In line with the post-pandemic recovery of the country, government efforts have been made to encourage doing business in the Philippines. The R.A. 11032, or the “Ease of Doing Business and Efficient Government Service Delivery Act of 2018,” has streamlined business registrations and other government processes through technological integrations. With similar effects, the Comprehensive Tax Reform Program continuously promotes a fair and transparent taxation system. These and all other efforts have attracted both local and foreign entrepreneurs and investors and allowed easier market penetration and establishment of businesses.
Based on the 2023 (Q3) data reported by the Philippine Statistics Authority (PSA), the total foreign investments, which accounted for PHP 27.3 billion or 109.3 percent increase from the investments in the same quarter during the previous year, were mostly allocated to the manufacturing industry, support service activities, and real estate. This proves that the Philippines remains one of the fastest growing economies in Southeast Asia, and many entrepreneurs and investors can always benefit from this growth.
Notwithstanding these, there are still a few hurdles that keep these entrepreneurs and investors undecided. These may include limited information and guides on how to get started. With that, this article provides a comprehensive guide on how to incorporate a company in the Philippines based on the latest information, requirements, and processes.
What is Company Incorporation?
Company incorporation is the legal process of forming a company or corporate entity. In its basic sense, a corporation is the resulting juridical entity with income, assets, and liabilities independent or separate from its owners and investors. In the Philippines, company incorporation starts with registration with the Securities and Exchange Commission (SEC).
As defined in the RCC, a corporation is “an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties expressly authorized by law or incidental to its existence (Sec. 2).”
Types of Corporations
Corporations formed or organized under RCC may be stock or nonstock corporations. Stock corporations are those that have capital stock divided into shares and are authorized to distribute to the holders of such shares, dividends, or allotments of the surplus profits on the basis of the shares held. All other corporations are nonstock corporations.
[a] Domestic Corporation. It is a corporation registered with the SEC and other government agencies in the Philippines. It may be 100% Filipino-owned, 60% Filipino-owned and 40% foreign-owned, or 40.01% to 100% foreign-owned (subject to certain provisions under the Foreign Investments Act).
[b] Foreign Corporation. It is a corporation formed under laws other than those of the Philippines’ and whose laws allow Filipino citizens and corporations to do business in their own country. It has the license and right to conduct business in the Philippines. It is allowed to operate a branch office, representative office, regional area headquarters (RHQ), and regional operating headquarters (ROHQ).
[c] Non-Stock Non-Profit Corporation. It is a corporation that neither generates profits nor issues shares of stock to its members. It operates for special purposes, such as charity, religion, education, culture, and civil service, among others.
[d] One Person Corporation. It is a corporation with a single stockholder, who is also the sole incorporator, director, and president.
Company Incorporation Process and Requirements
Incorporating a company in the Philippines can be quite complicated and daunting, especially for foreign nationals, who may not have knowledge and awareness of the corporate laws, government processes, and documentary requirements.
[1] Business Structure, Capital, and Other Legal Considerations
While company incorporation sounds easy on paper, it is complex and complicated in actual practice. Before processing the registration or dealing with any government agency, it is highly recommended to consult a business expert or a corporate lawyer to get clarity on the requirements, processes, and other technical and legal considerations.
[a] Business Structure and Foreign Equity. As previously discussed, a domestic corporation may be Filipino-owned or foreign-owned. If it is Filipino-owned by at least 60% equity, it is considered a Philippine company. On the other hand, it is foreign-owned by more than 40%, it is a foreign-owned domestic company.
Any corporation may be 100% foreign-owned except for those in the industries covered in the FIA Foreign Investment Negative List (e.g., mass media, marine resources, and small-scale mining).
[b] Incorporators. Particularly identified in the RCC, any person, partnership, or corporation, singly or jointly with others but not more than fifteen (15) in number, may organize a corporation.
Natural persons, who are incorporators, must be of legal age. Those licensed to practice a profession, and partnerships or associations organized for the purpose of practicing a profession are not allowed to organize a corporation unless provided under special laws.
Each incorporator of a stock corporation must own or be a subscriber to at least one (1) share of the capital stock. A corporation with a single stockholder is also allowed and is considered a one person corporation (OPC).
[c] Company Name. As provided by law, no corporate name is allowed if it is not distinguishable from those already reserved or registered for the use of another corporation. During SEC registration, a name verification is conducted to confirm the uniqueness and validity of a corporate name.
[d] Corporate Term. Any corporation may have a perpetual existence unless provided in its Articles of Incorporation (AOI). Once specified, it may also be extended or shortened by amending the document. Additionally, a corporation, whose term has expired may apply for a revival of its corporate existence.
