Are you planning to incorporate a Company in the Philippines, but have no idea about how to begin? Don’t you worry! this blog has your back. The Philippines has a formidable presence in the global business landscape. It is often touted for this state-of-the-art infrastructure, market diversity, and strategic location, paving the foundation for a promising business journey.
The availability of cheap and skilled manpower is another plus point in the Philippines that entrepreneurs get for pursuing their business endeavors. Setting up a new venture or corporation in the Philippines requires meeting various legal requirements, including securing an incorporation certificate, adhering to labor laws, and obtaining an industry-specific certificate. Let’s discuss these requirements individually so that you have a clear understanding of all the legalities, leading to the seamless establishment of your venture. Before we delve into how to Incorporate a Company in the Philippines, let’s take a glance at some popular legal structures.
Legal Structures Available in the Philippines for Business Registration
Choosing the right legal structure can make or break your business. Before you embark on a business quest, it is vital to weigh the following business models against your requirements and risk appetite:
Sole proprietorship
It offers comprehensive management control to the owner. The only downside is it brings unlimited liabilities, which may even lead to the closure of a business. There is no legal distinction between the owner and the company.
Partnership Business
A partnership business model is ideal for two or more individuals seeking to serve a common business objective. It has two major types: A general partnership and a Limited company.
While the former allows for equal profit dissemination among partners and collective decision-making, the latter deter limited partners from partaking in key management matters with access to a limited profit threshold, which is precisely equivalent to their contribution.
Corporation
The corporation is a widely popular business structure in the Philippines. It requires as few as 5 incorporators for establishment purposes. The higher limit, in this context, can go up to 15. The incorporator must be a legal person and should have attained a legal age. Every incorporation must subscribe to a minimum of one share of stock.
Corporation has two categories namely Stock Corporation and Non-stock Corporation. The stock corporations enable the bifurcation of stock capital into shares distributed among the investors, ensuring a continual influx of dividends and parts of the surplus profits.
Non-stock corporations are primarily chosen by non-profit entities, undermining any likelihood of stock share issuance. These entities confront stringent compliances because they fall under the ambit of the Securities and Exchange Commission (SEC).
Underlining pre-registration legalities to Incorporate a Company in the Philippines
The following section entails pre-incorporation checklists that one must be aware of before striving to incorporate a Company in the Philippines:
- The number of members that can be part of a company ranges from 2 to 15 with most of them belonging to national territory.
- Management must comprise at least one president, treasurer, corporate secretary, and compliance officer. Out of these, the corporate secretary must be a national resident.
- Appointing a local agent is mandatory if an overseas entrepreneur wishes to set up a new venture in the Philippines. The applicable law and required paperwork must be followed to bring the agent’s appointment into effect.
- A domestic corporation can have overseas equity, which is bifurcated as follows:
- >40.01% Foreign Equity
- <40% Foreign Equity
- 0% Foreign Equity (100% Filipino-owned)
- Capital requirements are dependent on the foreign equity bracket mentioned below:
- 0% Foreign Equity → US$100 or equivalent to ₱5,000
- <40% Foreign Equity → US$100 or equivalent to ₱5,000
- >40.01% Foreign Equity → US$200,000 or equivalent to ₱4,800,000
- Capital can be added after opening the corporate bank account. Alternatively, one can also reduce capital requirements by;
- Employing at least 50 national citizens → minimum capital requirement of US$100,000 or equivalent to ₱2,400,000
- Reinforcing assurance regarding the use of advanced technology → minimum capital requirement of US$100,000 or equivalent to ₱2,400,000
- Ensuring that 70% of exports contributes to overall sale→ minimum capital requirement of US$100 or equivalent to ₱5,000
Steps to Incorporate a Company in the Philippines
Registering an entity in the Philippines requires an applicant to follow the below-given steps:
Step 1. Register your Business with the SEC
The Securities and Exchange Commission (SEC) is a governing body that helms incorporation affairs. It offers an online platform that makes the registration process seamless and hassle-free. All you need is to create an account on the SEC’s portal and reserve a company name. Additionally, you need to visit the office in Mandaluyong for name registration purposes. While furnishing the application, make sure to affix the following paperwork:
- Your company’s charter documents such as Articles of Incorporation and By-laws
- Joint Affidavit of two incorporators
- Treasurer’s Affidavit
The SEC shall vet these documents for accuracy and legitimacy. Upon inspecting the paperwork, the authority shall grant the certification of registration. The grant of certification signifies that the business has been registered in the country’s bylaws and hence it can commence operation.
Step 2. Obtain Clearance from the Barangay
If your business resides within the Barangay district, you will need to secure clearance from the respective administration. It involves submitting an application along with documents such as certificate registration, two valid forms of identification, proof of business place, etc.
Step 3. Secure approval from the respective Mayor’s office
Before you can bring your business endeavors into action, securing approval from a respective Mayor’s office is vitally important. To do so, you must file a prescribed application with the municipality’s local office along with the following paperwork.
- A copy of registration certification
- Two valid forms of identification
- Proof of business place
- Your Barangay Clearance
Step 4. Reinforce a legal presence with the Bureau of Internal Revenue
Since your business shall attract a particular tax slab, its registration with the Bureau of Internal Revenue (BIR) became mandatory. Doing so will lend you a company’s Taxpayer Identification Number (TIN), which will help tax authorities keep tabs on your transactions. To secure this number, simply file BIR Form 1903 with the company’s local Regional District Office (RDO) and furnish the below-given dossiers:
- Certificate of Registration
- Barangay Clearance
- Mayor’s Office approval for pursuing business activities
- Proof of Address (Certificate of Land Title or Lease Contract)
- Valid IDs, if required
- BIR Form 0605 and BIR Form 2000, if required (both forms are available at specified rate)
- Register your account books and up-to-date invoices
Note: the tax certificate shall be issued in the BIR Form 2303.
Step 5. Register as an Employer
The final step in this process involves registering your manpower with the following agencies. It is a mandatory step to follow.
- Social Security System (SSS) (for social security)
- Philippine Health Insurance Corporation (for health benefits)
- Home Development Mutual Fund (for housing loan benefits)
Conclusion
It is evident from the above that it is quite easy to incorporate a Company in the Philippines. However, depending on the industry you serve, the registration steps required may vary drastically. In that case, you must proceed vigilantly and if possible under the guidance of an expert agency like Adviso.
