Launching a new business in the Philippines? If you’re planning on setting up a new company here, then you’ll definitely want to get better acquainted with the different types of business structures that you can opt for. Here’s a summary on the organizational structures that you can choose from as well as some of their advantages and disadvantages:
Best for small, Filipino-owned businesses, this business structure is defined by individual ownership of all assets and enjoyment of all profits.
The main disadvantage of this structure is that the business owner has unlimited personal liability.
This business structure is best for small to mid-sized businesses and more advantageous for Filipino citizens since foreigners will have a higher minimum capitalization requirement.
Can be general or limited and requires registering with the Securities Exchange Commission (SEC).
Most investors opt for this organizational structure as it’s the most flexible.
A corporation is its own juridical person and it must have at least 5 and no more than 15 incorporators and it needs to be registered with the SEC.
If it’s at least 60% Filipino-owned then it’s considered a Filipino corporation.
This is considered as an extension of a foreign corporation and as such does not have its own legal personality, but can derive income from the Philippines.
The minimum paid-up capital requirement is US$200,000, but this can be reduced to US$100,000 if the organization is engaged in activities involving advanced technology or if it has at least 50 direct employees.
A foreign corporation that’s governed by the laws of the country where its parent company is located.
It cannot derive income from the Philippines and is fully subsidized by its head office so only withholding taxes are required to be paid.
The initial capital requirement is US$30,000. This is a good option for companies that want to maintain full control of their organization.
Typically the structures of choice of major multinational companies that engage in international trade, RHQs and ROHQs are also considered foreign entities.
The former is not allowed to derive income from Philippine sources and has a required annual capital of US$50,000 for operating expenses.
The latter is allowed to derive income from the Philippines and has a one-time required capital of US$200,000.
Not sure which Philippine business structures will be the best fit for your company’s goals? For more advice on setting up a business in the Philippines, browse the site to view our business formation services and get in touch with us anytime.
