Published 20 November 2020, The Daily Tribune

When the Revised Corporation Code took effect last year, it introduced new legal structures designed to facilitate doing business in the Philippines. One of the highlights of the Revised Corporation Code is the creation of the One Person Corporation (OPC). The OPC is expected to entice sole proprietors and businessmen to conduct business through a corporate medium.

As its name suggests, a single stockholder may form an OPC. The single stockholder shall also act as the OPC’s sole director and president. He may likewise be appointed as the treasurer, provided that he submits a bond, renewable every two years, to the Securities and Exchange Commission (Commission). Evidently, the OPC grants the businessman complete control and authority to manage his business affairs through a corporate vehicle. The OPC can swiftly issue corporate resolutions without need of seeking consensus and approval from a board of directors or from its stockholders.

However, the single stockholder must appoint another person to act as the OPC’s corporate secretary as the single stockholder is prohibited by the Revised Corporation Code from being appointed as such.

But the primary advantage of an OPC is its legal identity, which is separate from the single stockholder.

The separate legal identity of the OPC allows the single stockholder to limit his liability in the conduct of his business. Absent the existence of grounds to pierce corporate veil, e.g. when the corporation is used to commit fraud or an illegal act, creditors of the OPC cannot reach the personal assets of the single stockholder.

To claim limited liability, however, the single stockholder should be able to prove that the OPC was adequately financed and that the property of the OPC is separate from his personal properties. Otherwise, the single stockholder shall be jointly and severally liable for the debts and liabilities of the OPC, which would allow creditors to claim payment from the personal assets of the single stockholder.

The OPC likewise seeks to ensure continuity of business transactions independently from its single stockholder.

The Revised Corporation Code requires the designation of a nominee and an alternative nominee, who shall take the place of the single stockholder to manage the OPC’s affairs in the event of the single stockholder’s death or incapacity. Further, the OPC may have perpetual existence.

These features allow businessmen to consider entering into long-term transactions and investments. It also ensures business stability for its creditors and investors.

While the OPC combines the complete dominion of a sole proprietorship and the limited liability of corporations, the current Philippine Tax Code treats OPC as regular corporations. Income received by the OPC is subject to corporate income tax rate of 30 percent. Said income is expected to flow to the single stockholder’s personal assets when the OPC declares cash and/or property dividend. This dividend will then be subject to final tax of 10 percent.

From this structure, income from the business conducted by an OPC will pass through two taxable incidents. In contrast, general professional partnerships (GPP) are not separately taxed as corporations and are only treated as pass-through entities. GPP are not subject to income tax. It is only when the income is distributed by GPP to its partners when the income is taxed as part of the personal income of partners.

Further, income received by single proprietors from their business is subject to the graduated income tax rates for individual taxpayers. As opposed to the 30 percent corporate income tax rate, the applicable income tax rates for individuals depend on the amount of taxable income.

For example, if the single proprietor’s taxable income did not exceed P250,000 the income tax rate is 0 percent. Taxable income tax rate becomes 30 percent only if the single proprietor’s taxable income exceeds P800,000. The highest tax rate for single proprietors is 35 percent when taxable income exceeds P8,000,000.

Aside from taxes, additional paperwork and documentation for OPC should also be considered. Apart from the registration documents, OPC are required to regularly file the following documents to the Commission: (i) annual financial statements audited by an independent certified public accountant; (ii) report containing explanations or comments by the president on every qualification, reservation, or adverse remarks made by the auditor in the financial statements, (iii) disclosure of all self-dealings and related party transactions entered into between the OPC and the single stockholder, and (iv) any other reports as the Commission may require.

In any case, the OPC presents itself as another viable alternative for a businessman to conduct his business independently. Whether he will adopt sole proprietorship or conduct his business through an OPC is a matter that must be evaluated on a case to case basis. It is strongly recommended to consult with a legal professional to review, analyze, and evaluate his requirements to come up with the most efficient structure for the conduct of his business.

For comments and questions, please send an email to