We have all heard about sole proprietorships. Most small business are under a sole proprietorship setup too. It’s quick, easy, and hassle-free. But with the amendment of the Corporation Code, comes now the One Person Corporation (OPC). Is there a difference between the two?
Before, there were only three business forms—sole proprietorship, partnership, and corporation. However, in 2019, RA 11232 was signed into law, revising the 38-year-old Corporation Code, to improve the ease of doing business in the country. One of the new provisions under RA 11232 concerns OPC.
Essentially, 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 an assumed trade name. The single proprietor is personally liable, and at the same time, he personally owns all the assets of the business.
On the other hand, an OPC has a legal personality that is separate and distinct from the sole stockholder of the corporation. The OPC, despite what the term “One Person” suggests, does not violate the concept of separate and distinct personality of corporations. If such is alleged, the burden is on the person to prove that the OPC is financially equipped and sustainable. The assets of the OPC are not owned by its sole stockholder, unless the OPC is not adequately financed. Likewise, the obligations of the corporation cannot be enforced against its sole stockholder, unless the situation would warrant the piercing of the veil of corporate fiction.
Under the Revised Corporation Code, a shareholder can now purchase all the shares of an existing corporation. Subsequently, he may apply for “conversion” and establish the OPC. Moreover, the OPC does not need to change its registration or disturb continuity of its life. It can convert and subsequently receive investors or admit strategic partners. All the OPC needs to do is to amend its Articles of Incorporation (AOI) and to follow the required governance for a regular corporation.
There is also no minimum paid-up capital required when it comes to an OPC, unlike in regular corporations. The OPC only needs to declare its proposed authorized capital stock, subscribed and paid-up, unless special laws or other rules would require it to do so, based on its intended operations.
It should be kept in mind that, in an OPC, it is required to appoint a nominee and an alternate nominee. The nominee will temporarily take the place of the one person until the interest of the one person is transferred to his lawful heirs, in case he dies abruptly.
For more information, you may visit the website of the Securities and Exchange Commission at www.sec.gov.ph.
