How to Start a Business in the Philippines
Estimated reading time: 14 minutes
Let me tell you, How to Start a Business in the Philippines, based on my own experience, what you need to do, enjoy the journey and I believe this post will help you achieve your goals.
With 7,641 islands in the Philippines, I won’t be surprised if you are excited to know, how to start a business in the Philippines in this wonderful archipelago. Doing business in the Philippines is a great idea because this island paradise offers you year-round sun, surf, and sand.
On top of that, this country is considered a Tiger of Asia. This means this country has one of the most robust economies, so starting a business in the Philippines is actually a smart move.
If you are planning to set-up your business in the Philippines, you are in the right place.
I have personally spent some time on this quaint island in South East Asia, and I can attest from experience that starting a business in the Philippines has great potential because the economic conditions of this country are on the rise.
This is the primary reason why numerous multinational companies and global financial institutions have established headquarters in this island. You’ll find Citigroup, Intel, Toyota, Hewlett-Packard, ING Bank, HSBC, and more.
The advantages to Start a Business in the Philippines
Starting a business in the Philippines means your office address will be in a strategic location.
You’re right smack in the center of Asia with cheap flights to Australia, North America, Europe, Middle East Asia, South America, and the rest of Asia.
The country also has a Special Economic Zone, which will give you only a 5% overall tax rate, and they have a tie-up with the ASEAN (Association of South East Asian Nations (opens in a new tab)), which opens vast trade opportunities for your company.
Those are astounding benefits, which offer you massive savings.
Doing business in the Philippines means you also have 100% ownership because the country is open and friendly.
Right now, most major cities in the Philippines have well-developed communication, transport, and business infrastructures, so you won’t have a difficult time setting up your office here. Most of all, you’ve got the power of the exchange rate working to your advantage.
Labor in this small Asian country is also inexpensive, so it makes a lot of sense to do business in the Philippines. You won’t regret transacting with the locals because Filipinos are highly skilled and industrious workers with a good attitude.
Moreover, the majority of the population understands and can converse in the English language. This is not at all surprising because the United States colonized them for almost 50 years back in the mid-1900s.
The types of business in the Philippines
If you are thinking about how to start a business in the Philippines, the first consideration that you have to figure out is the kind of business you want to engage in. There are several types of business entities that you can set up in the country.
Read below to figure out which is the best one the fits your company’s goals.
Register a Sole Proprietorship
A sole proprietorship in this country means you solely own the company. It is the most basic type of business you can set-up in here.
All it takes is one person to set-up and run this kind of business in the Philippines; thus, the founder of this kind of business is called a sole proprietor.
Sole proprietorship gives you the power, but it also means you are personally responsible for any liabilities your business incurs that.
Aligned with this, you, as the only head of the sole proprietorship, stand to gain the full benefits of any profits your company earns.
A sole proprietorship business in the Philippines means both your company and personal interests are considered as just one entity.
Should you incur any liabilities and your business goes bankrupt, they can take payments against your personal assets.
Setting up a sole proprietorship is akin to making an extension of yourself.
Set-Up a Partnership
Unlike the former, a partnership means there is more than one person running this business in the Philippines.
It requires two or more people who are in agreement to contribute to set-up the business. Of course, profits would be divided and shared between the parties concerned.
A partnership business in the Philippines is a separate legal entity.
You can choose a partnership with limited or unlimited liabilities.
If you opt to have a larger partnership in the country, you have to register this business entity with the SEC, also known as the Securities and Exchange Commission (opens in a new tab).
Build a Corporation
If you set up a corporation, you must have at least 5 shareholders who invest capital in your business in the Philippines.
A corporation acts as a single unit that intends to advance the interests of the whole corporation.
By setting up a corporation, they give you the same rights as individuals by the Philippine Government.
In essence, your corporation is akin to one person.
It is critical to note that the amount of liability for each shareholder is capped at the total amount they contributed to the capital.
Just like above, to be considered as a legitimate corporation doing business in the Philippines, you must register your company with the SEC (Securities and Exchange Commission) (opens in a new tab).
Establish a Branch Office
A branch or satellite office can be an extension of your foreign company. It will endeavor to carry the same activities that your mother company does abroad.
However, the main difference lies is that you’re carrying these activities out on foreign soil. Because of this, your satellite business in the Philippines will have to abide by all the rules and regulations of the country.
Put Up a Representative Office
A representative office means your business in the Philippines doesn’t have all the full rights to engage with trade in the country.
Your representative office can only promote your mother company.
