The Advantages of a Sole Proprietorship Business in the Philippines

A sole proprietorship is a basic business structure operated by just one owner who has complete authority over the business and is personally responsible for all of its assets and debts.
 
Sole proprietorship is one of the most widely used business forms in the Philippines mainly due to its simplicity, minimal cost, and easy, streamlined setup process, making it a top option for sole business owners, consultants, and individuals self-contractors. While sole proprietorship owners get to enjoy all profits earned by their business, they are also fully responsible for losses, debts, and liabilities.
 
In the Philippines, sole proprietors and their businesses are considered as a single taxpayer sharing the same Tax Identification Number (TIN) for tax purposes. Those who plan to establish a sole proprietorship in the Philippines need to register with the Department of Trade and Industry and must apply for a business trade name.

What are the differences between sole proprietorships and other business models?

Unlike other common business structures such as corporations, various partnerships, and limited liability companies or LLCs, it is the sole proprietor who is in charge and responsible for the business.
 
In partnerships, the responsibilities of the business are shared between multiple individuals. In LLCs and corporations, the financial liabilities are handled by the corporation and the LLC itself, and not the individuals behind its operation.

Advantages of a sole proprietorship

1. 1. Easy set up – The process of establishing a sole proprietorship in the Philippines is simple, especially when compared to the processes involved in setting up a partnership or corporation.

1. 1. More streamlined startup – Individuals who start a sole proprietorship do not need to worry about going through the long, and tedious process of preparing legal agreements, since they’re not going into business with other partners. There’s no need to create elaborate business structures, no lengthy meetings with the board of directors, and no complex accounting for the shares in the business. You just start your business right off the bat and hit the ground running.

1. 1. Nominal cost – Unlike other business models which require large fees and filings to operate for business, sole proprietorships are more affordable to establish and maintain.

1. 1. Direct control – As mentioned earlier, owners of a sole proprietorship have full control over all decision making. The owner is essentially the business itself, which means he or she has complete control over all business-related decisions, instead of sharing authority with a partner or a board of directors. Having direct control gives sole proprietorship owners the freedom to guide the business in any direction they choose.

1. Hiring flexibility – Sole proprietors are able to employ others and expand their business, enjoying tax benefits as a result. In addition, spouses of sole proprietors can also be employed in the company without needing to declare themselves as employees.

How to set up a sole proprietorship in the Philippines

To start a sole proprietorship, you’ll need to go to three different government agencies: The Department of Trade and Industry (DTI), your Local Government Unit (LGU) or Barangay, and the Bureau of Internal Revenue’s Revenue District Office in the city where you plan to set up your business.
 
Keep in mind that you cannot be officially registered as a sole proprietorship if you do not have complete documents and requirements from these three agencies.

Here’s a brief overview of the steps required to set up a sole proprietorship in the Philippines:

1. 1. Register a business name with the DTI

      The first step is to search for your intended business name and see if there are existing businesses with the same name. If the name you choose is available, fill out a business name application form, and then submit it to the DTI office. If all requirements are met, the DTI will issue a Certificate of Registration.

1. 1. Barangay Registration

      Submit a copy of DTI’s Certificate of Registration, Proof of Residence, and two valid IDs, and then fill out a business application form at the Barangay where your business will operate.

1. 1. Register at the Mayor’s Office

      Head to the municipal office in the city where you plan to establish your business. Here, you’ll need to complete an application form and submit your DTI Certificate of Registration, Barangay Clearance Certificate, Proof of Residency, and two valid IDs.

1. Bureau of Internal Revenue (BIR) registration

   The last step is to register your business with the BIR. To do this, you will need to obtain a copy of “BIR Form 1901” at your city’s regional office. You’ll also need to submit your DTI Certificate of Registration, Barangay Clearance Certificate, Proof of Residency, Mayor’s’ Business Permit, and a valid ID. After submitting these, pay for all registration fees, register your book of accounts, and submit any invoices and receipts for your business.

 
Get in touch with our team today to find out more about setting up a business in the Philippines. Call us at +1.806.553.6552 or send us a message here.