Choosing a business structure is an integral part of starting your own company. If you are an international investor, you’ll know that the most common ways to start a business are through a sole proprietorship or a one-person corporation.
In the article below, we explain the difference between these two business types and what they’re best suited for.
What is a sole proprietorship?
In this type of ownership, you own and operate the company and its assets in its entirety. You can enjoy all the benefits of the business. However, this also means you are solely responsible for liabilities and debt that may be incurred.
The proprietor and their business are considered as one entity and share a single Taxpayer Identification Number (TIN). Foreigners who want to own a sole proprietorship business need a minimum paid capital of $200,000.
Creating a sole proprietorship
To set up a sole proprietorship in the Philippines, follow these steps:
You can find a complete guide for registering your sole proprietorship here.
Advantages of a sole proprietorship
A sole proprietorship offers the following benefits:
Disadvantages of a sole proprietorship
Owning a sole proprietorship also comes with a few drawbacks:
What is an OPC?
A one-person corporation or OPC is the Philippine version of a limited liability company (LLC). As the name suggests, you don’t need other incorporators to apply for corporation registration in the Philippines. This is typically used by those who get into micro, small, or medium-sized businesses.
Foreigners can set up an OPC; however, they still need to abide by the Philippines’ Foreign Investment Negative List. The industry their business is in should also allow full foreign ownership.
Creating an OPC
To set up an OPC, the following steps must be observed:
Advantages of OPC
Owning an OPC offers the following perks:
Disadvantages of OPC
The downsides of owning an OPC include the following:
Sole Proprietorship vs. OPC: Which one should you choose?
Both business structures have their respective pros and cons so it’s best to weigh these and see which between these two will benefit you most. If you’re looking for something that is more cost-effective and gives you more freedom to dictate the direction of your business, a sole proprietorship could be best for you. But if you want to scale up your business, an OPC allows you to easily convert to a regular corporation.
The most important thing about choosing a company structure is to make sure it aligns with your business goals. Sort out your priorities and figure out the best option for you.
Do you still need more guidance on the best business structure to use in the formation of your foreign company? Learn more about starting a business in the Philippines with the experts at FilePino. Get in touch with us today by calling +1.806.553.6552 or by reaching out to us here.