Company Registration or setting up a legal Philippines entity is an important process. If planning on doing business in any country, I strongly suggest putting up a separate legal entity to protect yourself against losses or potential legal matters that can arise from regular business practice.

In the Philippines, it is especially important to have or be employed, by a legally registered company, business, or corporation. Philippines immigration laws are fairly lax, but working or conducting business without the proper visa can be a serious legal matter for foreigners, which can result in deportation and eventual black listing from entry into the country. So having a company that can issue you a work visa is crucial.

Fortunately there are many business structures available for foreign and domestic investors in the Philippines. All with pros and cons depending on the exact nature of the business you wish to conduct.

I’ll run down the six most common organizations, evaluate pros and cons, and go over some of the requirements for applying.

Sole Proprietorship is made for single individuals to run and operate their business. Generally used by small franchisers or someone running a small business. I would only recommend an investor to think about setting up a sole proprietorship if he’s thinking about opening a restaurant or bar and is a filipino citizen. The sole proprietorship doesn’t protect against personal liability for the enterprise and in the case of a foreigner 200,000 USD is required for the minimal capitalization without the protection of a company. The plus side filing with government offices is very easy and simple and can be done pretty quickly.

A Partnership again is made for smaller businesses but can be used in a larger capacity as well. The partnership requirements are similar to that of the sole proprietorship but limited liability can be established. I would also recommend this for filipino citizens as the minimum capital requirement is 200,000 USD if a foreigner is one of the partners and clearance by SEC must be sought. Although this is a relatively easy process if a partnership is your goal a joint venture may just as we be served without the capitalization or the risk.

A Stock Corporation is the most common type of company structure. At least 5 individuals are required for this company set-up. It can be 100% foreign owned but then the minimal capitalization is increased to 200,000 USD. Keeping the directors 60% filipino is also possible by using a lawyer or your employees as nominated directors. This is usually done quite painlessly, but there are some pitfalls to be aware of which I’ll cover in another post. The advantage is your minimum paid up capital can be reduced to as low as 100,000 Php(the SEC generally doesn’t approve companies with less than 100,000 Php). A stock corporation is it’s own filipino entity and can purchase land and participate in any business not listed on the Foreign Investment Negative List.

A Representative office is very helpful for companies looking to market or bring presence to the Philippines market. Not a Philippines entity it’s governed by the rules of the Parent Companies Country. They are easy to set-up have a low minimal capital requirement 30,000 USD, and a low annual maintenance. They are not allowed to derive any income from the Philippines so filing taxes are extremely easy.

A Branch office is very similar to a representative office except it is allowed to derive income from the Philippines. The registration process is almost identical, however the capital requirements are slightly larger 200,000 USD which can with moderate difficulty be reduced to 100,000 USD from the SEC.

Regional Headquarters (RHQ’s) and Regional Operating Headquarters (ROHQ’s) also are 100% foreign entities. They require some justification from the SEC why you would need to be located in the Philippines, usually customers or branches within the region. RHQ’s are merely for show not allowing to actively participate in any form of the business or derive income from the Philippines. They must annually remit 50,000 USD for operating purposes. An ROHQ is allowed to fully operate branches within the Philippines and has a one time capitalization requirement of 200,000 USD. Both are easy to set-up but requiring a lot of paperwork and certification from the home country. Recommended only for large multi-national companies.

All of these structures will allow you to issue Philippines work visas and employment permits. Some allow you to own cars, land, and buildings. Certainly all of them provide you with at least some level of protection when conducting business in the Philippines. Registration is an easy process and should be considered by any investor.

If you have any questions on any of the structures please don’t hesitate to write or comment to the blog, we certainly appreciate it.

Sincerely,

Judah Hirsch