Many business owners choose to launch their ventures as sole proprietorships. In this kind of corporate structure, the owner and the company are viewed as a single entity. This indicates that the owner has all control over the company and is responsible for all profits and losses. But what are the costs and conditions for forming a sole proprietorship?
It is relatively simple and inexpensive to register a sole proprietorship in the Philippines. Depending on the city or municipality where the business will be located, different fees apply for registration. The registration fee may be between 200 and 2,000 pesos. A barangay clearance, which costs between 100 and 200 pesos, and a mayor’s permission, which can cost between 500 and 5,000 pesos, are additional requirements for business owners.
Even though it is not legally necessary to register a sole proprietorship, doing so is advised to verify that the company is running properly and to prevent potential legal issues. The owner can open a bank account in the company name, seek for loans or credit, and get business licenses and permissions by registering the firm.
As a sole proprietor, the owner is able to pay themself by drawing money from the company’s profits. To avoid any misunderstanding or legal concerns, it is crucial to remember that the owner should keep track of all business costs and profits separately from their personal income.
The requirements and objectives of the business owner ultimately determine whether a sole proprietorship or a limited liability company (LLC) is the best option. For small enterprises with low-risk activities and modest investments, a sole proprietorship is suitable. On the other side, an LLC makes it simpler to get finance and provides additional protection for the firm owner’s personal assets.
In conclusion, it is inexpensive and reasonably simple to establish a single proprietorship in the Philippines. Although registration is not needed by law, it is advised to establish the legitimacy of the company and avert any potential legal issues. As a sole proprietor, the owner is able to pay themself by drawing money from the company’s profits. The demands and objectives of the business should be taken into account while deciding between a sole proprietorship and an LLC.
No, a sole proprietorship must pay to register for GST. Businesses with a yearly revenue of up to Rs. 20 lakhs are exempt from GST registration as of 2021. However, GST registration is required and costs money if the annual turnover surpasses this threshold. Depending on the jurisdiction and the kind of business, different states have different GST registration fees. It goes from 2,500 to 10,000 rupees.