For many years, solo entrepreneurs in the Philippines were limited to registering as Sole Proprietorships through the Department of Trade and Industry (DTI). While simple, this structure offers no legal separation between the individual and the business, meaning personal assets are at risk for business liabilities.
The enactment of Republic Act No. 11232, or the Revised Corporation Code (RCC), revolutionized the landscape by introducing the One Person Corporation (OPC). This structure provides a sophisticated alternative for solo operators seeking the benefits of incorporation without the need for multiple incorporators.
1. The One Person Corporation (OPC)
An OPC is a corporation with a single stockholder who is also the sole director and president. It is designed specifically for individual entrepreneurs, allowing them to enjoy a separate legal personality.
Key Features and Advantages
- Limited Liability: The most significant advantage. The personality of the corporation is separate from the individual stockholder. Generally, the stockholder’s liability is limited to the amount of their investment. Personal assets (like your home or personal savings) are protected from business creditors.
- Perpetual Existence: Unlike a sole proprietorship, which dissolves upon the death of the owner, an OPC can have perpetual existence. The designated "Nominee" and "Alternate Nominee" ensure business continuity.
- No Minimum Capital Stock: Generally, no minimum authorized capital stock is required for an OPC, unless specifically mandated by special laws.
- Sole Control: You retain 100% authority over decision-making without the need for a Board of Directors' meeting or consensus from other partners.
Mandatory Appointments
Even as a solo operator, the law requires the designation of certain roles (though you may hold multiple):
- President: The single stockholder is the default President.
- Corporate Secretary: You cannot be your own Corporate Secretary. You must appoint another person.
- Treasurer: You may be the Treasurer, but the SEC requires a surety bond based on the corporation's self-declared capital.
- Nominee and Alternate Nominee: You must designate these individuals to take over the management of the OPC in the event of your death or incapacity.
2. Sole Proprietorship (DTI)
This remains the most common entry point for micro-businesses due to its ease of registration.
Comparison at a Glance
| Feature | Sole Proprietorship | One Person Corporation (OPC) |
|---|---|---|
| Registration | DTI (Department of Trade & Industry) | SEC (Securities and Exchange Commission) |
| Legal Personality | No separate legal personality. | Separate and distinct legal personality. |
| Liability | Unlimited personal liability. | Limited liability (corporate veil). |
| Succession | Terminates upon death of owner. | Perpetual existence; passes to heirs/nominee. |
| Taxation | Taxed as an individual. | Taxed as a corporation (subject to CREATE Law). |
3. Taxation and Compliance
Choosing between a Sole Proprietorship and an OPC often comes down to the tax impact.
- Sole Proprietorships are taxed under the individual income tax rates (graduated rates up to 35% or the 8% flat rate for qualified earners).
- OPCs are subject to Corporate Income Tax. Under the CREATE Law, the Domestic Corporate Income Tax is generally 25%, or 20% for small and medium enterprises (with net taxable income below ₱5 million and total assets excluding land below ₱100 million).
Compliance Requirements for OPCs: OPCs face stricter annual requirements than sole proprietorships, including:
- Annual Audited Financial Statements (AFS).
- General Information Sheet (GIS).
- Disclosure of self-dealings and related party transactions.
- Maintenance of a Corporate Minutes Book.
4. Which One Should You Choose?
Choose an OPC if:
- Your business involves high risk or significant potential liabilities.
- You intend to scale and want a structure that looks more "institutional" to banks and investors.
- You want to ensure the business continues even after your passing.
- Your projected net income is high enough that the flat corporate tax rate is more beneficial than the top-tier individual graduated rates.
Choose a Sole Proprietorship if:
- The business is low-risk (e.g., professional consulting with minimal overhead).
- You want the simplest, least expensive registration and maintenance process.
- You prefer being taxed as an individual (especially if you qualify for the 8% tax regime).
Summary of Legal Safeguards
For solo operators, the One Person Corporation is widely considered the "best" structure for asset protection. However, the "piercing the corporate veil" doctrine still applies. If a solo stockholder treats the corporation’s money as their personal "piggy bank" without proper documentation, courts may disregard the corporate shield and hold the individual personally liable. Proper corporate bookkeeping and separation of funds are essential to maintaining the legal benefits of an OPC.