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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
- A One-Person Corporation is a corporation with a single stockholder. (Section 116, Revised Corporation Code)
- A sole proprietorship is a form of business organization with only one proprietary owner, a single individual who conducts business under his own name or a business name. (p.3, Commentaries and Jurisprudence on the Revised Corporation Code of the Philippines, Aquino, 2020)
- Unlike a one-person corporation, a sole proprietorship does not have a juridical personality separate and distinct from the personality of the owner of the enterprise. (Stanley Fine Furniture v. Victor Gallano, G.R. No. 190486, November 26, 2014)
A One-Person Corporation is a corporation with a single stockholder. (Section 116, Revised Corporation Code)
A sole proprietorship is a business owned and operated by one person. It is a form of business organization with only one proprietary owner, a single individual who conducts business under his own name or a business name. (p.3, Commentaries and Jurisprudence on the Revised Corporation Code of the Philippines, Aquino, 2020)
While both a sole proprietorship and a one-person corporation have one owner, the two entities differ in several ways.
As to juridical personality:
Like any corporation, one-person corporation has been vested by law with a personality separate and distinct from the persons composing it, as well as from any other legal entity to which it may be related.” (Zambrano v. Philippine Carpet Manufacturing Co., G.R. No. 2224099, June 21, 2017)
The law says:
“As a juridical person, a corporation may acquire and possess property of all kinds, as well as incur obligations and bring civil and criminal actions, in conformity with laws and regulations of their organizations.” (Article 46, Civil Code)
Unlike a one-person corporation, a sole proprietorship does not have a juridical personality separate and distinct from the personality of the owner of the enterprise.
In the case of Stanley Fine Furniture v. Victor Gallano, the Supreme Court pronounced that:
“A sole proprietorship does not possess a juridical personality separate and distinct from the personality of the owner of the enterprise. The law merely recognizes the existence of a sole proprietorship as a form of business organization conducted for profit by a single individual and requires its proprietor or owner to secure licenses and permits, register its business name, and pay taxes to the national government. The law does not vest a separate legal personality on the sole proprietorship or empower it to file or defend an action in court.”
Like any corporation, one-person corporation has been vested by law with a personality separate and distinct from the persons composing it, as well as from any other legal entity to which it may be related.” (Zambrano v. Philippine Carpet Manufacturing Co., G.R. No. 2224099, June 21, 2017)
The law says:
“As a juridical person, a corporation may acquire and possess property of all kinds, as well as incur obligations and bring civil and criminal actions, in conformity with laws and regulations of their organizations.” (Article 46, Civil Code)
As to its trade name
A sole proprietorship may either operate under a trade name or the name of the sole proprietor, there being no separate juridical personality, while in a one-person corporation, the term “OPC” must be indicated after its trade name.
The law says:
“A One Person Corporation shall indicate the letters “OPC” either below or at the end of its corporate name.” (Section 120, Revised Corporation Code)
As to registration requirements
Since only one person owns a sole proprietorship, it is the easiest and least expensive business organization to set up. Since the business does not possess a separate personality, and is considered as a mere extension of the person of the proprietor, there is no need to do any act just to create a sole proprietorship. However, despite registration not being a necessary step in creating a sole proprietorship, when one intends to use a business name, said business name has to be registered with the Department of Trade and Industry (DTI).
A sole proprietorship must be registered with the Department of Trade and Industry (DTI), while a one-person corporation shall be registered with the Securities and Exchange Commission (SEC).
Read also: Can an ordinary corporation be converted into a one-person corporation?
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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