The Pros and Cons of Setting Up a One Person Corporation in the Philippines
Setting Up a One Person Corporation in the Philippines-min

The Pros and Cons of Setting Up a One Person Corporation in the Philippines

In February 2019, the Philippine government released the Revised Corporation Code (RCC) to support the country’s fast-growing infrastructure and entice foreign investors to do business in the country. One of the major provisions in the RCC was the introduction of a new legal entity, the One Person Corporation (OPC).

An OPC is a business structure that allows a single person to form a corporation without the need of shareholders or a board of directors. The owner is the sole shareholder, acting director, and president of the corporation. To give you an insight into the new business structure, this article will walk you through the advantages and disadvantages of setting up an OPC in the Philippines. 

Advantages of a One Person Corporation in the Philippines

OPCs foster many advantages for entrepreneurs as they provide an easier way to establish a business in the country. Such advantages allow a single person to register as an OPC, reduce the minimum capital requirement, limit the liability for business owners, and many more. 

Limited Liability for Business Owners

The introduction of the OPC aims to support the growing sector of micro, small, and medium enterprises (MSMEs) in the Philippines by allowing a sole owner to register their business as a corporation without needing a minimum number of shareholders.

Registering your business as an OPC ensures that only the company is liable for its debts and obligations. The owner’s personal assets will be deemed separate and protected from creditors. This protection is known as the “corporate veil”, which separates the actions of an organization from the actions of a shareholder. 

Perpetual Existence

The former Corporation Code limits corporations to a 50-year lifespan with the chance to petition for renewal with the Securities and Exchange Commission (SEC). Under the RCC, corporations are now allowed to exist perpetually unless their Articles of Incorporation (AOI) provides otherwise. 

Such amendments were made to reduce the probability of businesses shutting down prematurely and allowing them to create long-term value investments. 

No Minimum Capital Requirement

Unlike other business structures, the OPC does not have a minimum capital requirement. Additionally, no portion of authorized capital is required to be paid up at the time of incorporation unless stated by special laws. 

The only payments needed to incorporate an OPC are filing fees, name reservation fees, and legal research fees. 

Open to Foreign Investors

Foreign investors may register an OPC. However, it must be within an industry that permits 100% foreign ownership. Approved industries include manufacturing, export, retail, or e-commerce. 

A full list of prohibited industries can be found on the Foreign Investments Negative List. Additionally, foreign nationals are required to provide paid-in capital of at least US$200,000.

Complete Control of the Business

Unlike a traditional corporation, the director of an OPC has total control over the company. They are not subjected to the scrutiny of shareholders and do not need to seek consensus from the board of directors. All business decisions are at the director’s sole discretion, and all profits are theirs alone.

Disadvantages of One Person Corporations in the Philippines

Despite the many advantages of setting up an OPC, there are several disadvantages that come along when using this kind of business structure to do business in the Philippines. 

Limited to Natural Persons, Trusts, or Estates

The RCC prohibits professionals from turning their practice into a corporation. This is to protect the fields of medicine, law, and other regulated professions from corporate interests and ensure that patient and client welfare comes first. Also prohibited from setting up an OPC are banks, quasi-banks, and other financial institutions to protect the public interest.

More Paperwork and Complexity

Compared to a sole proprietorship, OPCs have more administrative requirements. Along with the AOI, OPCs are also required to file the following documents:

  • Annual audited financial statements
  • An explanatory report in response to audit findings and recommendation(s)
  • Disclosure of all self-dealings between the OPC and the director
  • Other reports as required

Depending on the size of your company, these additional documents may require you to extend more hours to fulfill such requirements beyond the usual tasks of running your business. 

Existing Corporations Are Allowed to Restructure as OPC

An existing domestic ordinary stock corporation (OSC) may apply to convert to an OPC. A single stockholder must acquire all shares of the company. The role of the corporate secretary and treasurer must be filled. 

The director may appoint themselves as the treasurer but cannot be the corporate secretary. After meeting such prerequisites, the following documents must be submitted to SEC:

  • Amended Articles of Incorporation (AOI) 
  • Secretary’s Certificate
  • Proof of acquisition of shares 
  • A signed affidavit of acceptance for both nominees
  • Reservation of the corporation’s name
  • Monitoring clearance

You can visit SEC’s official website for more information regarding the OPC registration process. 

Register a One Person Corporation in the Philippines

In efforts to support the business scene in the Philippines, the OPC structure allows entrepreneurs and foreign investors to easily establish a business in the country by permitting minimal requirements upon registration. 

Doing so opens your company to grow and compete against strong industry players as well as making your services available to the Philippine and ASEAN markets. If you find the registration process exhaustive, you can reach out to business consulting firms to assist you.

Set Up an OPC in the Philippines With Ease

With a full suite of business registration and corporate compliance services, Kittelson and Carpo is dedicated to help entrepreneurs choose the right business structure in the Philippines.  

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