sole propreitorship

Sole Domestic
Features Proprietorship Partnership Corporation
A legal entity that

is separate and
A business A business owned by distinct from its
owned by a two or more owners (up to 15
Definition single individual. individuals. people).
Not a separate Forms a separate Separate legal

legal entity. legal entity, just like entity. Owners
Legal Owner is a corporation. are not
Entity personally liable. personally liable.
Relatively easy
and involves Requires
minimal cost. Requires a written incorporation,
Registered agreement and registration with
through the registration with the the SEC, and
Department of Securities and compliance with
Trade and Exchange more formal
Formation Industry (DTI). Commission (SEC). requirements.
Partnership itself Subject to

does not pay income corporate income
taxes, but profits are tax on profits.
passed through to Dividends
Owner pays partners who pay distributed to
personal income personal income shareholders are
Taxation taxes on profits. taxes. also taxed.
Generally unlimited,
but limited
partnerships can Limited liability
Unlimited offer some liability up to the amount
Liability personal liability. protection. of investment.
Managed by a
Controlled and Managed by partners board of
Managem managed by the or designated directors and
ent owner. managing partners. officers.
Generally dissolves
May cease to upon death,
exist upon the withdrawal, or
death or bankruptcy of a Has perpetual
incapacity of the partner unless existence unless
Continuity owner. otherwise agreed. dissolved.
Easier to raise
Limited to Can pool resources capital through
Capital personal funds from multiple the sale of
Raising and loans. partners. stocks.
Higher regulatory
requirements
Regulator Lower regulatory Moderate regulatory and compliance
y Burden requirements. requirements. standards.
Sole proprietorship is the simplest form of business
Sole proprietorship is a type of business model where the owner, called the sole proprietor, is
the only one who has direct control over the business and its pro ts.
Advantages of being a sole proprietor:
registration process involves at least 3 of ces - DTI, BIR, Mayor’s + Board
cost-effective - there’s also no capital requirement
control over management - sole proprietors are the only one responsible for their business,
allowing for swift decision-making
control over earnings - go-to structure for budding entrepreneurs as it allows immediate
reward for all the hard work
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Disadvantages of being a sole proprietor:
unlimited personal liability - the business is an extension of the owner, there’s no

clear-cut line between what’s for business, and what’s personal;
lawsuits to the business is a lawsuit to the owner - the owner’s personal assets are at risk
for debts, losses, and liabilities.
bankruptcy directly affects the sole proprietor.
limited growth - Sole proprietors are not allowed to sell shares to raise capital; little access to
capital, little room for expansion
in charge of everything - marketing, production, monitoring, purchasing, exhausting for the

sole proprietor - you're responsible for every aspect of your business, particularly in challenging
situations
Tax Considerations:
In the Philippines, sole proprietors are considered self-employed. Taxes led for the
business count as personal tax. If their gross income is P3,000,000 or below, then their
tax rate is at 8%.
Registration Process:
Step 1: Choose a business name and register - business name should comply with the
guidelines of the Department of Trade and Industry (DTI).
Step 2: Barangay clearance - to the barangay of ce where your principal business is located,
this certi es that your business complies with the regulations on the barangay level.
Requirements:
• DTI Certi cate

• Payment of fees
• Proof of address - community tax receipt
• 2 valid IDs
•
Step 4: Register to Bureau of Internal Revenue - BIR is the government agency responsible for
collecting taxes, so a business has to be registered here, too. After registration, the sole
proprietor receives a Certi cate of Registration (COR) and Tax Identi cation Number (TIN),
and Authorization to Print (ATP)
Requirements:
• Certi cates and permits from the above steps and IDs
• Payment of fees
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• Accomplished BIR Forms
Step 5: Register to Social Security System (SSS)
Step 6: Register to PhilHealth
Step 7: Register to Home Mutual Development Fund (PAGIBIG)
proceed to their of ces and register as a self-employed individual. Contributions to these

agencies give you access to a number of bene ts they provide.
If you’re employing people, you must also enrol them here and take care of their contributions.
Sole Proprietorship Best Practices
Stay compliant with the legal requirements - ensure your business is registered as per the
law, and if you’re hiring, remember to follow the employment legislation.
Keep Accurate Financial Records - maintaining clear and organized nancial records to help
you understand your business's nancial health;
Consider using accounting software or hiring a professional accountant to assist you.
While it’s not legally possible to separate your business and personal nances, it’s important to
still keep them distinct from one another - at least unof cially.
Open a separate bank account for your business and use it for all business-related transactions.
Understand your tax obligations - as a sole proprietor in the Philippines, you are subject to
personal income tax, which integrates your business income. - simplify the process during tax
season.
Hire only reliable and trustworthy employees - the people you hire can signi cantly impact
the success of your business. Maintain a safe and productive work environment.
Build a strong online presence - online presence is essential. Create a professional social
media and engage actively to reach a wider audience. This will help you market your services
effectively and interact with customers.
Continuously improve your skills - the success of your business heavily depends on your
skills and knowledge. Regularly invest in training and development to keep up with industry
trends and enhance your business acumen.
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Sole Domestic

Features Proprietorship Partnership Corporation

A legal entity that

Not a separate Forms a separate Separate legal

Partnership itself Subject to

Sole proprietorship is the simplest form of business

Advantages of being a sole proprietor:

registration process involves at least 3 of ces - DTI, BIR, Mayor’s + Board

cost-effective - there’s also no capital requirement

unlimited personal liability - the business is an extension of the owner, there’s no

bankruptcy directly affects the sole proprietor.

in charge of everything - marketing, production, monitoring, purchasing, exhausting for the

• DTI Certi cate

Step 5: Register to Social Security System (SSS)

Step 6: Register to PhilHealth

Step 7: Register to Home Mutual Development Fund (PAGIBIG)

proceed to their of ces and register as a self-employed individual. Contributions to these

Sole Proprietorship Best Practices

Consider using accounting software or hiring a professional accountant to assist you.

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