SOLE PROPRIETORSHIP
Sole Proprietorships and Partnerships
For accounting purposes, each business form is separate from
other business entities and from its owner(s).
A sole proprietorship is an unincorporated business owned by
one single person and often managed by that same person.
Sole proprietors include physicians, lawyers, electricians, and
other people in business for themselves. Many small service
businesses and retail establishments are also sole
proprietorships. Some characteristics of a sole proprietorship
are:
1 No legal formalities are necessary to organize such
businesses, and usually business operations can begin with only
a limited investment (called Capital).
2 A sole proprietorship does not pay taxes on profits at
the business level but instead pays taxes based on the
company’s earnings on the owner’s personal income tax.
3 The business owner is personally liable for all debts of
his or her company. This is called unlimited liability. Creditors
can take and use your personal assets to cover the company’s
outstanding business debt if the company does not have
enough money to pay debt.
4 A sole proprietor can take money out of the business
any time he or she wants which is recorded in an contra-equity
account called Drawing or Withdrawals.
A partnership is an unincorporated business owned by two or
more persons associated as partners. Often the same persons
who own the business also manage the business. Many small
retail establishments and professional practices, such as
dentists, physicians, attorneys, and many CPA firms, are
partnerships. The characteristics of a partnership include:
1 As with a sole proprietorship, if the company cannot
pay its debts the partners personal assets can and will be used
to pay off the debt. See how this unlimited liability is even
riskier in the case of a partnership. Each partner is personally
liable not only for his or her own actions but also for the
actions of all the partners. If, through mismanagement by one
of your partners, the partnership is forced into bankruptcy, the
creditors can go after you for all outstanding debts of the
partnership.
2 Another fun one is mutal agency. This means partners
can sign contracts on behalf of the company with or without
the other partner’s knowledge or approval. This makes the
unlimited liability part very scary!
3 Partneship agreements can be written or verbal, yes,
verbal! Any partner contributions are recorded in their own
Capital account.
4 As with a sole proprietorship, the business itself does
not pay taxes. Instead, the earnings of the company are
divided between the partners using an agreed upon rate and
the earnings are taxed on each partner’s personal income tax.
5 A partnership has a limited life meaning that when the
partners change for any reason, the existing partnership ends
and new one must be formed.
6 Partners can take money out of the business when they
want. This is recorded in each partner’s Withdrawal or Drawing
account.
How To Register a Sole Proprietorship with the
DTI
Businesses can be conducted in many ways. It may be through
a sole proprietorship, partnership or corporation. Sole
proprietors must register with the Department of Trade &
Industry (DTI) while corporations and partnerships are
registered with the Securities & Exchange Commission (SEC).
A sole proprietor must register with the DTI and secure a
Certificate of Registration. At present, the DTI now gives the
person the option to choose his scope of business whether it be
barangay, city, regional or national. Based on a recent
issuance by the DTI, there is no more need to register each
and every branch if it is located within the scope of the
registration. For example, if I register my scope as national
and my initial business is at Pasig City, Metro Manila, I do not
have to apply for a new DTI registration when I open a branch
at Davao City.
Registering a sole proprietorship with the DTI is simple. The
required information are as follows:
1.Proposed Business Name (List 3 names in order of priority
2. Business Address (Street Number, Name, Barangay, Zip Code,
City, Region)
3. Business Activities
4. Territorial Scope of business (Barangay, city, regional or
national)
5. Owner’s Full Name
6. Owner’s Address
7. Owner’s Date of Birth
8. Owner’s citizenship
9. Tax Identification Number or TIN of the Owner
The DTI also requires any two (2) of the following valid
identification cards, the original of which must be presented
for verification:
• Passport
• Valid Driver’s License
• Professional Regulation Commission (PRC) ID
• National Bureau of Investigation (NBI) Clearance
• Police Clearance
• Postal ID
• Voter’s ID
• Government Service Insurance System (GSIS) Unified Multi-
Purpose ID
• Social Security System (SSS) ID
• Tax Identification Number (TIN) ID
• Overseas Workers Welfare Administration (OWWA) ID
• Seaman’s Book
• Government Office and GOCC ID, Armed Forces of the
Philippines (AFP) ID, Home Development Mutual Fund (HDMF)
ID, Philpost ID, Philhealth ID
• Integrated Bar of the Philippines (IBP) ID
• Senior Citizen Card
• Person with Disability Card
There are three ways of registering with the DTI:
1. Purely over the counter – Registration can be done at
any DTI Field Office.
2. Online Filing – File application online at https://
bnrs.dti.gov.ph
3. Hybrid – Combination of over the counter and online
application

The registration fees will depend on the territorial

jurisdiction covered in the application. The fees are
Barangay PHP 200.00
City / Municipality PHP 500.00
Regional PHP 1,000.00
National PHP 2,000.00

DTI Registration is valid for 5 years. Applications for

renewal should be filed within the first 6 months from the
expiry of the registration. If the renewal is made during
the last 3 months thereof, a surcharge of 50% of the
registration fees shall be imposed.