You can engage in market research by studying customer demographics, habits, movement, and preferences.
You can also spread information about your products.
However, you are not permitted by law to engage in any form of buying and/or selling while you are in the country.
It is prudent to set-up this type of business in the Philippines if you’re still studying the country and testing the waters.
This way, you can check out what the country is like without having to pay any of the expensive business permits and other government paperwork.
The Crucial Information on How to Start a Business in the Philippines
It’s perpetually sunny weather may delude you into thinking this place is just for leisure.
I totally feel you on that one! I, for one, have enjoyed the many pristine beaches of the Philippines like Boracay, Panglao, and Siargao.
How to start a business in the Philippines as a foreigner may be the last thing on your mind while you’re sipping mimosas, under a beach umbrella with the sun giving you that golden tan and the wind gently caressing your face.
However, now is the time to look around you to see the benefits of engaging in business in this island paradise.
Starting a business in the Philippines has now become much easier and a lot simpler for foreigners over the past couple of years.
Now, the Philippine Government is even offering incentives for foreign businessmen.
If you start your business in the Philippines, the government supports you with a BOT or Build-Operate-Transfer investment scheme.
All the discounts and tax breaks they give you make it really tempting to set up shop and build your business in the Philippines.
Today, the Philippine Government has made the incorporation for all types of business simple for foreigners like you and I.
They have done this to encourage all entrepreneurs to invest in this developing country. Read on below to see the simple steps needed for you to start your own business in the Philippines.
Choose The Kind of Business Entity You Want to Set-up
The very first step to setting up your business in the Philippines is to choose the structure of your company.
If you have forgotten what they are, a quick love in the first segment of this article will refresh your memory.
Your choice will be based on a number of parameters. It depends on the size of your company, your resources, and your goals as a business.
Typically, foreigners set-up a sole-proprietorship, a partnership, or a corporation.
Register Your Business or Company Name
The second step to beginning your business in the Philippines is to think of a unique name and to register your proposed name with several government offices.
This depends on your type of chosen business. Look at the offices below.
Business Types in Sri Lanka
- Sole proprietorship – Register with the DTI or the Department of Trade and Industry
- Partnership/ Corporation – Sign up with the SEC or the Securities and Exchange Commission
- Cooperative – Arrange your documents with the Cooperative Development Authority
You will pay a fee for registering your business in the Philippines. The fee varies between 40 Philippine pesos (Php) to 120 pesos. Now, the similarity between the different types of business entities end here. There are different steps to set-up a sole proprietor business versus a partnership or a corporation.
I shall elaborate on each one for you below. They all have varying fees and different documentary requirements.
The Steps and Certificates Needed for sole proprietor business registration in
Wait for the DTI Certificate
After searching the DTI ( Department of Trade and Industry Philippines) (opens in a new tab) website to ensure that your business name does not match with anyone else, then you can proceed with your application you register your company name with the DTI.
You must wait for the DTI certificate of registration before you engage in any form of business in the Philippines.
Sign-up with the Barangay
The next step is to register with the Barangay, also known in English as the municipality. Go to the Barangay to fill-up an application.
You will be asked to submit your DTI certificate, two valid government IDs, and proof of your residence. After filing, you can claim your Barangay Certificate of Business Registration.
In here, you can also get your Barangay Clearance and Community Tax Certificate (CTC) (opens in a new tab).
You will need to submit both your DTI and Barangay Certificates along with your application. Once again, you need two valid IDs and your proof of residency.
After you have secured the aforementioned certificates and permits, you need to visit the regional district office of the BIR that is nearest to your business address.
You must file BIR Form 1901, which is your application to the BIR for your sole proprietorship business.
Then you must submit all the documents you have gathered along the way:
- DTI Certificate
- Barangay Certificate
- Mayor’s Business Permit
- Valid ID and proof of residency
You will have to pay a fee, along with BIR Form 0605 (opens in a new tab). Then you will register your book of accounts and your receipts. After the completion of these steps, you can claim your BIR Form 2303, which is known as your BIR registration certificate.
Take note that there are certain categories of business that may require additional requirements.
How to Start a Business in the Philippines, 10 Steps, Procedures and Documentation Requirements for a Partnership/Corporation
Sign Up with the SEC
You have to sign up for your partnership or corporation with the SEC. This is the Securities and Exchange Commission, which is a national government regulatory agency that oversees all registered types of business in the Philippines.
