How to Register New Domestic Corporation in the Philippines

A Corporation is a legal entity that is separate and distinct from its owner or incorporators. It has legal rights and obligations similar to an individual. It can enter into contracts, loans, hire employees, pay taxes, etc. The ownership of a corporation is divided into shares of stock.

A Corporation issues the stock to individuals or other businesses, who then become owners or stockholders, of the corporation.

Advantages of a Corporation

• The risk and liability is limited only to the corporation. Owners are not personally liable.
• It is easy to increase capital through the issuance of stocks to investors
• It can be passed on to different owners
• It can exist indefinitely
• It has the capacity to act independently similar to individual
• The management or decision-making is shared by the board of directors, not the sole individual.

Disadvantages of a Corporation

• More costly to set up than a sole proprietor
• It is mandated by more government reportorial requirements and laws
• Higher capital requirements and operating cost
• Higher tax rates

Where to Register a Corporation?

Here are the government agencies where the corporation are required to register in the Philippines:

• Securities and Exchange Commission (SEC)
• Local Government Units (LGU) where your business is located:
  • Barangay
  • Mayor’s Office
• Bureau of Internal Revenue (BIR)
• If you have employees, you need to register with the following:
  • Social Security System (SSS)
  • Philippine Health Insurance Corporation(PHIC)
  • Home Development Mutual Fund(HDMF)
  • Department of Labor and Employment(DOLE)

Who may form a Corporation?

Any person, partnership, association, or corporation, singly or jointly with others but not more than fifteen (15) in number, may organize a corporation for any lawful purpose or purposes. Provided, that natural persons who are licensed to practice a profession, and partnerships or associations organized for the purpose of practicing a profession, shall not be allowed to organize as a corporation unless otherwise provided under special laws. Incorporators who are natural persons must be of legal age.

Each incorporator of a stock corporation must own or be a subscriber to at least one (1) share of the capital stock.

How much is the Capitalization?

Stock corporations shall not be required to have a minimum capital stock, except as otherwise specifically provided by special law. However, some highly regulated companies or corporations are required to have a minimum capitalization based on the industry or equity of that certain entity.

Some domestic corporations with more than 40% foreign equity are required to have at least U$200,000.00 minimum paid-up capital if the registering corporation intends to operate as a Domestic Market Enterprise

Basic Documentary Requirements

• Name Verification Slip (may be secured online or at SEC Name Verification Unit)
• Articles of Incorporation (AI) and By-laws (BL)
• Treasurer’s Affidavit
• Joint affidavit of two incorporators to change the corporate name (not required if already stated in AI)

Additional Requirements

• Endorsement/clearance from other government agencies, if applicable
• Clearance from other Department of the Commission*
• For Corporations with more than 40% foreign equity: Application Form for registration under the Foreign Investments Act of 1991 (R.A. 7042, as amended)
• Endorsement/clearance from (a) Philippine Economic Zone Authority (PEZA) for the applicant under R.A. 7916, (b) Subic Bay Metropolitan Authority (SBMA) or Clark Development Corporation (CDC) for the applicant under R.A. 7227 and (c) Cagayan Economic Zone Authority (CEZA) for the applicant under R.A. 7922

References:
Republic Act 11232 or Act of Providing for the Revised Corporation Code
Republic Act No. 7042, as amended, also known as the Foreign Investment Act of 1991 (FIA)