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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.
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 Corporation | Number of Shareholders | Who can be a shareholder |
|---|---|---|
| Domestic Corporation | 2 to 15 | Natural person Partnership Association Corporation |
| One Person Corporation | 1 | Natural 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 Structure | Minimum Capital Requirement |
|---|---|
| Domestic Corporation (>=60% Filipino ownership) | Php. 5,000 |
| One Person Corporation (Filipino-owned) | Php. 5,000 |
| Sole Proprietorship | None |
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.
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.
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