To get approval,you must submit several documents:
- An approved business name
- Your company’s article of incorporation
- Treasurer’s affidavit
- Your company’s statement of assets and liabilities
- Company details such as information on directors, officers, and stockholders
Make Sure All Documents are Notarized
According to Section 14 and 15 of the Corporation Code, all your documents, including the Treasurer’s Affidavit, must be all notarized by a Philippine Notary Public, so you can do business in the Philippines. This would only take you around Php500 and one day to complete.
Settle the Minimum Deposit
Those who are bent on establishing and registering their business in the Philippines must deposit a minimum amount of their intended capital into a Philippine bank account.
The corporation code of the country sets the minimum amount at Php5,000.
That being said, your chosen bank will ask you for more paperwork, such as identification documents and your articles of incorporation.
Secure a Barangay Clearance
Similar to a sole proprietorship business, you need to visit the Barangay Hall (opens in a new tab), where your business is located to secure the clearance that will grant you the privilege to do business in the Philippines.
The only difference is you must submit:
- SEC Certificate of Incorporation
- approved AoA (articles of association)
- lease contract
- business plan
- the application form
The clearance also becomes more expensive, depending on the size of your organization.
It ranges from Php300 to Php1,000, which you must pay if you want to operate your business in the Philippines.
Pay for the Business Annual Community Tax
You must head off to the City Hall, specifically the CTO or City Treasurer’s Office to pay the necessary fees to do business in the Philippines.
These are the annual basic and additional community tax. The basic tax depends on your business activity, which must not be higher than five hundred pesos.
However, the additional tax is variable as it is subject to the assessed value of your real property, together with your earnings and dividends.
Get the Business Permit
If you are a partnership or corporation, you need a business permit from the BPLO or Business Permits and Licensing Office (opens in a new tab).
Depending on your business, you may need to secure other clearances or certificates:
- Location clearance
- Mechanical permit
- Certificate of electrical inspection
- Fire safety
- Inspection certificate, and/or sanitary permit
To illustrate, a gas station needs a clearance from the Department of Energy and a Fire Safety and Inspection Certificate. On the other hand, the restaurant business in the Philippines needs a sanitary permit.
Obtain Your TIN or Tax Identification Number
Before you can begin trading, you must first obtain a TIN for your business in the Philippines.
In order to do that, you must complete the following steps:
Present the company name verification slipShow your notarized articles of incorporation along with your corporation by-lawsSubmit the notarized treasurer’s affidavitGive your statement of assets and liabilitiesHand-in your complete data sheet with details on directors, officers, stockholders, etc.Notarized written document that shows your compliance with SEC reporting requirementsNotarized document showing your change of name into a corporation
After completing the above steps, SEC will now automate your TIN. This entire step takes about 2 to 3 days to finish.
Complete Registration with the BIR
You must then register to the nearest BIR (tax office) near your address, so you can operate your business in the Philippines.
This is a critical component as it will help you determine which taxes apply to your company. You must pay the annual registration fee to avail of your official sales invoices, receipts, and a book of accounts.
Register the Business with the SSS
As a partnership or corporation, you must register your business in the Philippines to the Social Security System (opens in a new tab).
You will need the following documents in order to get the ball rolling:
Form 1 or the Employer Registration Form R-1A or the Employment report list of your employees that specifies their birthdays, positions, salaries, and tenureArticles of incorporation, by-lawsSEC registration
Secure Other Government Requirements
To keep your business in the Philippines up and running, you have to secure clearances from other government offices. All of them have their own requirements, which you must comply with.
These offices are:
- The DOLE or the Department of Labor – They will secure your company’s occupational safety, and health standards are up to par
- PhilHealth – This is the Philippine Government’s insurance program to avail of healthcare benefits
- The Pag-Ibig Fund – This is a mandatory deduction for housing for all employees, which is also covered in part by the SSS (Social Security System) (opens in a new tab)
How to Start a Business in the Philippines? Synopsis
If you’re asking yourself how to start a business in the Philippines, my one final and all-important tip is to just go for it.
As you can see, setting up your business in the Philippines comes with many advantages. The Filipino people are all very friendly.
Aside from that, the Philippine Government has taken great pains to ensure foreigners feel welcome. You will not encounter many headaches establishing your business in the Philippines.
Since labor is very cheap, you can hire someone to secure all the vital papers, permits, and clearances for you, and you can even have them file on your behalf.
In fact, it is best to hire a local to get your requirements done because they are familiar with the processes of government offices.
Expanding your business in the country means going through the usual process of incorporation, taxation, accounting, and financial management.
In fact, you can do this all yourself if you have the time. Just check out the official Philippine Government website on trade to ensure you are on the right track.