” at your city’s regional office. You can send your comments and feedback at info@taxacctgcenter.org. Natural persons could not live longer than corporations. You’ll also need to submit your DTI Certificate of Registration, Barangay Clearance Certificate, Proof of Residency, Mayor’s’ Business Permit, and a valid ID. In a sole proprietorship, the legal entity of the business and that of the owner is the same, though, they are treated separate for accounting and tax compliance. Exception to this limited liability is the concept of piercing the veil of corporate entity where the legal entity of a corporation is disregarded if it is used to justify a wrong, protect a fraud, and such other ill instances. Nevertheless, we feel that using a corporate set-up could best be beneficial in the following ways: 1. There could be more reasons of using a corporation over a sole proprietorship and there could be more stories about it. List of Advantages of Sole Proprietorship. An LLC in the United States is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. Hiring flexibility – Sole proprietors are able to employ others and expand their business, enjoying tax benefits as a result. For foreign investors, there could be a number of options on what entity to use for Philippine operations. On the other hand, the corporate owner representing the corporation could simply say that he will have first to consult the Board of Directors for the unusual price consideration and could not decide outright. As SEC Chairperson Emilio B. Aquino said, “An OPC offers the agility and complete dominion of a sole proprietorship and the … Benefits of a Sole Proprietor Business Easier to set up and register Requires minimal amount of capital 3. Sitemap | Visit us at Suite 604 The Infinity Tower, 26th Street Fort Bonifacio Global City, Taguig, How to Register a Corporation in the Philippines, How to Set Up a Bank Account in the Philippines, Business and Legal Forms, Documents and Contracts, How to Register a Trademark in the Philippines, Types of Visas Available in the Philippines, The advantages of a sole proprietorship business in the Philippines, How to Get Great People to Join Your Startup Team, Common Mistakes to Avoid When Establishing a Startup, Great Investment Opportunities in the Philippines to Put Your Money Into, Company Registration with PEZA Accreditation, Company Registration with BOI Accreditation, Working Permits for Foreigners in the Philippines, Bureau of Internal Revenue (BIR) registration. Many Advantages of a One Person Corporation. Here is how we came about with this. Look around and observe big corporations and you will see some hundreds or thousand years old corporations. UNDER the Revised Corporation Code enacted in 2019, organizing a one-person corporation (OPC) is now allowed. Officially known as Republic Act 11232, it … Most businesses are owned by sole proprietors which is why this is the most common type of business ownership. With our years of practice, we have already registered various corporations with the Securities and exchange Commission and other government agencies. Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. How to Convert the 5-Person Corporation to One Person Corporation? Why Choose A Sole Proprietorship? Furthermore, a sole proprietor is a natural person(not a legal person/entity) who fully owns and manages this type of entity. 2. This is the seventh advantages of sole proprietorship and it means that the business of a sole trader is small in size and the structure of its management is also small, due to which the business works in a flexible form and manner. With the corporation, the intended participants would have the impression of a large scale so they cast away their doubts. Enter your email address to receive the best business insights from this blog. No Boss One of the reasons entrepreneurs prefer sole proprietorship over other business structures is not having to be accountable to any boss or supervisor since he or she is the owner of the company. Those who are interested in studying business issues like this should consider the University of St. Mary online MBA Program in order to advance their career. To set up a Sole Proprietoship in the Philippines, it requires going to 3 government agencies: DTI, LGU or Municipal Hall and Baranggay and the Revenue District Office of BIR in the city of your business address. This form of business organization is also the most common form of doing business in the United States. A sole proprietorship is a basic business structure operated by just one owner who has complete authority over the business and is personally responsible for all of its assets and debts. Domestic Corporations have a fixed 30% regular income tax rate while sole proprietors have the option to be taxed either at an 8% preferential tax rate or using the graduated tax table. Advantages of a Sole Proprietorship. With much respect, we beg to disagree to this notion. 21st Century Water Resources Refilling Station water refilling station M.L. Disadvantages of Sole Proprietorship . For comments, you may also please send mail at info(@)taxacctgcenter.ph, or you may post a question at Tax and Accounting Center Forum and participate therein. Easy and inexpensive process. At a glace over the Tax Code, a sole proprietorship is tax at a progressive rates of 5-32%, while a corporation is taxed at 30% on its taxable net income, so it appears that the corporation enjoys 2% lower income tax rate than a sole proprietor. It’s easy to set up a Sole Proprietorship in the Philippines (at least as compared to a Corporation or a Partnership). Benefits of Sole Proprietorship. In LLCs and corporations, the financial liabilities are handled by the corporation and the LLC itself, and not the individuals behind its operation. A sole proprietorship must apply for a business name and be registered with the DTI-National Capital Region (NCR). 5. 5 Advantages of Corporation over Sole Proprietorship In business, the use of a proper business entity or structure could bring about more business success, and … In this article, you will learn 1) what is the sole proprietorship and 2) what are the advantages and disadvantages of starting a business as a sole proprietorship. Now, we propose an addition – register a corporation and be successful in it. Public view of more heads running the business, Food and Drugs Administration Phils. 