Starting a Business in the Philippines

What are the different business structures and how can you start a business in the Philippines?

The Philippines has one of the fastest-growing economies. The World Bank notes that the Philippines economy remains strong with 5.8% growth in 2019 and a projection of 6.1% growth for 2020. In addition to that, the PwC projects the Philippines to make one of the biggest leaps in GDP rankings by 2050.

This shows that there are many opportunities for investors planning on starting a business in the Philippines. This article is an overview of setting up a business in the Philippines. Below we discuss the most common business structures investors choose in the Philippines. We will also talk about how to register your business.

Table of contents

    Business Structures in the Philippines

    Domestic Corporation

    The Domestic Corporation is the most common legal entity for businesses in the Philippines. A domestic corporation has more than one shareholder. Additionally, a shareholder is liable only to the extent of his or her share capital.

    One Person Corporation

    The One Person Corporation (OPC) is almost the same as a Domestic Corporation. The main difference is that an OPC has only one shareholder.

    Sole Proprietorship

    A Sole Proprietorship has only one owner. The owner has full control over the business and owns all assets and profits. Unlike a corporation, the sole proprietor is personally liable for any debts and losses incurred by the business.

    Corporate Structures for Corporations in the Philippines

    The corporate structure of both domestic and one person corporations has the following: 

    • Shareholders
    • Directors
    • Corporate officers

    Note that this does not apply to sole proprietorships.

    Shareholders in a Corporation in the Philippines

    As mentioned above, the biggest difference between the two kinds of corporations is the number of shareholders. However, there is also a difference in who can become a shareholder.

    Type of CorporationNumber of ShareholdersWho can be a shareholder
    Domestic Corporation2 to 15Natural person
    Partnership
    Association
    Corporation
    One Person Corporation1Natural person
    Trust
    Estate

    Directors in a Corporation in the Philippines

    The corporation’s shareholders elect the board of directors. Directors must also meet the following requirements:

    • Must be a natural person and of legal age
    • Must hold at least one share
    • Must not have been convicted of a crime punishable by imprisonment for longer than six years
    • Must not have violated the Corporation Code within five years before the date of election

    Since directors must hold shares, a domestic corporation can have no more than 15 shareholders. Meanwhile, in an OPC, the sole shareholder is also the director.

    Corporate Officers in a Corporation in the Philippines

    The board of directors assigns the corporate officers. All corporations in the Philippines must have the following corporate officers:

    • President. The president acts as the signatory on behalf of the corporation. He or she must be a shareholder and a director. As such, the sole shareholder of an OPC is also the president.
    • Treasurer. The treasure is in charge of all financial matters in the corporation. The president of an OPC may also hold this position. However, in such cases, the OPC president/treasurer must pay a surety bond. The amount depends on the company’s authorized capital stock.
    • Corporate Secretary. The corporate secretary handles all of the corporation’s administrative and informative work. Many corporate secretarial tasks involve maintaining compliance with laws. As such, your corporate secretary must have in-depth knowledge of laws and regulations for corporations.

    Outsource corporate secretarial tasks to Emerhub.

    Make sure that you remain compliant with laws and regulations.

    Registering a Business in the Philippines

    Minimum Capital Requirements when Starting a Business in the Philippines

    The minimum capital requirement for a corporation in the Philippines with at least 60% Filipino ownership is Php. 5,000.

    Business StructureMinimum Capital Requirement
    Domestic Corporation (>=60% Filipino ownership)Php. 5,000
    One Person Corporation (Filipino-owned)Php. 5,000
    Sole ProprietorshipNone

    Business Registration for Corporations and Sole Proprietorships  in the Philippines

    Business Name Registration 

    All corporations in the Philippines must register with the Securities and Exchange Commission (SEC). Emerhub can register your business name with SEC in about two weeks. 

    As for sole proprietorships, business name registration is with the Department of Trade and Industry (DTI). Our consultants can complete DTI registration on your behalf in as little as one day.

    Permits from the Local Government

    All businesses need to apply for permits from the local government where the business is registered. Such permits include the following:

    • Barangay Clearance
    • Zoning Clearance
    • Business Permit from the Mayor’s office

    As such, you must have a valid address for your company. Note that there are zoning restrictions on addresses you can use for your business. Our consultants can assist in finding a valid address. We can also secure the necessary permits on your behalf.

    If your business can operate without a physical office, you can also use a virtual office address. This is a cost-effective way to get a valid business address. You can use Emerhub’s virtual office address in the Makati central business district.

    Register your business in Makati.

    Use Emerhub’s virtual office address.

    Certificate of Registration with the Bureau of Internal Revenue

    To comply with tax laws, businesses must register with the Bureau of Internal Revenue (BIR). Note that you cannot conduct transactions if you are not registered with the BIR.

    Tax reporting is essential, and complying with relevant tax laws is very important. If your business does not have an accountant, outsource accounting tasks to a professional. A professional accounting service will ensure that you remain compliant with all relevant laws and that you are able to file your taxes on time.

    Outsource accounting tasks to Emerhub.

    Register as an Employer with SSS, PhilHealth, and Pag-IBIG

    Before you can hire employees for your business, you must be a registered employer with the following government agencies:

    • Social Security System (SSS)
    • Philippine Health Insurance Corporation (PhilHealth)
    • Home Development Mutual Fund (HDMF/Pag-IBIG)

    Registration with the above will allow you to make employer contributions. This is essential in complying with the employment regulations. Emerhub will take care of employer registration with the SSS, PhilHealth, and Pag-IBIG. We can register your business with these agencies within a couple of days.

    Ready to start a business? Fill out the form below and one of our consultants will get in touch with you.

    Sources:

    World Bank
    PWC

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