Recently the government of the Philippines has taken concrete steps to boost an already robust economy and reduce bureaucracy. These factors make doing business in the Philippines an attractive proposition for entrepreneurs and foreign investors. If you are planning to expand your business into the Philippines, there are a few basic things that you need to be aware of to ensure your activities are conducive to your success early on. This article outlines key steps to starting a business in the Philippines.
Why do business in the Philippines?
The Philippines has a rapidly growing service-oriented economy, which makes it a preferred location for many foreign business owners. Additionally, the government has taken steps to reduce red-tape, improve infrastructure, and increase investments in human capital, all while reviewing the tax system to make it easier to understand. All these make business in the Philippines even more attractive to foreign investment.
Types of business entity in the Philippines
When starting a business in the Philippines, you can choose any of the following corporate entities, depending upon your requirements:
- Sole Proprietorship: This means that you are the sole owner of the business and responsible for all profits and losses. In a sole proprietorship, there is no formal difference between personal and business interests.
- Partnership: In this structure, you share the responsibility with other people and personal and business interests are formally separate.
- Corporation: To establish a corporation, your business will need to have at least five shareholders with a minimum amount of capital. The liabilities of the shareholders are in proportion to the capital invested. A corporation must be registered with the Securities and Exchange Commission in the Philippines.
If you already have an established overseas business and are looking to expand into the Philippines market, there are other options. One particularly effective model is to have a local representative hired through a professional employer organization (PEO).
Starting a business in the Philippines
Starting a business in the Philippines begins with registration. The registration process incurs a certain charge to the business owner and it depends on the type of business that one is opening. Additionally, the documentation required for this step varies depending upon whether you are a Filipino or a foreign investor. The government regularly updates a webpage with requirements according to the founding person’s status. You will need to submit multiple copies of all the required documents.
The registration process
Registering a new company to do business in the Philippines can be a lengthy procedure, and will require some patience as business processes are not always as efficient as some places in the West. There are about 16 administrative steps to the process, some of which can be completed online, while others have to be done in person at an office. The above mentioned webpage details the complete procedure that needs to be carried out for each type of business entity.
To register the name of the business, you will need to submit three proposed names (in case the first one or two submitted are already in use) and this will cost up to 5000 PHP, depending on the business entity type. The naming certificate is valid for a period of five years.
To register a foreign-owned business, you will be required to submit the following documents:
- Authentic board resolution that authorizes the opening of a branch office in the Philippines
- Forms F103 or 104 (as relevant)
- Articles of incorporation of the business
- Relevant financial documents and records
- Inward minimum payment proof
Other legal obligations
If you plan to employ people for your business in the Philippines, then you will have to register with the Philippine Health Insurance Corporation for the employee’s health insurance. Under this scheme, employers have to pay a premium for a health insurance fund that is used in case of illness or injuries of the employees.
Moreover, you will also have to pay the required taxes for your business and withhold employee’s tax contributions as necessary.
Ready to do business in the Philippines?
The Philippines provides a host of benefits to foreign investors looking to expand their business in the country, as well as a growing economy that is likely to skyrocket as technological advancements make globalization easier in the coming years.
For more information about doing business in the Philippines, including incorporating a company in the Philippines or using a PEO to have employees recruited, hired, onboarded, payrolled, and managed rapidly, flexibly, and compliantly on your company’s behalf, contact our expert consultants.