Simplest business structure in the Philippines — owned and operated by one individual with unlimited personal liability. Registered with DTI and BIR.
A sole proprietorship is the most common business structure for Filipino entrepreneurs, particularly sari-sari stores, freelancers, market vendors, and small service providers. It is owned entirely by one person, who also carries unlimited personal liability — meaning creditors can go after the owner's personal assets (bank accounts, property, vehicle) if the business cannot pay its debts.
Registration involves two steps: first, securing a business name with the Department of Trade and Industry (DTI); second, registering with the local government (business permit) and the BIR (COR, TIN). The entire process is simpler and cheaper than incorporating a company. There is no minimum capital required.
In practice: Nena Reyes starts a general merchandise store in Cavite. She registers the business name "Nena's Store" with the DTI for ₱500 (regional name), then registers with her barangay and municipal hall for a business permit, and then visits the BIR RDO to register as a sole proprietor and obtain her COR and authority to print official receipts.
Why it matters: The critical difference from a corporation: the business and the owner are legally the same person. This simplifies taxes (one income tax return for both business and personal income) but creates risk — if the business is sued or has unpaid debt, the owner's personal savings and assets are exposed. As your business grows and takes on more financial risk, consider whether converting to an OPC or corporation makes sense.
For tax purposes, sole proprietors file BIR Form 1701 (or 1701A for 8% flat tax) and may choose between the graduated income tax and the 8% flat tax on gross receipts exceeding ₱250,000.