FilePino asks: Are family corporations the same as any ordinary corporation in the Philippines?

FilePino asks: Are family corporations the same as any ordinary corporation in the Philippines?

For those who have been operating businesses as single-proprietors for some time, the concept of incorporation is often looked at as a next step in expanding their ventures. This is mainly because switching a business’ legal structure from a sole proprietorship to a corporation comes with many benefits such as limited liability and risks for both its owners and its shareholders, as well as increased flexibility for financing and tax planning.

One particularly popular corporate entity in the Philippines is the so-called “Family Corporation.”

But first, what is a corporation? How does one set up a business in the Philippines? And what legal forms and requirements do you need when starting a business?

The nature of a corporation

A corporation, as defined by Philippine law, is an entity registered with the Securities and Exchange Commission (SEC) that has all of the legal rights and obligations of an actual person. This means that a corporation has the capacity to act independently similar to individuals and is thus required to pay taxes, allowed to enter into contracts and legal agreements, and even get bank financing.

Not only that, but a corporation also has the legal capacity to sue and be sued in its own right, and can even be held responsible for its own actions, similar to private individuals.

Because a corporation is a legal entity that is separate and distinct from its owners and shareholders however, the latter 2 cannot be held liable for any misdeeds a corporation might commit. This makes it particularly attractive to entrepreneurs who want more security.

Other benefits associated with corporations include the following:

  • Corporations can easily increase their capital by issuing stocks to investors.
  • Corporations can be passed on to different owners.
  • Corporations can exist indefinitely.
  • Corporations are managed by a board of directors, which means that decision making isn’t shouldered by a single individual.


Types of corporation

Corporations in the Philippines are usually categorized into 2 types: Stock Corporations and Non-Stock Corporations.

By definition, a Stock Corporation is one whose capital stock is divided into shares, and is allowed to distribute its profits to its shareholders.

While Stock Corporations in the Philippines are usually domestic in nature, they can sometimes be fully-owned by foreigners, provided, of course, that they are in industries that are not restricted in the 11th Philippines Negative Investment List.

This means that starting a business in the Philippines can be easy for foreigners.

A Non-Stock Corporation, on the other hand, is an entity that does not issue any shares of stock to its members. Non-Stock Corporationsare usually founded and organized for charitable, religious, educational, and cultural purposes.

As mentioned earlier, one type of corporation in the Philippines is the so-called “family corporation.”

While it may seem like a distinct category, legal and business experts say there isn’t much that sets “family corporations” apart from their conventional counterparts — whether domestic or foreign — aside from the fact that their shareholders are related to each other.

These types of firms function just like any other Stock Corporation or Non-Stock Corporation, and setting up a family corporation in the Philippines won’t be any different from their conventional counterparts.

Registering a business

Common documents, legal forms, and requirements needed when starting a business and registering a corporation include:

  • A name verification slip from the SEC
  • Filled out and notarized Articles of Incorporation (AI) and By-laws (BL)
  • Notarized Treasurer’s Affidavit
  • Barangay Clearance
  • Business Permit


Can you register an OPC?

A more recent development that entrepreneurs and owners of single-proprietorships may want to look into, however, are One-Person Corporations or OPCs.

Introduced to the Philippine corporate landscape in February of 2019, a One-Person Corporation is a business structure that basically allows a single person to form a corporation by himself. This means that once a company is registered as an OPC, the business owner also becomes its sole shareholder, acting director, and president.

This business structure is especially attractive to those who operate micro, small, and medium enterprises (MSMEs).

As OPCs operate in the same way as most corporations save for the lack of multiple shareholders and directors, it also enjoys the same benefits as conventional stock corporations.

Want to register a corporation in the Philippines? FilePino can help you.

FilePino offers a full array of services guaranteed to help business owners experience a smooth and seamless — not to mention quick and efficient — business registration process. FilePino can also help with other important business-related tasks.

Starting a business in the Philippines need not be time-consuming and stressful. Get in touch with us today at +63.917.892.2337 or contact us here to get started.