How to Register a Sole Proprietorship in the Philippines

In the Philippines, many freelancers, consultants, and small business owners register as sole proprietors. It’s one of the simplest ways to work independently, offering a fast and low-cost path to running your own business.

The process is straightforward: you secure a business name with the Department of Trade and Industry (DTI), then apply for the necessary permits and a tax identification number with the Bureau of Internal Revenue (BIR). There’s no minimum capital required for Filipino citizens, and much of the registration can now be done online.

This structure gives professionals the flexibility to launch their business with few barriers, which is why it remains one of the most common forms of self-employment in the Philippines.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in the Philippines?

In the Philippines, a sole proprietorship is officially called a sole proprietorship. Depending on context, it may also be referred to as:

• Sole trader
• Self-employed worker
• Independent contractor

In practice, these terms all mean that one person is responsible for running the business and assumes full control and responsibility without creating a separate entity.

How does a sole proprietorship work in the Philippines?

Sole proprietorship vs. domestic corporation in the Philippines

Here’s a side-by-side look at sole proprietorship and corporation structures in the Philippines.

Step-by-step: How to register a sole proprietorship in the Philippines

Step 1: Check your eligibility

You must be at least 18 years old. Filipino citizens are fully eligible. Foreign nationals may register only if allowed by law, their business is not on the Foreign Investment Negative List, and they have the necessary visa or permits.

Step 2: Choose your business name

You may use your own name or a unique trade name. Check availability and register via the DTI Business Name Registration System (BNRS) online. The name is valid for five years from the date of registration and can be renewed for subsequent five-year periods

Step 3: Gather required documents

• Two valid government-issued IDs
• Proof of address
• DTI Business Name Registration Certificate proving that your business name has been officially registered
• Barangay Clearance – Issued by the Barangay Hall (your neighborhood-level government) that certifies that your business complies with the rules of the barangay
• Mayor’s Permit / Business Permit – authorization from the city or municipality to operate legally
• Community Tax Certificate (Cedula) – proof you’ve paid your annual community tax
• BIR Form 1901 – application form to register with BIR
• BIR Certificate of Registration (Form 2303) – issued after registration; shows your tax obligations
• Books of Accounts – official ledgers/journals registered with BIR for recording income and expenses

Step 4: Register with local authorities

Register with the Barangay to get a Barangay Clearance, then apply at the City or Municipal Hall for a Mayor’s Permit or Business Permit.

Step 5: Register with the Bureau of Internal Revenue (BIR)

Complete BIR Form 1901, submit your DTI Certificate, required permits, IDs, and pay the documentary stamp tax (₱30). The ₱500 annual registration fee is no longer required as of January 22, 2024. You’ll receive a Certificate of Registration and TIN.

Step 6: Complete post-registration obligations

Once registered, you will receive your BIR Certificate of Registration (Form 2303), which confirms your tax obligations. If applicable, the BIR will also provide your VAT registration. You must then issue compliant invoices for every transaction, maintain your books of accounts, and file your taxes on schedule—monthly, quarterly, and annually.

You are also responsible for keeping your registration details up to date. Changes such as a new business address, trade name, or closure of operations must be reported to the BIR and local authorities promptly.

Financial and tax obligations for sole proprietors in the Philippines

You are responsible for:

• Income taxes: Sole proprietors are taxed as individuals under the graduated income tax system (0%–35%). If annual gross receipts do not exceed ₱3 million, you may elect the 8% flat tax on gross income above ₱250,000 in lieu of percentage tax and graduated rates. Taxes are paid through quarterly income tax returns and a final annual income tax return filed with the BIR.

  • Social security/pension contributions: Self-employed individuals must register with:
  • SSS (Social Security System): provides retirement, disability, sickness, and maternity benefits
  • PhilHealth: the national health insurance program
  • Pag-IBIG Fund: a government savings and housing loan program

  Contributions are mandatory if you employ staff, and optional but recommended if you work only for yourself.

