Incorporation Options in the Philippines

There are different investment vehicles available to you, and to determine the right type of investment vehicle, it is necessary to determine the exact nature of your business or the types of activities in which your Philippine office will be engaging in.

Investment Vehicle: Corporation

Types:

  • Stock Corporations:
    • Domestic Corporations or Subsidiary
    • Branch Office
    • Representative Office
    • Regional Headquarters (RHQ)
    • Regional Operating Headquarters (ROHQ)
  • Non-stock Corporations:
    • Associations
    • Foundations
    • Religious Organizations
    • Non-Government Organizations
    • Educational Institutions

Ownership Structure: For Domestic Corporations, ownership may be categorized as 100% fully foreign owned; 60% foreign owned and 40% Filipino owned; 60% Filipino owned and 40% foreign owned. Majority of shares may also be owned by a corporation or an individual.Members for non-stock corporations function as stockholders but is not represented by shares of stock.

Involved Government Agencies: 

  • Securities and Exchange Commission (SEC)
  • Local Government Unit (LGU)
  • Bureau of Internal Revenue(BIR)
  • SSS, Philhealth, Pag-IBIG

*See table below for companies requiring endorsements from other government agencies

Investment Vehicle: Partnership

Type: 

  • General Partnership
  • Limited Partnership

Ownership Structure: Two (2) or more partners.

Involved Government Agencies:

  • Securities and Exchange Commission (SEC)
  • Local Government Unit (LGU)
  • Bureau of Internal Revenue (BIR)
  • SSS, Philhealth, Pag-IBIG

*See table below for companies requiring endorsements from other government agencies

Investment Vehicle: Cooperative

Type: N/A

Ownership Structure: Association of persons

Involved Government Agencies:

  • Cooperative Development Authority (CDA)
  • Local Government Unit (LGU)
  • Bureau of Internal Revenue (BIR)
  • SSS, Philhealth, Pag-IBIG

*See table below for companies requiring endorsements from other government agencies

Definitions

Corporation: Stock Corporations

Domestic Corporation or Subsidiary
A Domestic corporation is organized under the laws of the Philippines. It can be wholly or partly foreign or Filipino-owned. A minimum of five incorporators, who are natural persons and majority of which are Philippine residents, may incorporate a domestic corporation. A domestic corporation may have 5 but not more than 15 members of the board who must be shareholders to be elected board directors.

Branch Office
A foreign corporation that wishes to operate in the Philippines may secure a license to establish a branch office in the Philippines. A branch office has no personality separate from the head office. It is the foreign corporation that does business in the Philippines. To obtain a license to do business in the Philippines, it needs to prove its legal existence in its home country, demonstrate financial solvency and liquidity, and appoint a resident agent who will receive summons and other legal processes for the foreign corporation.

Stated otherwise, a branch office is considered an extension of its parent office (head office). Any legal liabilities incurred by the Philippine office will be extended to the head office.

Regional Headquarters
A Regional Headquarters supervises, coordinates and acts as a communication center for its subsidiaries, branches or affiliates in the Asia Pacific region and other foreign markets. An RHQ does not derive income from the Philippines. The head office may, however, sell and market its products to its clients even if located in the Philippines.

Regional Operating Headquarters
A Regional Operating Headquarters can be formed to serve its subsidiaries, branches or affiliates in the Philippines, Asia-Pacific Region, and other foreign markets. Unlike the RHQ, a ROHQ may derive income for any or all of the qualifying services it renders to its subsidiaries, branches or affiliates in the Philippines.

Non-stock Corporations:

By the definition from the Corporation Code of the Philippines, non-stock or non-profit corporations are formed and organized for the following purposes:

  • Religious
  • Charitable
  • Civic Service (which includes, chambers, agricultural, trade and industry)
  • Social
  • Cultural
  • Literary
  • Fraternal

And any other combination thereof, which is subject to the special provisions of the governing classes of non-stock corporations. Non-stock corporations may also be categorized as profit or non-profit.

For Profit: (Another term used for profit corporations is private corporations or closely held corporations)

A closely held corporation (with few Individuals) with no interest in selling shares.

A closely held corporation is defined as a company:

  • that has less than nineteen (19) shareholders
  • All of its issued stock of all classes are subject to restrictions on transfer
  • that shall not enlist in any stock exchange or make any public offering of its stocks

Non-profit:
Is a corporation formed for some benefit of the public and which the organization and its owners and shareholders shall not profit from.

Partnership

A partnership may be formed when two or more persons bind themselves through a contract to contribute money, property or industry to the partnership with the intention of dividing its profits amongst themselves. Each of the members of the partnership may act as a manager, however, the members may agree to only have one managing partner.

General Partnership
Is a form of partnership where the partners have unlimited liability for debts and obligations of the partnership.

Limited Partnership
Is a form of partnership where at least one partner has unlimited liability where the liability is up to the amount of capital contributions.

Sole Proprietorship

A business solely owned by an individual having full control and authority of the business and owns all its assets. The liabilities of the sole proprietorship is born by the business owner.

Cooperative

Is an association of persons who voluntarily joined to achieve a lawful a common social or economic end. Each member contributes to the capital of the association and share in the risks and benefits of the undertaking.


The business categories stated below will require endorsement from the following government agencies:

Source: Securities and Exchange Commission (http://www.sec.gov.ph/gsr/primary/endorsements.html)

Air Transport Civil Aeronautics Board
Banks, Pawnshops or other Financial Intermediaries with Quasi-Banking Functions Bangko Sentral ng Pilipinas
Charitable Institutions Department of Social Welfare and Development
Educational Institutions: (stock & non-stock)
  • Elementary to High school
Department of Education
  • College, Tertiary Course
Commission on Higher Education
  • Technical Vocational Course
Technical Education Skills and Development Authority
Electric Power Plants Department of Energy
Hospitals/Health Maintenance Organizations Department of Health
Insurance Insurance Commission
Neighborhood Associations Housing and Land Use Regulatory Board
Professional Associations Professional Regulation Commission
Radio, TV, Telephone National Telecommunications Commission
Recruitment for Overseas Employment Philippine Overseas Employment Administration
Security Agency Philippine National Police
Volunteer Fire Brigade Bureau of Fire Protection
Water Transport/Shipbuilding/Ship Repair Maritime Industry Authority

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Incorporation Options in the Philippines