Last May 6, the Securities and Exchange Commission (SEC) began accepting applicants for one person corporations (OPCs), one of the major additions to Republic Act 11232 or the Revised Corporation Code. A day later, the SEC announced that it already approved the country’s first-ever OPC, a transport business named Smart Transportation and Solutions.
Under the new law, individuals can register their business with only one incorporator, a decrease from the previous law requiring at least five shareholders. This means that entrepreneurs without any business partners now have another business structure they can apply for apart from sole proprietorships.
In this article, we’ll discuss what you need to know about OPCs and what makes them different from sole proprietors.
Who Can Put Up an OPC?
“Only a natural person, trust, or estate may form a One Person Corporation,” reads the Revised Corporation Code. However, professionals cannot register an OPC for their respective professions. For example, an accountant cannot put up an OPC to practice accountancy.
The law also disallows certain types of businesses to put up OPCs, namely “banks and quasi-banks, pre-need, trust, insurance, public and publicly-listed companies, and non-chartered government-owned and -controlled corporations,” as all of these businesses are subject to stricter corporate regulations.
OPCs are also open to foreigners who are looking to put up a business in the Philippines. However, these are still subject to the regulations on foreign ownership limits.
Differences Between OPCs and Sole Proprietorships
Before the approval of the Revised Corporation Code, most entrepreneurs who were unable to find business partners to meet the five-person requirement would opt to register their business as a sole proprietorship.
Entrepreneurs registering as sole proprietors mean that they become personally liable for all the risks that their businesses take. In other words, the assets of the business and the entrepreneur are treated as the same, making it risky for a sole proprietor’s personal resources.
That risk doesn’t apply to an entrepreneur registering as an OPC. As an OPC, a business owner can claim limited liability, which means that the company’s assets and the owner’s personal assets are treated separately. Should a business go under debt, creditors of sole proprietors can demand for an entrepreneur’s personal assets, whereas OPCs only stick to the assets invested in the company.
As OPCs are corporations, they have a fixed income tax rate of 30%. Sole proprietors are treated as individuals when taxed, which means their applicable rates would vary depending on their gross sales.
How to Register as an OPC
The process of incorporating an OPC is similar to that of registering a corporation. In a notice released by the SEC days before they started accepting applications, it listed five main steps for OPC registration:
1. Verification and approval of company name
2. Submission of registration documents (i.e., cover sheet, articles of incorporation, written consents)
3. Payment of filing fees (Php 100 for name reservation, at least Php 2,000 for articles of incorporation depending on authorized capital stock, at least Php 20 for legal research fee depending on the total filing fee, and an additional Php 3,000 for foreigner applicants)
4. Submission of notarized documents and proofs of payment
5. Receipt of the certification of registration
Note that the SEC will only process applications for OPCs manually, which means that interested entrepreneurs must go to the SEC head office in the Philippine International Convention Center to complete the process. While the notice did not mention online processing, it said that the manual process was only applicable for the time being.
Unique OPC Regulations
As OPCs have a relatively unique structure compared to traditional corporations, the Revised Corporate Code listed provisions and exceptions that only apply to them.
For one, all one person corporations must add “OPC” to their corporate names. In the case of the first OPC registration accepted, its full corporate name is “Smart Transportation and Solutions OPC.”
Entrepreneurs registering as OPCs are not required to submit corporate bylaws, or the official regulations of a company. However, they still need to submit the company’s articles of incorporation.
As an OPC only has one incorporator, they will serve as both the director and president of the formalized company. The law also states that OPCs must appoint a corporate secretary, treasurer, and other necessary officers within 15 days from the date of incorporation. The business owner cannot take the role of corporate secretary, but they may assume the role of treasurer provided that they submit a bond to the SEC.
While OPCs will only have one board member, registrants must submit the written consents of a nominee and an alternate nominee. These are the designated individuals who will take over the business in the event of the founder’s death. They will handle company operations until an heir to the founder is legally recognized.
OPCs give entrepreneurs without partners another option for formalizing their businesses. While it is not necessarily better or worse than sole proprietorships, it’s a step forward in making entrepreneurship accessible to more Filipinos and foreigners who want to do business in the country.