Which Business Structure is the Best for a Philippine BPO? (A Guide to Company Structures in the Philippines)

Which Business Structure is the Best for a Philippine BPO? (A Guide to Company Structures in the Philippines)

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:

Single/Sole Proprietorship
  • 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).

Stock Corporation
  • 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.

Branch Office.
  • 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.

Representative Office
  • 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.

Regional Headquarters (RHQ)/Regional Operating Headquarters (ROHQ)
  • 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.