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How to set up a business entity in the Philippines
To incorporate in the Philippines, start by choosing the right business structure and hiring knowledgeable liaisons.
The Philippines is a lucrative market, home to abundant natural resources and liberal incentives aimed at attracting foreign capital. These are among the reasons that it may be a smart move to do business in the country.
As it stands, creating a business in the Philippines can be tricky. But with the right knowledge and expert help, you can incorporate to legally in this Southeast Asian country.
What kind of entity makes sense?
There are four common entities for foreign investors who want to do business in the Philippines: corporation, joint venture, partnership enterprise, sole proprietorship and representative office.
A corporations is considered a personality separate and distinct from that of its stockholders. For a stock corporation, the shareholders’ liability is limited to the amount of their share in the capital. All other corporations are non-stock corporation.
Joint venture (JV)
In a joint venture, you partner with a Filipino citizen to start a business entity or contractual arrangement. This limited liability entity is a feasible investment vehicle for construction projects and some energy operations.
Experts warn that a joint venture is unwieldy because partners rarely hold the same business vision. Even still, many individuals choose to enter into joint ventures because they can’t start a corporation.
Unlike a corporation or a JV, you don’t create a legal entity by entering into a partnership. Instead, you simply create a contract between one or more partners to conduct business.
There are other major differences. For example, a partnership is an unlimited liability company, so you could be on the hook for full costs incurred through your business. Partnerships are also excluded from many industries in the Philippines.
You may operate a business as the sole beneficial owner of your business. Considered a “one man” form of business, it’s the most common entity for a small retail operation.
Creating a representative office is the easiest way to build a business entity in the Philippines. It’s also an inexpensive option. However, a representative office excludes you from performing many operations in the country. For example, you can’t sign contracts or even earn money. Essentially, a representative office gives you a presence in the Philippines, and not much more.
Should I hire a professional?
It’s an excellent idea to hire a liaison to navigate tricky incorporation waters. Work with someone from the Philippines who speaks fluent Tagalog or the dialect of your office’s location. They’ll interact with officials on your behalf, and they’ll tell you the appropriate places to register your business entity.
What kind of documentation will I need?
Here are a few documents you’ll need to register your business:
- Certificates of incorporation
- Bank reference letters
- Passport copies
- Resume and photo
- Description of the scope of your business
- Lease contracts of your office address
- Business license
You may need different documentation depending on where you’re registering and which officials you meet with. Strongly consider working with a company that helps foreign investors create businesses in the Philippines.
Laws & Legal Docs for International Money Transfers to Philippines
Where do I file my information?
You’ll submit documentation to your location’s Regional District Office of the Bureau of Internal Revenue. Your business may also need to be approved by other authorities.
Other factors to consider
- Naming your business. You’ll need to check with the Department of Trade and Industry to confirm that the business name you’d like to register is available.
- Obtaining a “barangay” clearance. This necessary document clears you to do business in your entity’s location.
International billing and payments
Your new business will require you to make and receive international payments, which means you’ll make transactions between currencies and across borders.
You can safely and affordably manage your business payments — with lower fees and stronger exchange rates — by comparing the services of a money transfer specialist.
Use a money transfer to manage your international business payments
It’s important to choose the right business entity to operate in the Philippines. Consider working with an organization that specializes in helping foreign businesses incorporate in the country — this will streamline your progress and help you avoid pitfalls along the way.
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