Business RegistrationWhat is a One-Person Corporation: Key Benefits and SEC Requirements

A One-Person Corporation (OPC) is a unique business structure introduced in the Philippines under Republic Act No. 11232, also known as the Revised Corporation Code of 2019. Unlike traditional corporations that require multiple shareholders, an OPC allows a single individual to establish and operate a corporation with limited liability, combining the flexibility of a sole proprietorship with the benefits of a corporate entity. 

We’ll explore the key features of an OPC, its advantages compared to a sole proprietorship, and the requirements for registration with the Securities and Exchange Commission (SEC) in the Philippines.

What is the Meaning of a One-Person Corporation

An OPC is a corporation with a single stockholder, who can be a natural person, trust, or estate. This stockholder serves as the sole director and president of the corporation, streamlining decision-making processes. Unlike a sole proprietorship, an OPC is considered a separate legal entity, meaning the owner’s personal assets are protected from business liabilities. This structure is ideal for freelancers, consultants, or small-scale entrepreneurs who want the credibility and protection of a corporation without the complexity of multiple shareholders.

The OPC is distinct from other business forms in the Philippines, such as partnerships or multi-shareholder corporations, as it caters specifically to individuals seeking full control over their business operations. However, certain restrictions apply – professionals regulated by specific laws (e.g., doctors, lawyers) cannot form an OPC for their practice, and banks, insurance companies, and other public corporations are also ineligible.

Key Benefits of an OPC Compared to a Sole Proprietorship

1. Limited Liability vs. Unlimited Liability
   • An OPC offers limited liability, meaning the corporation is a separate legal entity, and the owner’s personal assets are generally protected from business debts or legal claims. In contrast, a sole proprietorship exposes the owner to unlimited liability, where personal assets can be seized to settle business obligations which is a significant risk.
2. Full Control with Formal Structure
   • Like a sole proprietorship, an OPC grants the owner complete authority over business decisions, from strategic planning to daily operations, without needing to consult other shareholders or directors. However, an OPC provides a formal corporate structure, unlike the informal nature of a sole proprietorship, which makes it appear more professional and credible.
3. Perpetual Existence vs. Limited Lifespan
   • An OPC has perpetual succession, allowing the business to continue through a designated nominee and alternate nominee if the owner becomes incapacitated or passes away. Conversely, a sole proprietorship usually dissolves upon the owner’s death or incapacity, disrupting continuity and affecting clients or suppliers.
4. Access to More Tax Incentives
   • An OPC may enjoy tax benefits, such as deducting business expenses before computing taxable income, and can access incentives under specific laws depending on the business type. While sole proprietorships also allow expense deductions, they normally do not qualify for corporate-specific tax incentives.
5. Lower Tax Rates for Higher Incomes
   • A One-Person Corporation (OPC) files a corporate income tax return (BIR Form 1702) as a separate legal entity, taxed at flat corporate rates (20-25%). Conversely, a sole proprietorship reports business income on the owner’s personal tax return (BIR Form 1701) at progressive individual rates (0-35%). At higher income levels (around PHP 2,000,000 and above), OPCs benefit from lower tax rates, making them more suitable for medium to large enterprises.

SEC Registration Requirements for an OPC

Here are the standard SEC registration requirements. Additional documents may be needed based on your specific business.

1. Basic Documentary Requirements
   • Articles of Incorporation: This document outlines the OPC’s purpose, structure, and operational details. It must include the name of the single stockholder, nominee, and alternate nominee.
   • Cover Sheet: A standard SEC form summarizing the application.
   • Name Verification Slip: The proposed company name must be unique and approved by the SEC.
   • Bylaws: While not mandatory, bylaws can be submitted to define the OPC’s internal rules.
2. Nominee and Alternate Nominee
   • An OPC must designate a nominee and alternate nominee to manage the corporation in case the single stockholder becomes incapacitated or passes away. These individuals ensure the business’s continuity and must be named in the Articles of Incorporation.
3. Minimum Capital Requirements
   • No minimum capital is required for an OPC unless specified by industry-specific regulations. However, the single stockholder must subscribe to at least 25% of the authorized capital stock and pay at least 25% of the subscribed capital.
4. Proof of Payment
   • Evidence of payment for the subscribed capital, such as a bank certificate of deposit, is required. This ensures the OPC has sufficient funds to commence operations.
5. Tax Identification Number (TIN)
   • The single stockholder must provide their TIN, and the OPC will need to secure its own TIN from the Bureau of Internal Revenue (BIR) after SEC registration.
6. Additional Requirements (if applicable)
   • Foreign nationals forming an OPC must submit proof of identity, such as a passport, and comply with foreign ownership restrictions for certain industries. Trusts or estates forming an OPC require relevant legal documentation.

It’s best to work with a professional business registration service when preparing requirements to register a corporation, including an OOPC. The process is strict, and documentation errors can lead to delays and rejection.

Steps to Register an OPC

1. Reserve the Company Name: Use the SEC’s eSPARC online portal to verify and reserve a unique name.
2. Prepare Documents: Compile all required documents, ensuring accuracy and completeness.
3. Submit to SEC: File through the SEC’s eSPARC portal or in person.
4. Pay Fees: Settle the required registration and filing fees.
5. Obtain SEC Certificate: Upon approval, the SEC issues a Certificate of Incorporation.
6. Post-Registration: Obtain a Mayor’s Permit, register with the Bureau of Internal Revenue (BIR) for your TIN and books of accounts, and enroll with SSS, PhilHealth, and Pag-IBIG for employee benefits. You may also need to secure other permits and licenses depending on your business. To ensure full legal compliance, we strongly recommend consulting a professional business registration service.

Summary

A One-Person Corporation is an excellent option for solo entrepreneurs in the Philippines seeking a balance of control, liability protection, and professional credibility. Its advantages, including limited liability, perpetual existence, and enhanced credibility, make it a great alternative to sole proprietorships.  However, registering an OPC has more strict requirements. Mistakes in your documentation can lead to long delays and even rejection.

Prepare carefully and don’t hesitate to contact us for expert guidance. We’ll take care of all the requirements to ensure a smooth and efficient business registration process.

First Time Registering a Business? Here’s Where to Find Help

Registering a business in the Philippines can be a complex and challenging process. With numerous permits and licenses required by the government, it’s easy to miss a document or forget to renew it. Unfortunately, this can lead to costly fines or even force your operations to shut down.

Thankfully, the Business Registration Philippines team provides comprehensive support for your business registration, so you don’t have to stress over the paperwork. 

We’ll handle the permits and renewals so you can focus on what matters most—running your business and achieving financial success.

Contact us today to schedule an initial consultation with one of our experts:

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