This is the most important question in business registration because your answer will greatly affect how you go through the next steps of registration and, of course, the tax implications.
As to Registration Body
- Sole Proprietorship: Register with the Department of Trade and Industry (DTI) through BNRS. You can receive your e-certificate within minutes.
- Corporation: Requires drafting Articles of Incorporation, Bylaws, and Treasurer's Certificate, then submitting to the Securities and Exchange Commission (SEC). Approval takes 2-3 weeks, sometimes a month or two.
As to Liability
- Sole Proprietorship: General liability — creditors can pursue all of your assets, even your personal assets, to settle debts.
- Corporation: Limited liability — debtors can only run after the assets of the business only, because corporations are treated as a separate and distinct entity from the owners.
As to Taxes (Income Tax)
- Sole Proprietorship: Maximum individual taxation rate of 35%
- Corporation: Taxed at 25% on taxable income (reduced from 30% under CREATE Act)
As to Number of Owners
Sole proprietorship suits single owners. Corporations work for 2-15+ owners, with shares determining ownership percentages and dividend rights.
Quick Recap
- Registration: Faster for sole proprietors
- Liability: Personal assets protected with corporations
- Tax: Generally lower for corporations