Starting a Business in the Philippines

Starting a business in the Philippines is simple with our Company Registration services to foreign entities seeking to set up operations in the Philippines. We offer end-to-end assistance from company incorporation, corporate secretarial work and corporate housekeeping to application for secondary licenses/permits, corporate restructuring, and general compliance work.

When starting a business in the Philippines, we help our clients choose the right type of business entity to register, whether their purpose is to generate income or establish their back office in the country. We also assist them in evaluating the following:

• Ownership structure
• Capital requirements on the industry to engage in
• Need for special or secondary licenses/permits (if they intend to engage in regulated industries)
• Location of business
• Staffing requirements to assess the approximate size of their office space and facilities

Types of Business Entities for Foreign Investors

Foreign entities looking to start a business and set up a company in the Philippines can choose among six types of legal entities:

For Foreign Investors Seeking to Establish a Local Company:

• Domestic Corporation
• One Person Corporation

For Existing Foreign Corporations Seeking to Expand Operations in the Philippines:

• Branch Office
• Representative Office
• Regional Headquarters (RHQ)
• Regional Operating Headquarters (ROHQ)

When doing business in the Philippines, you will realise that all types of corporations in the country can only start their business operations after registering with the Securities and Exchange Commission (SEC) — the government agency mandated to regulate and supervise existing corporations in the country.

Domestic and One Person Corporations are required to obtain a Certificate of Incorporation and a Certificate of Registration from the SEC. A Certificate of Incorporation legitimizes its existence as a corporation organized and existing under Philippine laws. A Certificate of Registration authorizes it to engage in business within and outside the Philippines.

Foreign corporations seeking to do business in the Philippines are required to obtain a License to Do Business from the SEC before starting their operations.

Generally, corporations with foreign equity are allowed to set up businesses in the Philippines, except in areas of investment partially or wholly exclusive to Filipino entrepreneurs. For a complete list of the areas of investment restricted to foreign enterprises, please click here.

Also, existing foreign corporations are required to appoint a Resident Agent who will receive summons and legal proceedings served to their corporation in the Philippines. The resident agent can be a foreigner or a Filipino citizen.

Domestic Corporation

Similar to a Limited Liability Company (LLC), a Domestic Corporation (or Subsidiary Corporation if with foreign equity) is the most common type of corporation in the Philippines. Its legal entity is separate from its shareholders and must have at least five incorporators, who must be natural persons of legal age and subscribers of at least one share of capital stock in the corporation.

This type of corporation is required to obtain a Certificate of Incorporation and a Certificate of Registration from the SEC. A Certificate of Incorporation legitimizes its existence as a corporation organized and existing under Philippine laws. A Certificate of Registration authorizes it to engage in business within and outside the Philippines.

There are three types of domestic corporations in the Philippines:

• 100% Filipino-Owned Domestic Corporation
• 60% Filipino-Owned and 40% Foreign-Owned Domestic Corporation
• 40% to 100% Foreign-Owned Domestic Corporation

The minimum capital requirement of a domestic corporation will depend on its source of revenue, which can be any of the following:

• Export-Market Enterprise– if at least 60% of the company’s revenues are generated from overseas, the minimum paid-up capital is US$100.
• Domestic-Market Enterprise– if more than 40% of the company’s revenues are generated within the Philippines, the minimum paid-up capital is US$200,000.

Related: How to Set Up a Domestic Corporation in the Philippines »

One Person Corporation

A One Person Corporation (OPC) is a type of corporation with a single stockholder who shall also be the sole director and president. It offers the full authority and control of a sole proprietorship and the limited liability of a domestic corporation, an ideal setup for aspiring entrepreneurs planning to run a corporation on their own without the associated risks of incurring personal liabilities and having business partners.

The single stockholder (also known as incorporator) can be a natural person of legal age, a trust or an estate. Under applicable laws, the trust does not refer to a trust entity, but to the subject being managed by a trustee.

