Partnership Business in the Philippines: Legal Requirements and Registration Process

Looking to start a partnership business in the Philippines? In that case, you will have to register your business with the local governmental bodies, pay legal fees, and apply for several different permits to operate your business. 

In this article, we’ll look at the types of partnership businesses, the documents you will require, and a step-by-step process to help you register your partnership business in the Philippines with ease.

What is Considered a Partnership Business in the Philippines?

According to the Civil Code Article 1767 in the Philippines, a partnership is a contract between two or more people who agree to contribute money, property, or industry to a shared fund and divide the profit among themselves.

The main features of a partnership include:

• At least two people entering an agreement to become partners
• Each person contributes resources to the business
• Any profit is divided amongst themselves based on their agreement
• A valid registration at the Securities and Exchange Commission (SEC) with a minimum capital of PHP 3,000

Types of Partnership Business in the Philippines

In the Philippines, you have two types of partnerships that you can choose to set up, each with its pros and cons:

A. General Partnership

For a general partnership, all partners will have an equal responsibility in managing the business and can make executive business decisions that they deem necessary. Partners will have complete control over the business, granting them more freedom and flexibility.

On the bright side, you can generate more startup capital with more partners involved in the business. Especially when compared to sole ownership of the business. 

However, you will also be liable if the business fails which could lead you to be in debt. The personal assets of partners are usually used to cover any business debts or dues which could impact you badly if things go wrong. 

B. Limited Partnership

A limited partnership is more varied in terms of responsibilities and liabilities. In this case, partners are held accountable based on the extent of their financial contribution to the business. Furthermore, limited partners are often uninvolved in the business, making them silent partners.

Limited partnerships could generate high startup capital for the business, especially if you have wealthy investors or partners investing in the company.

Getting into a limited partnership is great for those who don’t have technical expertise and can only provide monetary support as they are not obliged to take care of the daily business operations.

Legal Requirements to Set up a Partnership Business in the Philippines

Before starting your business operations in the Philippines, you must register your business with the relevant government agencies. The supporting documents required for the process of partnership registration include:

• SEC Registration Cover Sheet
• Name of the Partnership Business and Name Verification Slip
• Articles of Partnership
• Joint Affidavit
• Certificate of Bank Deposit
• Principal Office Address
• Information on Partners (Name, Citizenship, Tax Identification Number, Address, Birthday)
• Capital Contribution of Partners
• Purpose of Partnership
• Endorsement of Clearance from Government Agencies

If you have foreign partners, investors, or companies involved, then registering your business will require additional documents as outlined below:

• FIA Form 105
• Proof of existence for the foreign company involved if it is registered abroad
• Board resolution of the foreign company
• Certificate of Reciprocity as required by the Retail Trade Liberalization Act (RTLA) if applicable
• Certificate of Inward Remittance or Bank Certificate as required by the RTLA if applicable

Furthermore, certain industries in the Philippines are regulated by the Foreign Investment Negative List (FINL) which limits or prohibits foreign ownership. For partnerships with less than 40% foreign ownership, you will require a minimum capital of USD 100 or PHP 5,000.

If foreign ownership is over 40%, the general base capital requirement is USD 200,000. Your base capital can be reduced to USD 100,000 if you meet certain requirements as imposed by the local government.

How to Register A Partnership Business in the Philippines

Now that we’ve outlined all the documents you need to have, let’s go through the steps on how to register your partnership business.

1. Register with The Securities and Exchange Commission (SEC)

The first step to start a partnership business in the Philippines is to verify the business name and secure the official registration certificate from the SEC. You need to gather all mandatory documents as mentioned above depending on whether you have local partners or foreign, and prepare the application.

Our local business incorporation experts will help you verify the business name and gather the required documents for an easier registration process.

2. Get A Barangay Permit

The Barangay is the smallest local administrative district in the Philippines, so a Barangay Certificate is required for businesses to operate within their jurisdiction. This certificate is also known as a Barangay Business Clearance or Barangay Business Permit.

This certificate showcases that your business complies with the business requirements in that locale. You can get a Barangay Permit from your area’s Barangay Hall. As this certificate does expire between six months to a year, you will need to renew it. 

Refer to our article on Business Permit Renewal in the Philippines for more details on that. 

3. Register with the Bureau of Internal Revenue (BIR)

All businesses must register with the Bureau of Internal Revenue in the Philippines and pay taxes to the government. Failing to do so will result in a fine and imprisonment by the local authorities.

Once you’ve registered your partnership business in the Philippines, you will be given a Tax Identification Number. This way, you can issue official receipts for your business and keep track of your accounts.

For registration, you will need to complete and submit the following forms:

• BIR Form 1903
• BIR Form 1906
• Payment for the BIR registration fee through BIR Form 0605
• BIR Certificate of Registration with BIR Form 2303
• Samples of receipt or invoice templates
• Partnership Resolution to transact with BIR
• SEC registration
• Application for Authority to Print (ATP) within 30 days after issuance of BIR Form 2303
• Application for registration of Book of Accounts within 30 days after issuance of BIR Form 2303

Additionally, there are tax laws, regulations, and reporting requirements by the local government units and regulatory agencies that your business will have to comply with.

This includes paying your corporate and withholding taxes in the Philippines or paying towards mandatory contributions.

4. Apply For A Mayor’s Permit

Also known as a business permit in the Philippines, the Mayor’s Permit is required to ensure that your business is compliant with the city’s business and safety standards. For this, you will need to visit the Business Permit and Licensing Office (BPLO) of the area that you’re in.

Requirements for application include:

1. Mayor’s Permit Application Form
2. Sanitation Permit
3. Fire Safety Inspection Permit
4. Zoning Clearance

5. Register with the Social Security System (SSS), PhilHealth and Pag-IBG

If you are hiring employees in the Philippines, it is mandatory to register with the SSS to provide social security benefits to your employees. For this, bring along a copy of your Article of Partnership, a map of your business location, and three forms, Form R-1, Form R1-A, and Form R-6 or R-6 with a special bank receipt.

In addition to SSS, registering with PhilHealth and Pag-IBG (Home Development Fund) is also a requirement to stay compliant with the law. PhilHealth provides health insurance benefits, while Pag-IBG provides housing benefits for your employees.

Cost of Setting up a Partnership Business in the Philippines

In terms of the cost of setting up your partnership business, you will need to pay the following official fees during the registration process. Please note that these are not the total costs, as additional expenses may apply:

• A filing fee of 1/5 of 1% of the partnership’s capital, but not less than PHP 2,000, plus 1% of this amount as a legal research fee.
• PHP 30,000 for Documentary Stamp Tax (DST).

Starting A Partnership Business in the Philippines with Emerhub

At Emerhub, we have a professional team of local advisors who will help you with the legal requirements, registration process, and obtaining the necessary licenses or permits from local governing bodies.

For more details, fill out the form below and we will put you in touch with one of our local experts.