[e] Permanent Office Address. The SEC and other government regulatory bodies require the official address of a company where all official communications and legal documents, such as tax notices and summons, are sent. Depending on the nature of business or operations, a particular office space area may also be required.
[f] Capital Requirements. Stock corporations are not required to have a minimum capital stock, except as otherwise specifically provided by special law. As stated in Section 13 of the RCC, however, the paid-up capital shall, in no case, be less than Five Thousand Pesos (PHP 5,000), in which at least twenty-five percent (25%) of the authorized capital stock in the AOI must be subscribed at the time of incorporation and at least twenty-five percent (25%) of the total subscription must be paid.
[g] Directors or Trustees and Officers. Within thirty (30) days after the election of the directors, trustees, and officers of a corporation (i.e., a president, who must be a director; a treasurer, who must be a resident; a secretary, who must be a citizen and resident of the Philippines; and other officers as may be indicated in the bylaws), their names, nationalities, shareholdings, and resident addresses must be submitted to the SEC.
[2] SEC Registration
Once all incorporation details are set, the company may already be incorporated by registering with the Securities and Exchange Commission (SEC), the primary registrar and overseer of the corporate section in the Philippines.
[a] eSPARC Registration. While most government agencies have already automated business registration processes as mandated by the Ease of Doing Business and Efficient Government Service Delivery Act of 2018, company registration with the SEC may already be processed online on its Electronic Simplified Processing of Application for Registration (eSPARC) facility.
[b] Name Verification and Reservation. One of the initial steps in the eSPARC Registration is the processing of the company name for verification and reservation. This ensures that the proposed name is not duplicated or in conflict with those registered or existing in the SEC database.
[c] Signing and Notarization of Documents. After encoding all the required details, the registration documents, such as the AOI and Bylaws, may be initially generated for review before submission for pre-approval. Once submitted and pre-approved, these documents may already be printed, routed for signing, and notarized. Within thirty (30) days, these must be uploaded to eSPARC. After approval of the submitted documents, payment may already be processed.
[d] Submission of Documents. Within thirty (30) days from payment, the signed and notarized documents in hard copies must be submitted personally to the SEC Processing Office (SEC Main Office).
[e] Certificate of Incorporation. A digital Certificate of Incorporation is readily available for download once the payment of fees is confirmed. The physical or hard copy, however, is for pickup at the SEC Main Office days or weeks after the submission of documents.
[3] Barangay Business Permit Application
In the Philippines, a barangay is the smallest political, territorial, and administrative unit that forms the most local level of government. To secure a Barangay Business Permit or Clearance, proceed to the Barangay Hall with jurisdiction over the principal business address, present the SEC Certificate of Incorporation, lease contract or its equivalent, and other documents, and pay the assessed fees based on the total floor or office area (e.g., PHP 11 per square meter).
[4] Mayor’s or Business Permit Application
Among the stages in company incorporation, the registration with the respective city or municipal government is perhaps the most complicated. Not only do the requirements and processes vary across cities and municipalities, but there are also various permits and clearances that must be processed and secured first before the final issuance of the Mayor’s or Business Permit by the City or Municipal Business Permits and Licensing Office (BPLO).
[a] Locational Clearance and Zoning Certificate. The application for the permit or clearance is usually processed at the City or Municipal Planning and Development Office (CPDO). The CPDO evaluates the application, schedules, and conducts a zoning inspection. The purpose of the inspection is to ensure that the business establishment is allowed in the chosen location as per the Comprehensive Land Use Plan and Zoning and other relevant ordinances.
[b] Local Business Tax Payment. Normally, once the Barangay Business Permit and the Locational Clearance and Zoning Certificate have been secured, the application may already be lodged with the BPLO for business tax assessment. In some LGUs, the Community Tax Certificate (CTC) or Cedula is automatically released after the payment of the business tax, while in others, this is separately paid.
[c] Fire Safety Inspection Certificate (FSIC). The Bureau of Fire Protection’s (BFP) inspection process usually comprises six (6) stages: application, inspection scheduling, inspection day, recommendations, compliance period, and follow-up inspection. After receiving the application form and payment of fees, BFP provides the schedule for the site visit and inspection. If ever there are any critical recommendations after the inspection, the company is given a grace period to comply before a follow-up inspection.
[d] Sanitary and Occupational Health Permits. Requirements for Sanitary Permit to Operate vary depending on the LGU and types of business establishments, e.g., hotels, restaurants, spas, medical clinics, etc. In addition to this, the Occupational Health Permit is also required, especially for food business establishments. This further requires the company employee’s medical tests, i.e., drug tests, urinalysis, fecalysis, etc., that are normally conducted in the city hall itself. Sometimes, an HIV-awareness seminar (with an exam after) is also a requirement.
