Setting Up a Sole Proprietorship in the Philippines

Discover the power of sole proprietorship in the Philippines – a dynamic business structure with a single owner at the helm. Take full charge of your business endeavors while embracing responsibility for debts and liabilities. Reap the rewards firsthand as you secure all the profits your venture garners. Start your journey to success today!
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Definition of a Sole Proprietorship

A sole proprietorship is a business structure in the Philippines with only one owner. The owner has control of all the business activities, which means that he is also accountable for all the debts and liabilities that the business incurs. The owner will also receive all the profits his company earns.

Pros and Cons of a Sole Proprietorship

As with any business entity, setting up a sole proprietorship has its pros and cons. Here are some of them below.

Pros of a Sole Proprietorship

  • The taxes you will pay will depend on the profits earned by the enterprise.
  • The sole proprietor acquires all the assets and profits of the business.
  • Capital requirement is at a minimum amount. 
  • The sole proprietor has complete control over the enterprise. 
  • The business is easier to manage as scheduling meetings with a board of directors is unnecessary to decide on major issues. 
  • The government requirements are considerably fewer compared to all other business types.

Cons of a Sole Proprietorship

  • Although the sole proprietor may increase capital through bank business loans, he cannot increase the capital by selling business interests.
  • The sole proprietor has personal accountability for the enterprise’s debts, losses, and liabilities. 
  • It’s difficult to separate the sole proprietor’s income from the company as he becomes accountable for the business’ income tax. 
  • Lawsuits against the business can upset the company and the sole proprietor’s assets. The sole proprietor may pay for the damages with his own money if he loses the case. 
  • Personal lawsuits filed against the sole proprietor can negatively affect the company’s finances.

Procedure for setting up a Sole Proprietorship in the Philippines

1. Register your business name at the Department of Trade and Industry (DTI).

  • Customers remember brands through their business names. Reserve and register your business name at the DTI to obtain a DTI Certificate of Registration which is a significant step towards legalizing your business. Once you have successfully registered and printed your Certificate of Registration, you may register next at the Bureau of Internal Revenue (BIR).

2. Register your business at the Bureau of Internal Revenue (BIR).

  • For sole proprietorships with existing Tax Identification Number (TIN), you need to update or submit a transfer of records to your recent BIR Regional District Office (RDO) before submitting your new business application. 
  • For first-time applicants who do not have TIN yet, fill out the BIR Form 1901 or Application for Registration for Sole Proprietors and prepare to submit requirements to the RDO where your business is located. 
  • Requirements: 
    • DTI Certificate of Registration
    • Valid government ID or PRC ID
    • Accomplished and paid BIR Form 0605
    • Annual registration fee of P500
    • Books of accounts that the companies will use
    • Sample format of the invoices that will use

3. Register your business with your local barangay hall.

  • Head to the barangay where your business is situated and fill out the application form. 
  • Together with your accomplished application form, submit: 
    • Two valid government IDs
    • Contract of Lease of Certificate of Land Title (proof of address)
    • Certificate of business registration from DTI
  • Pay the clearance fees.
  • Get your clearance tax certificate. (Processing time will depend on your local barangay hall)

4. Register your business with your local City Hall.

  • Go to your business location’s local City Hall and head towards the Business Permit and Licensing Office (BPLO) to secure your Mayor’s Permit or Business Permit. 
  • Submit your accomplished form together with:
    • Barangay Clearance Certificate
    • DTI Certificate of Business Registration
    • Contract of Lease or Certificate of Land Title (proof of address)
    • Two valid IDs
    • Fire, Sanitary, Occupancy Permits, and other permits as requested by your local government office
  • Pay the Mayor’s Permit fee.
  • Claim your Mayor’s Permit. (Processing time will depend on your local city hall)

5. Apply for registration with SSS, Philhealth and Pag-IBIG.

  • Sole proprietors hiring employees for their business should register their employees to Social Security System (SSS), PhilHealth, and Pag-IBIG or Home Development Mutual Fund. These are government-mandated benefits for employees working in the Philippines. SSS provides insurance benefits which include disability, sickness, maternity, and death benefits; PhilHealth gives health insurance, and Pag-IBIG offers housing loans.

How do I pay taxes as a Sole Proprietor?

Sole proprietors are responsible for paying their taxes. The average tax rate for sole proprietors is eight percent (8%) if gross receipts/gross sales and other non-operating income for the year do not exceed three million pesos (P3,000,000). The good news is you may avail of tax deductions and exemptions. The government may deduct company expenses like rent, employee wages, and utilities. You may also claim tax credits by contributing to local social welfare programs. Ask guidance from accounting consultants to know more about tax benefits available for your business type.

Guidance for the establishment of Sole Proprietorship in the Philippines

It is plausible for business owners to be confused about how and where to start their sole proprietorship business in the Philippines. To make it easier, you can just contact Business Registration Philippines

Business Registration Philippines is a website dedicated to helping investors, business owners, and other stakeholders establish and incorporate their enterprises. Topics range from Accounting, Finance, Human Resources, Business Process Outsourcing, Product Registration, Taxation, and more. It is a microsite of Triple i Consulting Inc. 

Triple i Consulting is the first ISO 9001:2008 company in the Philippines to offer business registration services to its clients, With a team of Philippine business strategy experts who provide professional help for locals and foreign nationals looking to register or start their sole proprietorship in the country, the company’s team of experts are endowed with up to 10 years’ worth of knowledge and skills in the Philippine business registration, accounting and taxation, FDA licensing and product registration, and more. 

Business Registration Philippines, together with Triple i Consulting offers the following services:

Schedule an initial free consultation with one of our business registration experts. Contact us through any of the following methods:

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