Philippines Sole Proprietorship

The definition of a Sole Proprietorship or “single proprietorship” in the Philippines – is a business structure owned by an sole individual who has full control/authority of its own and owns all the assets, personally owes and answers to all liabilities and losses. A sole proprietorship must apply for a business name and be registered with the DTI-National Capital Region (NCR). In the provinces, application may be filed with the DTI regional/provincial offices.

The major disadvantage of a sole proprietorship is the unlimited liability of the owner. Creditors will not only try to obtain the assets of the business but also the personal property of the owner as payment for debts.

The sole proprietorship uses the TIN of its owner and must apply for all the usual business permits required by a business in the Philippines.

There are minimal capital requirements for Filipino citizens.

Some types of business may need other endorsements from various government agencies.

General information needed to apply for a sole proprietorship.

A. Business Details

1. Location. Indicate the barangay, city/municipality, and region where business is/will be located.

2. Tax Identification Number (TIN). Indicate TIN duly issued by BIR to you as individual taxpayer.

B. Owner’s Details

– First Name, Middle Name, Last Name, Suffix (if applicable).

– Date of Birth. Owner must be of legal age (at least eighteen [18] years old).

– Citizenship. For Filipino applicants, present two (2) primary ID or a combination of one (1) primary and one (1) secondary ID. Foreign Nationals must present the original and submit clear certified copy of the following, if applicable, namely: Certificate of Authority to Engage Business in the Philippines pursuant to Foreign Investment Act (Republic Act No. 7042 as amended); Certificate of Authority to Engage in Retail Trade per Republic Act No. 8762 (Retail Trade Liberalization Law), or such other applicable laws, as the case may be.

C. Owner’s Address

– House/Building No. This information include building name and floor number, Lot, Phase and Block numbers, and Subdivision, among others. Street, Barangay and Town/City, Province.

– Zip Code. Check the Philippine Postal Service Web site for proper Zip Code

DBC will assist you in obtaining all the necessary documents needed to apply for a Philippines sole proprietorship business registration and acquire all the necessary business permits. Contact DBC for a free assessment.

A sole proprietorship is only recommended for very small business due to the unlimited liability of the owner. We recommend setting up a corporation for most business and for foreign investors.

Philippines sole proprietorship

Foreign Ownership of Corporations in the Philippines

Foreign investors usually have the same rights as Filipino citizens and must register their businesses with the Securities and Exchange Commission (SEC) (corporation, partnership, branch office or representative office) or with the Department of Trade and Industry’s Bureau of Trade Regulation and Consumer Protection (sole proprietorship). Foreign ownership of corporations is defined in the Corporation Code of the Philippines. The Foreign Investment Act (R.A. 7042, 1991, amended by R.A. 8179, 1996) liberalized the entry of foreign investment into the Philippines.

Businesses with Foreign Investment Restrictions

Within the 1991 Foreign Investment Act (FIA) there are two negative lists also known as the “Foreign Investment Negative List” which defines the foreign investments which are limited or restricted by the constitution and specific laws. Negative List A & Foreign ownership is limited for reasons of security, defense, risk to health and morals and protection of small and medium scale enterprises. Negative List B

Domestic Corporations (subsidiary)

A registered company with at least 60% Filipino ownership is considered as having Philippine nationality; if more than 40% foreign-owned, it is considered a foreign owned domestic corporation.

More than 40% and up to 100% foreign ownership of a Domestic Market Enterprise is allowed as long as the paid-in capital is a minimum of USD 200,000.00. Employing a minimum of 50 direct employees or using advanced technology may allow a paid-in capital of less than USD 100,000.00 (R.A. 7042 as amended by R.A. 8179).**

Retail Trade Enterprises

100% foreign ownership is allowed for Philippine retail trade enterprises: (a) with paid-up capital of USD 2,500,000.00 or more provided that investments for establishing a store is not less than USD 830,000.00; or (b) specializing in high end or luxury products, provided that the paid-up capital per store is not less than USD 250,000.00 (Sec. 5 of R.A. 9762). No foreign equity is allowed in Retail Trade Enterprises with less than the above mentioned capital.

Export Businesses

An export enterprise is defined as a business who exports at least 60% of its output.
Export Business Enterprises may be 100% fully foreign owned and may file with the SEC for an exemption of the paid-up capital requirement of USD 200,000.00.
KPO, BPO, Back Office, IT, Web Development and call centers are all considered Philippines Export Enterprises.

** Unless otherwise indicated in the Philippine Foreign Investment Negative List

Foreign ownership of land in the Philippines