Regular Corporation and One Person Corporation in the Philippines
Written by
Jelli Mae C. Cuyos, CPA
Why incorporate your business?
Are you starting a business and you are not sure whether you should form a corporation? Are you wondering how many people are needed to start a corporation in the Philippines?
Maybe, you have heard about regular corporation and one person corporation, and you don't know what it means! We’ll, we’ve got you covered folks or should I say dearest gentle readers. Dealing with the Securities and Exchange Commission (SEC) for business registration can be tricky and may require professional guidance.
The governing law on formation of corporations in the Philippines is the Republic Act No. 11232 or the Revised Corporation Code which took effect on February 23, 2019. Under Section 2 of R.A. 11232, a corporation is defined as an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incidental to its existence.
Corporations under the Revised Corporation Code are divided into two main types: stock and non-stock. Stock corporations have their capital divided into shares that can be distributed to shareholders. Non-stock corporations, on the other hand, do not issue shares.
However, there is a new classification introduced under the Revised Corporation Code. Starting 2019, an single individual may form a corporation on their own and enjoy the benefits of a corporation. Learn more below!
What is a One Person Corporation (OPC)?
The Revised Corporation Code introduces a unique type of business entity called a One Person Corporation (OPC). An OPC can be established by an individual, a trust, or an estate, who is the sole owner of the corporation.
Under the old corporation law, if an investor or entrepreneur wants to start a business in the Philippines, you generally have three options: 1) open a sole proprietorship or 2) form a partnership with at least one other individual or 3) lastly, meet the minimum five incorporators to start a corporation.
Before the Revised Corporation Code, there is a minimum requirement of five incorporators to form a corporation. Thus, if you want to enjoy the benefits of having a corporation in the Philippines, you have to find other incorporators to get started. This resulted in a lot of people using "dummies" just to start a corporation.
Now that our law allows a One Person Corporation, it provides ease of doing business in the Philippines. An OPC enjoys all the powers and attributes of a regular corporation. This means it has a separate juridical entity, limited liability, and perpetual existence, just like any other corporation.
Moreover, a One Person Corporation is also taxed under the same laws as a regular corporation. This means it is subject to both Minimum Corporate Income Tax (MCIT) and Regular Corporate Income Tax (RCIT).
In sum, forming an OPC offers the advantages of a corporation, while being owned by a single individual, trust, or estate.
Lastly, let us now compare One Person Corporation and Regular Corporations
First, an OPC is required to have the suffix "OPC" either below or at end of its corporate name. On the other hand, regular corporations are required to add "Corp.", "Corporation", "Inc." or "Incorporated" to at the end of its corporate name.
Second, an OPC can be formed by one incorporator, while a regular corporation needs at least two up to fifteen incorporators to start the company.
Third, an incorporator in an OPC may be a single individual, trust or estate. On the other hand, an incorporator in a regular corporation may be an individual or another corporation.
Fourth, a single stockholder of an OPC acts as the President and sole Director which gives them full reign and responsibility over the corporation. On the other hand, the management and direction of a regular corporation falls on the board of directors or trustees.
Lastly, both types of corporations are similar in the sense that they provide limited liability for stockholders, can exist indefinitely, and are recognized as separate legal entities from their stockholders or directors.
These are just some of the common distinctions between a regular corporation and an OPC. If you'd like to know more and gain a better understanding our corporation law, you can book your free initial consultation with us to discuss your specific questions.
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