Company Incorporation in the Philippines: Options and Benefits

The Philippines (“Philippines”) boasts one of the world’s fastest-growing economies, with a GDP growth rate of 5.7% in the mid of 2024. This growth, combined with a receptive, transparent, and open market, makes Philippines, an attractive destination for company incorporation. The country’s robust infrastructure development, English-speaking workforce, low labor costs, and various government incentives position Philippines as a global hub for business setup.

With the advancement in technology and massive industrial growth, businesses in Philippines have evolved drastically. The agriculture sector remains a dominant business in Philippines; however, plenty of opportunities are available in other sectors for Filipinos and expats.

IMPORTANCE OF COMPANY INCORPORATION

Company incorporation is a crucial process that businesses must undergo to legally operate in Philippines. This process involves submitting necessary documents to the Securities and Exchange Commission (“SEC”) or other relevant authorities, depending on the business structure. Incorporation grants a company a separate legal entity, enabling it to engage in commercial activities, provide employment, and access financial resources.

BENEFITS OF COMPANY INCORPORATION IN PHILIPPINES

Expanding business in Philippines can be complex but rewarding with proper planning and guidance. Key benefits include:

• Protection from Personal Liability: Corporations in Philippines are treated as separate legal entities, protecting shareholders from personal liability for corporate debts beyond their investment.
• Tax Benefits: Corporations enjoy significant tax benefits, including flexibility in deducting fringe benefits and other expenses such as salaries, bonuses, and education benefits.
• Access to Capital: Incorporation provides flexibility in raising capital through the sale of stock and other equity interests, as opposed to borrowing funds and incurring interest payments.
  
  
  

GOVERNMENT OFFICES INVOLVED IN COMPANY INCORPORATION

The following government offices are involved in the incorporation process:

• Securities and Exchange Commission (SEC)
• Bureau of Internal Revenue (BIR)
• Department of Trade and Industry (DTI)
• Local Government Unit (Mayor’s Office)
• Social Security System (SSS)
• PAG-IBIG
• PhilHealth

TYPES OF BUSINESS STRUCTURES IN THE PHILIPPINES

Understanding the correct business structure is essential for aligning with business goals. Common structures include:

• Sole Proprietorship: It is owned by one person, requiring a $200,000 capital for foreign-owned businesses not on the Foreign Investment Negative List.
• Partnership: It can be established by two or more people, forming a separate legal entity.
• Cooperative: An association of people with common interests aiming to achieve social, economic, and cultural goals, with a capital requirement of P15,000 (P100,000 for multi-purpose cooperatives).
• Corporation: A corporation can have up to 15 people acting as a single entity, with varying capital requirements based on ownership structure.
• One-Person Corporation: A corporation with a single stockholder, with capital requirements depending on the percentage of revenue from foreign sources.
  
  
  

ELIGIBILITY CRITERIA FOR COMPANY INCORPORATION

Applicants must meet specific criteria, including:

• A registered local office;
• At least 5 incorporators (individuals or corporations) and 1 resident Filipino director
• Reserved company name and Articles of Incorporation;
• Minimum paid-up capital based on business structure;
• Directors must be at least 18 years old.
  
  

BUSINESS INCORPORATION REQUIREMENTS

Key requirements include:

• 2-15 directors or incorporators (majority residing in Philippines);
• Four officeholders (President, Corporate Secretary, Treasurer, Compliance Officer);
• Minimum capital of $200,000 for majority foreign-owned companies;
• Registration certificates from SEC, BIR, and other relevant agencies;
• Notarized Articles of Incorporation and By-Laws;
• BIR registration certificate and Mayor’s Business Permit;
• Proof of local address and valid IDs of incorporators.

LIST OF DOCUMENTS FOR COMPANY INCORPORATION

Required documents include:

• Application for Registration;
• Board Resolution;
• Notarized Articles of Incorporation;
• Verification slips for the company’s name;
• Tax Identification Numbers (TIN) of principals and signatories;
• Passports and valid IDs of foreign investors and incorporators;
• Proof of registered official address.

PROCESS OF COMPANY INCORPORATION

The step-by-step process involves:

• Reserving the business name with SEC (or DTI/CDA for sole proprietorships/cooperatives);
• Submitting necessary documents, including Articles of Incorporation and Treasurer’s Affidavit;
• Opening a corporate bank account and depositing share capital;
• Obtaining a certificate of incorporation from SEC;
• Registering with local government units;
• Obtaining a BIR registration certificate;
• Registering as an employer with other government agencies.

TIMELINE FOR COMPANY INCORPORATION

The incorporation process typically takes 45 to 60 days, depending on document complexity and readiness.