Before starting a business in the Philippines, it is important to choose the right business structure. This is a good opportunity to learn more about the administrative requirements and associated costs so you’ll be prepared before your start your business.
Currently, there are three business structures that are prevalent in the Philippines:
Sole Proprietorship – the business is owned and managed by a single entity. Liabilities incurred by the company are solely the responsibility of the sole proprietor.
Partnership – the business is owned and managed by two or more entities. Partnership has the option to choose the business structure to have limited or unlimited liabilities.
Corporation – the business is owned by at least five (5) shareholders who stake a minimum amount of capital. The liabilities of the shareholders are capped depending on the total amount of their invested capital.
Each type of business structure has its own merits but, for this article, let us focus first on how to start a corporation in the Philippines.
Advantages of Starting a Corporation
The risk and liability are limited only to the corporation, owners or shareholders are not personally liable.
It is easier to increase capital by issuing stocks to investors.
Company ownership can be passed on and the corporation can exist indefinitely.
Corporations have the capacity to act independently.
The decision-making and management of the corporation are shared by the board of directors.
The first thing to starting a corporation in the Philippines is to register it with the following government agencies:
Securities and Exchange Commission
Local Government Units (Barangay and Mayor’s Office) where the corporation is located.
Bureau of Internal Revenue
If you’re going to have employees: Social Security System, Philippine Health Insurance Corporation, and Home Development Mutual Fund
How to Start a Corporation in the Philippines
Choose your industry.
Choosing the right niche or industry is a good first step in any business venture. Make sure that the corporation is playing to your group’s strength and knowledge to increase its rate of success. Foreign investors are also encouraged to visit government agencies so they’ll be informed of the rules, regulations, and limitations if they ever decide to establish their business in the country.
Register a business name.
For corporations, you need to register your chosen business name at the Securities and Exchange Commission. After SEC registration, you’ll also need to obtain a DTI registration, a Mayor’s business permit, BIR registration, and SSS/PhilHealth/Pag-IBIG Fund registration in that order before business operations commence.
Get an office address.
A headquarters is a must for corporations as this is where your business operations happen. This also shows that your business is credible and professional. It is a good way to make an impression on your clients and future investors.
Secure a business bank account.
Aside from an office address, it is also important to secure a bank account exclusively for business use. Finance advisors suggest creating four bank accounts: savings account, operations account, tax account, and investment account.
Apply for the required clearance and permits.
Securing all the permits, licenses, tax requirements and clearance needed for your business operations is important to avoid penalties and other problems for non-compliance.
Starting a corporation in the Philippines is fairly easy as long as you have prepared your business structure and plans beforehand. For more information about business registration, you can always consult with an accountant or visit a government agency to know more about the requirements, policies, and other fees related to the start-up.