What is a Sole Proprietorship?

According to the Chan Robles Virtual Law Library, a sole proprietorship allows an individual to register and operate a business without the need for partners or co-owners. It is often referred to as the simplest form of business organization, which makes it a popular choice for many first-time entrepreneurs.

What is a One Person Corporation (OPC)?

As the name suggests, a One Person Corporation is a type of corporation that can be formed by a single individual. Unlike the old corporation law—which required a minimum of five incorporators and disallowed trusts and estates as stockholders—the new law permits a single person, trust, or estate to be the sole stockholder.

Key Differences Between Sole Proprietorship and One Person Corporation

The main distinction between the two lies in liability and legal identity:

• In a sole proprietorship, the owner and the business are legally considered the same entity. They share a single Tax Identification Number (TIN). This means the owner has unlimited liability—if the business incurs debt, creditors can go after the owner's personal assets.
• In contrast, a One Person Corporation separates the individual from the business. The corporation has its own legal identity and TIN, and the owner enjoys limited liability—personal assets are protected, and liability is limited to the amount of investment in the business.

What Has Changed in the Law?

Previously, aspiring entrepreneurs in the Philippines had to choose between a sole proprietorship, partnership, or corporation. For this discussion, we’ll focus only on the first and the last.

Forming a corporation used to be a more complex process, involving multiple stockholders, submission of articles of incorporation, by-laws, and other legal documentation—often requiring professional help from lawyers and accountants. Corporate tax rates were also higher compared to other forms.

On the other hand, a sole proprietorship involved a relatively simple process—just registering a business name with the Department of Trade and Industry (DTI). It came with lower capital requirements, minimal permits, and allowed the owner to keep all profits.

Despite its simplicity, many entrepreneurs still chose the corporate route because of the limited liability protection. In some cases, people went as far as registering businesses under another person’s name (e.g., a household helper) just to meet the old legal requirements. The introduction of the One Person Corporation aims to eliminate such practices.

Additional Improvements Under the Revised Law

• Perpetual Existence: Corporations now have perpetual life by default, unless stated otherwise in their registration. This is a major shift from the previous 50-year corporate lifespan.
• Revival of Expired Corporations: Corporations whose terms have lapsed can now apply for revival, regaining all rights and privileges outlined in their original registration.
• No Minimum Authorized Capital Stock: One Person Corporations are no longer required to declare a minimum authorized capital. However, at least 25% of the subscribed capital stock must be paid up.