Similar to a Domestic Corporation, an OPC is also required to obtain a Certificate of Incorporation and a Certificate of Registration from SEC.

A foreign natural person can set up an OPC, provided they engage in areas of investment not restricted from foreign participation.

Unlike other types of corporations, an OPC is not required to have a minimum authorized capital stock, except as otherwise provided by law. Further, unless stated by applicable laws or regulations, no portion of the authorized capital is required to be paid up at the time of incorporation.

The single stockholder is required to designate a nominee and alternate nominee who shall be indicated in the Articles of Incorporation to replace the single stockholder if they die or become incapacitated to operate the OPC.

Related: How to Register an OPC in the Philippines »

Branch Office

A Branch Office is a revenue-generating entity that carries out the business activities of its foreign parent company into the Philippines. It does not have a separate legal entity from its parent company and its liabilities are incurred by the head office from abroad.

The minimum paid-up capital of a branch office is US$200,000.00, but can be reduced to the following:

• US$100,000.00 (if it will engage in business activities involving technology or employ at least fifty [50] direct employees)
• US$100.00 (if it seeks to be an Export-Market Enterprise that generates income overseas)

Related: How to Set Up a Branch Office in the Philippines »

Representative Office

A Representative Office is a non-income generating entity that can be set up by a foreign company in the form of a back office or contact center where they can delegate their administrative and technical operations, such as following:

• Promote company services/products
• Facilitate client orders from abroad
• Perform quality control of products for export

It does not have a separate legal entity from its foreign parent company and its liabilities are incurred by the head office from abroad. As a non-income generating entity, it is not allowed to offer services to clients or third parties in the Philippines.

The minimum capital requirements of a representative office are US$30,000.00, which shall be annually remitted by the parent company to support operating expenses.

Related: How to Set Up a Representative Office in the Philippines »

Regional Headquarters (RHQ)

Similar to a Representative Office, a Regional Headquarters (RHQ) is a non-income generating entity that can only be set up by foreign corporations with subsidiaries, branches, and/or affiliates worldwide. It can be established in the form of a contact center or back office to supervise, inspect or coordinate the administrative functions of the aforementioned entities.

Under conditions allowed by law, it may source raw materials, market products, train employees, and/or conduct research and development in the Philippines.

It does not have a separate legal entity from its parent company and its liabilities are incurred by its head office from abroad.

Under Philippine laws, an RHQ is not allowed to perform the following:

• Generate income or offer services to third parties in the Philippines
• Manage the operations of its subsidiaries, branches, and/or affiliates
• Deal directly or do business with its clients in the Philippines

Its parent company is also not permitted to sell or market products through the RHQ office.

The minimum capital requirement for setting up an RHQ is US$50,000.00, which shall be annually remitted by the parent company to support operating expenses.

Related: How to Set Up a Regional Headquarters in the Philippines »

Regional Operating Headquarters (ROHQ)

Similar to a Branch Office, a Regional Operating Headquarters (ROHQ) is a revenue-generating entity that carries out the business activities of its foreign parent company into the Philippines. It can only be set up by foreign corporations with affiliates, subsidiaries, and/or branches worldwide, in the form of a service center for the entities owned by the parent company.

An ROHQ does not have a separate legal entity from its parent company and its liabilities are incurred by its head office from abroad.

Under Philippine laws, it is not allowed to directly or indirectly solicit or market goods/services on behalf of its parent company, subsidiaries, branches, and/or affiliates. It is also prohibited from offering qualifying services to third-party enterprises other than its associated entities.

To support its annual operations, the parent company is required to remit at least US$200,000 every year.

Related: How to Set Up a Regional Operating Headquarters in the Philippines »

How Can InCorp Help?

Having serviced numerous global entrepreneurs and businesses in Asia, InCorp Group’s team of consultants are in the know of how to efficiently start a business in the Philippines. With a wide range of corporate services that supports a seamless business registration process, our team is ready to cater to all your needs when starting a business. Get in touch with our team to see how we can help and ways in which we can offer assistance when doing business in the Philippines.