{"id":12724,"date":"2023-08-28T09:00:00","date_gmt":"2023-08-28T01:00:00","guid":{"rendered":"https:\/\/blog.ninjavan.co\/en-ph\/?p=12724"},"modified":"2023-08-18T14:49:02","modified_gmt":"2023-08-18T06:49:02","slug":"sole-proprietorship-vs-corporation","status":"publish","type":"post","link":"https:\/\/blog.ninjavan.co\/en-ph\/sole-proprietorship-vs-corporation\/","title":{"rendered":"Sole Proprietorship vs Corporation: What\u2019s Best for Your Business?"},"content":{"rendered":"\n

If you\u2019re planning to open a business in the Philippines, there are two different structures you can choose from. You can mainly run your business under a sole proprietorship<\/strong> or a corporation<\/strong>.\u00a0<\/p>\n\n\n\n

So, what are the similarities and differences between a sole proprietorship and a corporation? <\/p>\n\n\n\n

The general difference is the number of owners they could have. In a sole proprietorship, only one person owns the business. In a corporation, one or two people share ownership. <\/p>\n\n\n\n

But there\u2019s more to it than that. They also differ in their structure of ownership, benefits and drawbacks, registration process, and registration cost.<\/p>\n\n\n\n

What is a sole proprietorship?<\/h2>\n\n\n\n

As a business structure, a sole proprietorship is a business that only has one owner. It has no shareholders or partnerships, no board members and board elections, and no share capital. <\/p>\n\n\n

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\"Sole
A a sole proprietorship is a business that only has one owner, which is you!<\/em><\/figcaption><\/figure>\n<\/div>\n\n\n

Unlike a corporation that has all these qualities, a sole proprietorship has a simpler business structure. You\u2019ll have full ownership of the business \u2014 you have full control over it, you make all the decisions, and all the business profit and assets are yours and yours alone. You\u2019re also personally responsible for all the liabilities your business could face. <\/p>\n\n\n\n

Note:<\/strong> In the Philippines, Sole Proprietors and One Person Corporations are different.\u00a0<\/em><\/p>\n\n\n\n

What are the benefits of a sole proprietorship?<\/h3>\n\n\n\n

Being a sole proprietor has its advantages. Take note of these benefits and use them to your advantage.<\/p>\n\n\n\n

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  1. Less expensive and simpler process.<\/strong> Registering to DTI for a sole proprietorship has cheaper fees. The process is also simpler as there are minimal requirements. There\u2019s also less paperwork involved. In fact, you can do the full registration online.<\/li>\n\n\n\n
  2. Less complicated taxes. <\/strong>As a sole proprietor, you don\u2019t have a separate business tax. So, filing your taxes is easier and more manageable. You only have to file for your income tax, meaning your taxes are generated from how much you earn or profit from your business.<\/li>\n<\/ol>\n\n\n\n

    Read more about your Tax Obligations as an Online Seller<\/a>.<\/p>\n\n\n\n

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    1. No minimum capital.<\/strong> In the Philippines, there\u2019s no minimum capital requirement when you open a business under a sole proprietorship! <\/li>\n\n\n\n
    2. You\u2019re the boss.<\/strong> Sole proprietors are self-employed. So, you make all decisions for your business. This makes it easier to manage your business because all your decision-making doesn\u2019t have to undergo a more extensive process like board meetings.   <\/li>\n\n\n\n
    3. You keep all the profits.<\/strong> As a sole proprietor, you get to keep all the profits you earn through your business. You don\u2019t have any business partners to divide your profits with. <\/li>\n\n\n\n
    4. Lower tax rates.<\/strong> There is a lower tax rate for self-employed individuals. In the Philippines, it\u2019s around 8% (as long as your annual income from your profit does not exceed Php3,000,000). <\/li>\n<\/ol>\n\n\n\n

      Also take note of these Tax Exemptions for MSMEs<\/a>.<\/p>\n\n\n\n

      Disadvantages of sole proprietorship<\/h3>\n\n\n\n

      Of course, disadvantages are inevitable. You might want to take note of these disadvantages, so you can strategize how to work around them. <\/p>\n\n\n\n

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      1. No legacy building.<\/strong> In case anything happens to you as a sole proprietor, or you decide to discontinue your business, your business cannot be passed down to anyone. This is because you’re the sole owner of your business. The business dies with you. <\/li>\n\n\n\n
      2. No separation between assets and properties.<\/strong> As a sole proprietor, you\u2019re personally liable for all your assets and liabilities. Should anything happen to your business assets and properties, you have to personally answer for them. <\/li>\n\n\n\n
      3. No financial and liability protection.<\/strong> Since there\u2019s no distinction between your personal and business assets and liabilities, there\u2019s little to no financial and liability protection under a sole proprietorship. Should your business go into debt, you\u2019re personally liable for it. <\/li>\n<\/ol>\n\n\n\n

        What is a corporation?<\/h2>\n\n\n\n

        A Corporation is the exact opposite of a sole proprietorship. Under the RA 11232 of the Philippine Constitution, a corporation has a general classification of <\/strong>Domestic Corporation<\/em><\/strong> and One Person Corporations (OPCs)<\/em><\/strong>.<\/p>\n\n\n

        \n
        \"Corporation
        A corporation consists of incorporators and shareholders
        who co-own the company.<\/em><\/figcaption><\/figure>\n<\/div>\n\n\n

        A domestic corporation<\/em><\/strong> should have at least five incorporators.<\/strong> Incorporators are a group of people in charge of setting up and registering the corporation under the required government entities.<\/p>\n\n\n\n

        Aside from incorporators, a corporation should have shareholders. There\u2019s no longer a minimum number of shareholders required to establish a corporation in the Philippines. A corporation can have a single shareholder<\/strong> established under an OPC<\/strong>.<\/p>\n\n\n\n

        What is a corporation made of?<\/h3>\n\n\n\n

        Corporations have an extensive structure. Whether your corporation is a domestic corporation or an OPC, it has to be composed of the following:\u00a0<\/p>\n\n\n\n