Sole Proprietorship In The Philippines

A sole proprietorship gives complete control to an individual owner. It is one of the simplest structures for business expansion in the Philippines. Freelancers and self-employed professionals are both included under sole proprietorship. 

Foreigners can establish a sole proprietorship in the Philippines in industries not governed by ownership equity laws. Over 40% of firms are registered as sole proprietorships in the Philippines as per 2015 data. The process to register a sole proprietorship in the Philippines is also comparatively smoother. 

Now let us see how to establish a sole proprietorship in the Philippines. 

Who can be a Sole Proprietor in the Philippines?

Unlike the US and the UK, the Philippines does not have the legal concept of a Limited Liability Company (LLC) or Private Limited Company. Hence, many self-employed individuals and small businesses start as sole proprietorships and then transition to domestic corporations.

You must fulfill the following criteria to establish a sole proprietorship in the Philippines – 

  • Be a single owner of the business
  • Have a Special Investor’s Resident Visa
  • Be the sole beneficiary liable to responsibilities, profits, and losses.

Note: The sector you operate in should not have foreign equity restrictions.

Benefits of Sole Proprietorship in the Philippines

When choosing a business entity for your company, you must know the advantages of the structure you choose. A fair share of tax procedures and legalities are involved in registering a new business. 

Here are some benefits of setting up a sole proprietorship in the Philippines:

  • You remain the sole supervisor of all your business operations
  • You have complete control over the decision-making process
  • There is no separate taxation for the business 
  • The tax rate for self-employed individuals is 8%, provided their income is less than P3,000,000) 

It is cheaper to set up a sole proprietorship in the Philippines than a corporation

Documents Required for Registering Your Business in the Philippines

Anyone looking to establish a sole proprietorship in the Philippines must fill out the mandatory documentation forms for registration. Moreover, they must register at these three different government agencies:

  • The Department of Trade and Industry
  • Local Government Unit 
  • Bureau of Internal Revenue 

You must submit the following documents to register a sole proprietorship in the Philippines: 

  • Business Name application form
  • Foreign Investor’s application form
  • Passport size photos 
  • Biodata
  • Valid visa 
  • Certificate of Authority to Engage in Business
  • Government-issued ID such as passport, driver’s license, National ID
  • Resident Agent Appointment form 
  • Proof of inward remittance of Foreign Currency with Peso Conversion
  • Bank certificate of deposit 
  • Authority to verify bank account and bank certificate of deposit

Authorities might ask for additional documents depending on the nature of your business.

Other Criteria for Registering a Sole Proprietorship in the Philippines

Be mindful of these things when registering as self-employed in the Philippines: 

  • All businesses must secure a mayor’s permit or municipal license from the city (where the business is located) to ensure compliance with local regulations. 
  • After incorporating a sole proprietorship in the Philippines, if you plan to hire more employees in the future, you must register your business with:
  • Social Security System
  • Home Development Mutual Fund
  • Philippine Health Insurance Corporation
  • You must register with the appropriate regulatory bodies according to the nature of your business/product.

How to Register a Sole Proprietorship in the Philippines?

Multiple steps are involved in setting up a sole proprietorship in the Philippines. Here’s a step-by-step guide for the same: 

Register a business name: ‍

  • Decide upon a business name, one that is not already registered or trademarked,
  • You can keep your own name,
  • Fill out the application form on the Department of Trade and Industry website, 
  • Check if the business name is available, 
  • Pay the registration fee,
  • Obtain a DTI Certificate of Registration (COR) and make a printout of the same.

Register with Barangay Office: This acts as a legal requirement to operate your business.

  • Go to the Barangay Hall of your business location,
  • Submit the application form along with the DTI Certificate of Registration,
  • Submit address proof,
  • Two valid ID proofs, 
  • If successful, you will get the Certificate of Business Registration. 

Register in the Mayor’s Office: This helps acquire permission to operate in the local municipality.

  • Go to the municipal office where you plan to set up your business 
  • Fill out the necessary form(s)
  • Submit residency proof/lease contract (for a rented office) 
  • Pay the Mayor’s permit fee
  • Claim the business permit and licenses

Register with the Bureau of Internal Revenue: This is crucial for managing sole proprietorship taxes in the Philippines.

  • Go to the Regional District Office and fill out the BIR Form 1901 
  • Submit the Certificate of Registration from DTI, Barangay clearance, and Mayor’s Business Permit
  • Give an address proof and Valid IDs, 
  • Pay the registration fees, 
  • Register your book of accounts, 
  • You will get your final Certificate of Registration.

Once you have acquired all four certificates, you can start working on the business operations.

Conclusion

Setting up a sole proprietorship in the Philippines can be long and time-consuming. After all, it may take months to get the relevant permits from concerned authorities. Plus, you must be well-versed with the local rules and regulations for self-employed people. 

If you don’t wish to bear the burden alone, we recommend you partner with a global EOR firm like Multiplier

With local entities in over 150+ nations, our experts can help set up your sole proprietorship in a foreign country. We can also help you onboard freelancers and manage their payroll. Our one-click payroll services will save you the hassles of taxation in foreign countries.

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Frequently Asked Questions

There is no minimum capital requirement to set up a sole proprietorship in the Philippines.

A sole proprietorship does not mandate a resident agent. A resident agent is a mandatory requirement for establishing a branch office or a representative office in the Philippines.

One Person Corporation or OPC is a firm composed of a single stockholder, who could be an individual, trust, or estate. Foreign companies cannot avail this structure.

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