1.
Corporation
A corporation is a legal entity that is separate from its owners (called
shareholders) and is created under the laws of a particular jurisdiction.
It is a business organization that has the ability to own property, enter
into contracts, incur debts, and engage in legal activities in its own
name, rather than in the names of the individuals who own it.
Here are some key features of a corporation:
1. Legal Entity:
A corporation is considered a "person" under the law, which means it
can sue and be sued, own assets, and be responsible for its liabilities
independently of its shareholders.
2. Limited Liability:
One of the primary advantages of a corporation is limited liability for
its owners (shareholders). This means that shareholders are not
personally responsible for the corporation's debts or legal actions. If
the corporation faces financial trouble, shareholders' losses are limited
to the amount of money they have invested in the company.
3. Ownership and Shares:
Corporations are owned by shareholders who hold shares (also called
stocks) in the company. Shareholders can buy and sell shares, which
allows the ownership to change over time. The value of shares can rise
or fall based on the corporation’s performance and other market
factors.
4. Centralized Management:
Corporations typically have a board of directors who are responsible
for making major decisions and overseeing the management of the
company. The board appoints executives (such as a CEO) to handle
day-to-day operations.
5. Perpetual Existence:
A corporation can continue to exist even if its shareholders or
executives change, unlike partnerships or sole proprietorships, which
may dissolve upon the death or departure of an owner.
6. Taxation:
Corporations are generally taxed separately from their owners. This
can lead to what’s called "double taxation," where the corporation pays
taxes on its income, and then shareholders are taxed again on
dividends they receive. However, some types of corporations, such as
S corporations in the U.S., are designed to avoid double taxation.
In the Philippines, a One Person Corporation (OPC) is a type of
business entity that was introduced under the Revised Corporation
Code of the Philippines (Republic Act No. 11232), which took effect
on February 23, 2019. The OPC allows a single individual to establish
a corporation, which is not possible under traditional corporate
structures where there must be at least two or more incorporators.
Here are the key features of a One Person Corporation (OPC) in the
Philippines:
Key Features of a One Person Corporation (OPC)
1. Single Shareholder
An OPC can be formed by just one person as the shareholder. This is
the key distinguishing feature of an OPC, compared to traditional
corporations, which require at least five incorporators.
2. Limited Liability
Like regular corporations, an OPC provides limited liability to its
owner. This means that the owner is not personally liable for the debts
or obligations of the business, as the corporation is considered a
separate legal entity.
The owner’s liability is limited to the amount of capital they invested in
the business.
3. Ownership and Control
The sole shareholder of an OPC is also the sole director and
president of the company. This allows for full control over business
decisions by a single individual.
4. Corporate Governance
While the OPC has only one person, the corporation is still required to
follow standard corporate governance procedures as outlined in the
Revised Corporation Code.
The owner may appoint a corporate secretary and treasurer, but
these positions can be held by the same person, as long as they are
distinct from the owner’s role as the president.
5. Minimum Capital Requirement
The minimum capital required for an OPC depends on the type of
business it plans to engage in, but there is typically a lower capital
requirement compared to traditional corporations.
For most businesses, the minimum paid-up capital is ₱1. However,
for certain types of businesses, the minimum capital may be higher
depending on industry regulations.
6. Easier Incorporation Process
Establishing an OPC is relatively straightforward compared to setting
up a traditional corporation, as it involves fewer formalities and is a
quicker process.
The formation of an OPC requires the submission of key documents,
including the Articles of Incorporation, which must state that it is a
One Person Corporation.
7. Taxation
OPCs are subject to the same tax rates as other corporations in the
Philippines. They can avail of tax benefits and deductions, and their
income is taxed separately from the owner’s personal income.
OPCs are required to file tax returns and comply with Bureau of
Internal Revenue (BIR) regulations.
8. Continuity
Like any corporation, an OPC has perpetual existence, which means
the business can continue to operate even if the owner passes away,
subject to legal procedures for transferring ownership. This is different
from a sole proprietorship, which typically ends with the owner's death.
9. Restrictions on OPC
The owner of an OPC cannot be a government official or an entity
like a foreign corporation. The shareholder must be a natural
person, and not a corporate entity, which is a restriction to maintain
the principle of personal liability limited to the individual behind the
OPC.
