Sole Proprietorships in the Philippines

This is the simplest business entity you can have in the Philippines; it’s owned by one individual who has complete control of all the business services, profits, and assets. The owner of this business is called a ‘sole proprietor’, and he alone bears all the responsibility for any liabilities, issues, and debts that the business might incur over time. Foreign investors can become sole proprietors in the country, but they will be subject to the restrictions given by the Foreign Investment Negative List (FINL).

Legal fees and capital requirements

To create a sole proprietor business in the Philippines, you need to accomplish several registrations and legal fees to avoid problems with the law.

The Department of Trade and Industry (DTI) will issue payment fees once you apply for business registration; once you go to the bank to pay, evidence in the form of ‘proof of payment’ must be passed either through physical or online means.

Here is a list of all the fees all companies are required to pay:

• Registration Fee per territorial scheme:
  • Barangay P200
  • City/ Municipality P500
  • Regional P1000. National P2000.

Afterwards, you are required to register with certain government agencies to complete your capital requirements. These include the Bureau of Internal Revenue (BIR), Social Security Systems (SSS), Home Development Mutual Fund (HDMF) / Pag-IBIG Fund and even the local Barangay Office and Business Permit and Licensing Office (BPLO) relative to your corporation’s location.

You’ll also have to register with PhilHealth; they are the ones monitoring your employee’s wellbeing, and it's best to show them that you’re taking proper care of your people by paying a fixed amount for the employee’s health insurance fund.

The ownership structure of a sole proprietorship

This type of business has the simplest organisational structure compared to the other possible enterprises in the Philippines. A sole proprietorship is owned, managed, and controlled by a single individual. This person has the final word on all the business's financial, strategic, and marketing decisions.

An owner of a sole proprietorship does not need to answer to anyone, especially their employees, about any business decisions. His main goal is to keep the business profitable, legal, and safe enough to meet the financial obligations needed it. This business is 100% owned by a single owner; if he decides to share his equity, a complete business restructuring is required.

Types of sole proprietorship

o   Sole proprietorship as a Filipino citizen

As mentioned before, the simplest form of business in the Philippines is sole proprietorships. Creating one in the Philippines as a Filipino citizen is easy since they don’t have the exact requirements as partnerships or corporations like board meetings, elections, and sharing capital with another.

o   Sole proprietorship a foreigner

The first difference in establishing a sole proprietorship as a foreigner is that you cannot immediately gain a business license in your name. You need to register with the Department of Trade and Industry (DTI) and secure all local licenses and permits so that you can perform all your desired business operations.

How to register a sole proprietorship

Once you accomplish the DTI and local requirements, follow the following steps below to complete your registration process.

1. Register a business name with DTI to acquire a DTI Certificate of Registration.

      i.        Visit DTI’s Business Name Registration System here.

     ii.        Read the Terms and Conditions and click Accept.

    iii.        Fill in your personal information.

    iv.        Choose the nature or industry of your business (e.g., Bakery)

     v.        Provide your business with a name like Sam’s Bread and Cupcakes

    vi.        Make sure your business name is available and passes the criteria given

   vii.        Fill in other required information once your business name has been approved

  viii.        Pay the registration fee

    ix.        Print DTI Certificate of Registration (COR)

     x.        After acquiring a DTI Certificate of Registration (COR), you may now proceed and register with the Bureau of Internal Revenue (BIR) and secure a Business Permit.

2. Register with the Bureau of Internal Revenue (BIR) to acquire a Certificate of Registration. 

    i.      Complete the BIR Form 1901 – Application for Registration (for Sole Proprietor)

   ii.      Give a valid Government ID with Name/Address/Birthdate or PRC ID (if professional)

  iii.      Show a completed and paid BIR Form 0605 – Annual Registration Fee of P500.00

  iv.      Prepare the sample format of the receipts and invoices you will use for sales

   v.      Prepare the books of accounts, such as journals and ledgers, you will use for record-keeping

  vi.      DTI Certificate of Registration, if you use a “Trade Name.”

 vii.      Once you have completed all the requirements, submit them to the Regional District Office (RDO), where your business is located.

  viii.    Claim your BIR Form 2303 – Certificate of Registration (COR)

  ix.      Apply for Authority to Print (ATP) within 30 days upon issuance of the BIR Form 2303

   x.      Apply for registration of Books of Accounts within 30 days upon issuing the BIR Form 2303. 

3.  Compile the necessary business permits from the local government unit (LGU) of your business address 

1.   Secure a Barangay Business Clearance and Barangay Business Plate from your area’s Barangay Hall.

2.  Secure Location/Zoning Clearance

3.  Secure Company Cedula or Community Tax Certificate (CTC)

4.  Secure Comprehensive General Liability (CGL) Policy. Other LGUs will not require a CGL Policy

5.  Pay the business tax assessment/billing assessment

6.  Secure a Mayor’s Permit and Business Plate from the BPLO

7.  Secure Sanitary Permit

8.  Secure a Fire Safety Inspection Certificate (FSIC)