[e] Other Permits and Clearances. The requirement for the City or Municipal Environment and Natural Resources (CENRO) permit and other business registration-related clearances depends on the LGU and the nature of business operations.
[5] BIR Registration
While the Mayor’s or Business Permit is no longer a requirement for BIR registration, the latter may already be processed after SEC registration. The BIR registration, with the RDO having jurisdiction over the principal business address of the company, provides the company with authority to register a Taxpayer Identification Number (TIN), issue official receipts and invoices, and register the books of accounts.
[a] BIR Form 1903 – Application for Registration. This is the official BIR form used for the application for registration of corporations and partnerships, including Government Agencies and Instrumentalities (GAIs), local government units (LGUs), cooperatives, and associations.
[b] BIR Form 1906 – Application for Authority to Print Receipts and Invoices. This is the official BIR form for the application for authority to print receipts and invoices (ATP) and is accomplished and filed every time printing of new booklets is needed.
[c] BIR Form 1905 – Application for Registration Information Update, Correction, or Cancellation. This form is accomplished when there is an update or change to any registration data or information with the BIR. For new corporations, this is used for the registration of the books of accounts.
After successfully registering with the BIR, the company is issued or receives a BIR Certificate of Registration (COR), Authority to Print Receipts and Invoices (ATP), Notice to Issue Receipts and Invoices (NIRI), stamped books of accounts, and approved primary and secondary receipts.
[6] Employer Registration with Statutory Agencies
After the BIR registration, the company may already be deemed fully incorporated in the Philippines. However, as an entity employing people, additional mandated registrations with the statutory agencies must also be processed.
[a] Social Security System (SSS). Created by virtue of the Social Security Act of 1954, SSS administers social security protection to workers in the private sector by providing replacement income for workers in the events of death, disability, sickness, maternity, and retirement.
[b] Philippine Health Insurance Corporation (PHIC) or PhilHealth. Attached to the Department of Health, it administers the National Health Insurance Program, which was established to provide health insurance coverage and ensure affordable and accessible health care services for all Filipinos.
[c] Home Development Mutual Fund (HDMF) or Pag-IBIG Fund. Under the Department of Human Settlements and Urban Development (DSHUD), it administers the national savings program and affordable shelter financing for Filipinos.
SSS, PhilHealth, and Pag-IBIG Fund employer registrations usually require a few forms to accomplish and other supporting documents, i.e., normally registration documents received from other government agencies, and are filed with the servicing branches within the city or municipality where the company is located. After the registrations, the agencies issue Certificates of Registration (CORs) and access to the employer’s online accounts.
[6] Other Registrations and Special Licenses
Company incorporation in the Philippines is not a one-size-fits-all process. Additional clearances or endorsements from appropriate government agencies may be required, depending on the industry.
For instance, schools and academic institutions require clearance from the Department of Education, banks from the Bangko Sentral ng Pilipinas (BSP), hospitals from the Department of Health (DOH), private employment agencies (PEAs) from the Department of Labor and Employment (DOLE), and so on. Corporations may also opt to avail of tax and other incentives by securing special licenses, such as those issued by the Philippine Economic Zone Authority (PEZA).
About FilePino’s Company Incorporation Services
FilePino, Inc is a duly registered one-stop-shop business consulting firm specializing in company incorporation, operates within Bonifacio Global City (BGC), Taguig, and provides services to thousands of companies and businesses within Metro Manila and nearby provinces.
[a] Premium Package. This covers the basic company incorporation and registration processes — legal and accounting consultation for a maximum of forty-five (45) minutes, SEC registration and name appeal, if any, barangay and mayor’s business permit application, and BIR registration.
[b] Corporate Package. This includes basic company incorporation and registration processes in the premium package, together with manual and online registrations with the statutory agencies (i.e., SSS, PhilHealth, and Pag-IBIG Fund) and other additional and optional services (e.g., dry seal, frame, USB, etc.).
[c] Enterprise Package. This is the most comprehensive service package for company incorporation and registration, which includes a legal and accounting consultation for a maximum of two (2) hours, SEC registration with complete documentation and legal assistance, barangay and mayor’s business permit application, BIR registration, manual and online registrations with the statutory agencies, corporate bank account opening, DOLE 1020 registration, nominee service, and many value-added services to choose from.
… and you might just need our assistance.
Ready to incorporate your company in the Philippines? Set up a consultation with our business specialists to discuss service packages, scopes of work, service fees, and other matters! Call us at (02) 8478-5826 (landline) and 0917 892 2337 (mobile) or send an email to info@filepino.com.