7 Advantages of Using a Sole Proprietorship Entity for a Business. director’s fees, business meeting expenses, etc. If you thrive on simplicity and autonomy, a sole proprietorship could be a match made in heaven. To illustrate, let us take for example a trucking service business who was contracted to transport an expensive chemical from Metro Manila to Baguio for a fee. Registration of Corporation. If all requirements are met, the DTI will issue a Certificate of Registration. The one person corporation creates a wealth of opportunity for entrepreneurs in the Philippines. In most of our seminars on basic business accounting and tax compliance or basic bookkeeping for entrepreneurs, the following question is almost always raised: “Which is better, a SOLE PROPRIETORSHIP or a CORPORATION?”. Whatever the sole proprietorship earns, the business owner earns as well. 4. A sole proprietorship is a great option for any Filipino who dreams about starting his or her own company. Many small business owners, mom and pop businesses operate under the sole proprietorship type of business entity for the following reasons. See our quality seminars, workshops, and trainings... Bureau of Immigration (BI) 2021 Annual Report for Registered Expatriate Visa and ACR I-card Holders in Philippines, 7 Basic Features of Independent CPA on CTA Tax Cases Philippines, 8 New Notable 2020 Tax Rules in Philippines under COVID-19 Pandemic, RMC 111-2020: Clarifications on Certain Issues Relative to VAPP. As an individual or a sole proprietor, the income, regardless of where it came from, is lumped together and taxed as a whole. In fact, the business and the man are the same, it does not have a separate legal entity. In the end, what the corporation offers from a tax perspective is flexibility. Despite its simplicity, a sole proprietorship offers several advantages, including the following: 1. Advantages of Sole Proprietorships The main advantages of starting as a sole proprietor are the ease of set-up and the benefit of pass-through taxation. Additionally, this risk extends to any liabilities incurred as a result of acts committed by employees of the company. (FDA). Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. If the name you choose is available, fill out a business name application form, and then submit it to the DTI office. More long-term structure. Advantages of a Sole Proprietorship. THE SOLE PROPRIETORSHIP. We also had a pending invitation from a School in Southern Leyte for a one-day seminar program. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Copyright © FilePino Inc. All rights reserved. On the above example, if the trucker is a corporation, then, the cargo owner can only resort to corporate assets and if the same is insufficient, the stockholders of the trucker company could not be held liable. That time, online marketing is up but there had been instances of fraudulent online sales – fictitious items and services sold but after initial payment, the seller is nowhere to be found. Sole Proprietorship This is when only one person owns and controls the business. As opposed to a corporation, not only is it easier from a legal point of view to get a proprietorship off the ground, but it’s also a lot cheaper. If you have very limited capital, then this may be your only option. Sole Proprietorship Is a business owned and operated by a single person. After submitting these, pay for all registration fees, register your book of accounts, and submit any invoices and receipts for your business. Call us at +1.806.553.6552 or send us a message here. Any small or big business, only to work for the customer’s needs and wants satisfaction. As a matter of fact, you can register a basic domestic corporation with PhP5,000.00 paid-up capitalization. After all, success is not purely dependent upon the structure, but a matter of how it operates. 1. Since you are the only owner of a sole proprietorship, you are in complete control of your business. There could be more business expenses in a corporation that could not be made in a sole proprietorship, e.g. When we started this SME education advocacy on basic business accounting and BIR compliance in mid-2010, we initially used a sole proprietorship business for our personal convenience – evaluating the market, marketing strategies, facilities, and funding. In the Philippines, common observation is that sole proprietorship is for small scale, while a corporation is for a large scale business operations. This one is also a great one. All income of a sole proprietorship is taxed immediately under its owners account, while in corporation, net income after tax is taxed only upon actual distribution of cash or property dividends. However, there are some big disadvantages which an individual needs to consider before getting into it. Most businesses start as a sole proprietorship because it’s low-cost, simple, and easy to set up; then later evolve into a more complex business as it develops. In a corporation, the death of the founder simply leaves the legacy and a concrete evidence of how he lived and managed his business in a corporate set-up. We have some participants from Ilo-ilo, Batangas, Laguna, Cavite, Pangasinan, Subic, Ilocos Sur, Baguio, and counting as we go along. In an instance where corporate assets fell short to pay its obligations and eventually shuts down, stockholders cannot be made liable to the extent of their personal assets. You are going to find out the answers below. Quite easily the most common business structure and the simplest out of all the other structures, a “sole proprietorship” is a business that is owned by only one person. Public view of more heads running the business.This goes with the saying, “two heads are better than one”. It is also very fast to put up. Increased Purchasing Power The capacity of a consumer to buy goods or services is his buying power. Unlike other common business structures such as corporations, various partnerships, and limited liability companies or LLCs, it is the sole proprietor who is in charge and responsible for the business. Sole Proprietorship firms are very easy to form and attract certain advantages that are unique to them. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. Submit a copy of DTI’s Certificate of Registration, Proof of Residence, and two valid IDs, and then fill out a business application form at the Barangay where your business will operate. At present, we have participants coming in not only from Metro Manila, but from other parts of the country – or should I say, from all over the country. The definition of a Sole Proprietorship or “single proprietorship”in the Philippines – is a business structure owned by an sole individual who has full control/authority of its own and owns all the assets, personally owes and answers to all liabilities and losses. Limited liability in a corporation. As previously stated, a sole proprietorship is the most basic form of business you can operate. Get in touch with our team today to find out more about setting up a business in the Philippines. 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