Here’s what you need to know!
Are you one of the lucky ones who thrived as an entrepreneur during the pandemic?
Are you ready to launch a business idea you have been safekeeping all along?
Whether you are taking your venture to the next level or you are just getting started understanding how to get your business recognized as legit comes handy, let us walk you through it.
What are the kinds of business registrations in the Philippines?
In the Philippines, you may register your business as a sole proprietorship, partnership or corporation. Start-ups and ventures mainly owned by one person usually register as a sole proprietorship. Partnerships also has to kinds – regular partnerships or general professional partnerships. If you are a licensed professional such as lawyer, public accountant, engineer and the likes- a general professional partnership could work for you. Let’s say you are running a retail business with a partner (there are two owners), this will fall under general partnerships, but if you are two dentists who would like to operate a clinic together, you would have to register as a general professional partnership.
For other businesses where owners prefer to protect individual assets, work with more investors, issue shares and stocks of ownerships or if calling the business a corporation just appeals more, this is the right page and discussion.
Let’s get you started in the world of corporations!
We’ll give you an overview of getting a corporation registered legally – where to process registration, requirements and timelines. First you need to meet the SEC.
Who is the SEC?
The government regulatory agency that registers and supervises the corporate sector or “corporations” is called the Securities Exchange Commission or SEC. This is your first friend in the government if you want to be legit.
What is the process for registration?
Step 1: Verification of corporate name with SEC via the SEC Company Registration System.
Step 2: Drafting and execution of the Articles of Incorporation with the assistance of a competent legal counsel.
Step 3: Deposit of cash received for subscribed shares of stocks in a banking institution in the name of the temporary treasurer-in-trust-for account. For some types of companies, you need the certificate confirming the successful opening of a TITF account, other types will not require this anymore.
Step 4: Filling of the Articles of Incorporation with the SEC together with the following:
- Personal information sheet of the incorporators which is autogenerated after completing the SEC Company Registration System
- Company By-Laws
Step 5: Payment of filing and publication fees. A payment form is generated after completing the SEC Company Registration System; the payment may be settled through the online payment portal that has been created to add convenience for new registrations.
“Sounds complicated, do I need to do all these by myself?”
Sure, you may! Looking at the steps, you may assume that anyone who knows how to comply with instructions could process this. BUT! Having an expert, like a lawyer with the right expertise and rigorous experience could be a lifesaver! Someone with experience can quickly prepare the requirements, foresee possible challenges, and address them even before going to the SEC. An experienced lawyer can save you from unnecessary (and possibly expenses!) going back-and-forth with the SEC. Count the time and resources you can save. Hiring experts would actually save you time and money, as you skip the trial-and-error of a D-I-Y registration and ensure a more efficient experience overall.
Generally, what are the kinds of corporations? There are two: Domestic and Foreign.
A domestic corporation is a corporation that is registered and existing under Philippine laws. A common misconception is that it cannot be domestic if owners are foreign. But this is not the case, because a domestic corporation can be Filipino-owned or foreign-owned. If more than 40% of the shareholders of the corporation are foreigners- then it is a foreign-owned corporation. So yes, you may have foreigners as owners of domestic corporations, which means you are also free to get shareholders from outside the country. In addition, the foreign owners do not need to be living in the Philippines to own and contribute to the corporation, but all documents need to be originally signed so if you have foreign owners, expect to be going through a lot of overseas mailing and coordination with the consular offices where the foreign owners are from.
If you are registering as a domestic corporation, the next step is to identify the class of the corporation, which will determine the specific requirements that need to be prepared. Here is a list of domestic corporation classes:
- One Person Corporation
A One Person Corporation (OPC) is a corporation composed of a single stockholder who may be a natural person, whether a Filipino or a foreigner, a trust or an estate.
- Stock Corporation
Stock corporations, with two or more shareholders, are the most common corporate vehicle for persons establishing their businesses for profit. A stock corporation’s capital is divided into shares of stock representing proportional ownership of the corporation. Stock corporations may offer these shares of stock to the public and may distribute the surplus profits of the corporation to its shareholders.
- Nonstock Corporation
Nonstock corporations are created primarily for public good and welfare such as for charitable, religious, educational and social civic purposes. It does not issue shares of stock to its members and cannot distribute any profits to its members.
The second kind, foreign corporation, is a corporation formed, organized or existing under laws other than those of the Philippines. Imagine a business that started in another country and ventures into the Philippines as part of its expansion. When that company enters the Philippines, they are considered foreign corporations.
A foreign corporation may structure its organization by: incorporating a domestic corporation, registering a Branch Office, registering a Representative Office, registering a Regional/Area Headquarters, or registering a Regional Operating Headquarters. The path to your registration will depend on the route you’ll take as a foreign corporation.
How long is the business registration process?
A realistic timeline for the process of incorporation is two weeks to one month. We need to get all documents ready and submitted to the SEC, then our two weeks to one month countdown starts. If you have signatories who are outside the Philippines, additional time should be alloted. Documents would have to be sent to them for their original signature, then the Philippine consular office has to authenticate the documents before getting them back to the Philippines for submission with the SEC.
Once you have registered with the SEC, what’s next?
What’s next is the other government agencies! Baranggay and city level permits have to be processed. Depending on which city you’ll register, the documents and timeline may vary. Once these permits are done, we can proceed with the process with the Bureau of Internal Revenue (BIR). It will be a different ballgame once we’re in this step, and would call for a separate discussion.
“These all sound complicated!” If you’re fresh from your pandemic business’ success and this step overwhelms you, we understand. If you started with the mindset, “start small” and the thought of consulting or hiring a lawyer intimidates you, remember- there is no harm in just asking. More often than not, lawyers are more than happy to provide free initial consultation to assess your needs before you commit to anything, we highly suggest you drop us a message so you can get a picture of how we can help you. You’d even be surprised that fees are actually not as scary or heavy as you think.
The next steps to continue growing your business can be a much easier and peaceful process by letting experts take care of the “complicated” parts, this way, you can focus on utilizing your resources to build your business and grow your sales and revenues.