Q: What are the various types of business structures in the Philippines?
A: The various types of business or organizational structures in the Philippines are sole proprietorship, partnership, corporation, branch office, representative office, regional headquarters and regional operating headquarters.
Q: How do these business structures differ from one another?
A: A. Business enterprises organized under Philippine Laws are:
- Sole proprietorshipis a business structure owned by an individual who has full control/authority of his own and owns all the assets, personally owes and answers all liabilities or suffers all losses and enjoys all the profits to the exclusion of others. Must apply for a Business name with the Department of Trade and Industry.
- Partnershipis treated as a artificial being having a separate legal personality from that of it’s members. It may either be general or limited. depending on the liability of partners. It consists of two or more partners. A partnership must register with the Securities Exchange Commission (SEC) with a minimum capitalization of three thousand pesos (Php3,000.00).
- Corporationis a juridical person established under the Corporation code and is regulated by the SEC with a personality separate and distinct form that of it’s stockholders. It consists of at least 5 to 15 incorporators each of whom must hold at least one share. It must be registered with the SEC. The minimum paid-up capital is five thousand pesos (Php5,000.00).
- Business enterprises organized under Foreign Laws are:
- Branch Officeis an extension of a foreign enterprise and has no separate and independent legal personality. It can carry out the business activities of its head office and may derive income from the Philippines. It is required to inwardly remit US$ 200,000.00 to the Philippines as its assigned capital.
- Representative Officeis one which deals directly with the clients of its parent company in the Philippines, but may not derive income from the Philippines. It undertakes activities such as information dissemination, communication center, promotion of the company’s products as well as quality control. It is required to have an initial remittance of at least US$ 30,000.00 working capital into the Philippines.
- Regional Headquarters/Regional Operating Headquarters (RHQs/ROHQs)
Any multinational company may establish an RHQ or ROHQ as long as they exist under laws other than the Philippines, with branches, affiliates and subsidiaries in the Asia Pacific Region and other foreign markets.
A regional headquarters is limited in its activities such as acting as supervisory, communication and coordinating centre for its subsidiaries, affiliates and branches in the Asia-Pacific region. It may not derive income and its operating costs must be covered by the foreign corporation. The required capital is US$50,000.00 annually to cover operating expenses.
A regional operating headquarters (ROHQ) is similar to a regional headquarters but is allowed to derive income from the Philippines, however numerous restrictions apply. The required capital is US$200,000.00 one time remittance.
Q: Where does one apply for registration of investments?
A: For Sole Proprietorship – submit an application together with the required documents at the Department of Trade and Industry (DTI).
For Corporation, Partnership, Branch and Representative Offices – submit an applications together with the required documents at the Securities and Exchange Commission (SEC).
Q: Can a foreign investor be allowed to own a 100% of a business entity?
A: Yes, one hundred percent (100%) foreign equity may be allowed in all areas of investments under the Foreign Investments Act (FIA) R. A. 7042 except those included in the Regular Foreign Investment Negative List (FINL).
Q: When can foreigners do business or invest in a domestic enterprise up to 100% of its capital?
A: 1. Full entry of foreign investors is feasible if the proposed activity is not among those listed in the FINL;
- When the paid-up capital for domestic market enterprise is at least US$200,000 which may be lowered to US$100,000 if the following conditions are met:
- a) intoduction of advanced technology
- b) employment of at least 50 direct employees.
Q: What is domestic market enterprise?
A: Domestic market enterprise shall mean an enterprise which produces goods for sale, or renders services to the domestic market entirely or if exporting a portion of its output fails to consistency export at least sixty percent (60%) thereof.
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