• VAT / Percentage tax: Businesses with annual gross receipts over ₱3 million must register as VAT taxpayers and charge 12% VAT, filing VAT returns monthly and quarterly. If your gross receipts are ₱3 million or less and you do not opt for the 8% flat tax, you must instead pay a percentage tax (3%) on gross sales, filed quarterly. This tax is separate from income tax and applies in addition to the graduated rates, unless you have elected the 8% flat rate.

• Record-keeping requirements: You must maintain BIR-registered books of accounts, issue compliant invoices for every sale or service, and keep all records for at least ten years in case of audit.

Launch your contracting career and stay compliant with Deel

Registering a sole proprietorship gives you independence, but it also means handling taxes, invoices, and records on your own. Deel’s all-in-one platform helps you manage obligations without the stress. With Deel, you can:

• Automate invoicing and expense tracking with essential Bookkeeping tools
• Create, send, and sign localised work agreements
• Keep accurate records for tax season
• Access expert tax advice and compliance support
• Get paid through multiple payment and withdrawal methods
• Spend your earnings in USD with the Deel Card
• Access funds early with Deel Advance
• Enjoy contractor perks from 150+ partners

Stay independent, without the admin overload. Sign up to Deel for free today.

FAQs

What is the minimum capital required to start a sole proprietorship in the Philippines?
There is no formal minimum capital required for Filipino citizens. Foreign nationals, however, are generally required to invest at least US $200,000 (or US $100,000 if the business uses advanced technology or employs at least 50 Filipinos).

Do sole proprietorships need to register for VAT/GST?
Only if gross receipts exceed the VAT threshold of ₱3 million; otherwise, a percentage tax applies.

How much are the standard monthly or annual contributions?
Since 2024, there is no BIR annual registration fee, but self-employed individuals must contribute 15% to SSS, 5% to PhilHealth (on income ₱10,000–₱100,000), and 1–3% to Pag-IBIG depending on monthly earnings.

Can a sole proprietor hire employees?
Yes. You must register with SSS, PhilHealth, and Pag-IBIG and remit contributions for your employees.

How long does it take to register as a sole proprietorship in the Philippines?
DTI name registration can be done online in a few days. Completing all steps typically takes from a few days to a few weeks, depending on location and processing times.

Can foreign nationals register as sole proprietors in the Philippines?
Yes, provided their business is not on the Foreign Investment Negative List and they meet visa/permitting requirements.

Do sole proprietors need a separate business bank account?
Not mandatory, but highly recommended for clear accounting and professionalism.

What happens if I stop working as a sole proprietor?
You should deregister with the BIR, cancel permits at local offices, and optionally retire your DTI registration.

Are there any government incentives or reduced rates for new sole proprietorships?
Yes — if your business qualifies as a Barangay Micro Business Enterprise (BMBE) with total assets of ₱3 million or less (excluding land), you are eligible for income tax exemption on earnings from operations, and may receive benefits such as priority access to special credit facilities, technical and marketing assistance, and local tax or fee reductions. You can register for BMBE status through the DTI’s dedicated portal.

Can I use Deel as a sole proprietorship to get paid by international clients?
Yes. Deel allows sole proprietors and freelancers to receive global payments in multiple currencies, with low fees and transparent exchange rates.

Does Deel generate compliant invoices for sole proprietors?
Absolutely. Deel automatically generates legally compliant invoices that align with the Philippines' regulations and standards.

Can Deel help me with taxes as a sole proprietor in the Philippines?
Yes. Deel provides downloadable tax reports and payment records to support your filing. While not a substitute for an accountant, Deel makes record-keeping much easier.

Does Deel offer contracts for freelancers and sole proprietors?
Yes. Deel includes local-law-compliant contract templates so you can work with clients safely and professionally.

Can I access benefits through Deel as a sole proprietor?
Yes. Deel offers optional perks such as health insurance, retirement savings plans, and other benefits usually available to employees—bringing more security to freelancers.