When setting up a business in the Philippines, it is vital to choose the right business structure as it will determine your company's extent of liability and flexibility in operations. Below are some of the common business structures to consider:
In the Philippines, a stock incorporation is a business entity with capital stock divided into shares. You may form a stock corporation with up to 15 incorporators, which can consist of individuals, partnerships, associations, or corporations. While there is no general minimum capital stock requirement, certain sectors may have regulations mandating capital thresholds.
For businesses that prefer a single-owner corporate structure, the One Person Corporation (OPC) provides an alternative. This structure allows a single stockholder, which can be a natural person, trust, or estate, to set up in the Philippines.
However, certain businesses such as banks, quasi-banks, and publicly listed companies are not permitted to incorporate as an OPC. Unless specified, an OPC is not subject to a minimum capital stock requirement.
In a partnership, the business is considered a separate legal entity from you and your partners. You can choose between two types of partnerships: a general partnership, where you and your partners are fully responsible for the business' debts and obligations, or a limited partnership.
In a limited partnership, one or more general partners have unlimited liability while limited partners are only liable for the amount they have invested. A partnership will require at least two partners to be formed.
A branch office offers the flexibility to conduct income-generating activities while operating under the umbrella of your parent company’s legal and organisational framework. This makes it a practical option if you are looking to expand into the Philippines without establishing a separate legal entity.
While this setup provides consistency and easier management, bear in mind your parent company is fully accountable for the branch’s actions. As such, you will need to assess the amount of risk you’re willing to take on before opting for a branch office in the Philippines.
Fully funded by your parent company, a representative office will allow you to carry out tasks like information sharing, communication with clients, and market research in the Philippines. It is important to note that a representative office cannot earn income locally.
Any liabilities or obligations that arise are the responsibility of your parent company as the representative office is not an independent entity but a direct extension of your business. This setup is ideal if you are simply looking to gain insight into the Philippines’ market or strengthen your brand presence without engaging in commercial transactions.
A regional headquarters (RHQ) is an entity type you may consider if your company is involved in international trade. Its primary function is to help in managing and coordinating the activities of your subsidiaries, branches, or affiliates overseas.
In other words, a RHQ in the Philippines is strictly for administrative purposes. It cannot engage in activities that generate or earn income within the country. The focus is on supporting your broader international operations, rather than conducting business locally.
Regional operating headquarters
A regional operating headquarters (ROHQ) differs from a RHQ in that it allows you to deliver certain services to your affiliates, subsidiaries, or branches, and earn income from those activities. This is a suitable business structure if you are providing qualifying services such as business planning, logistics, research, training, and technical support. However, bear in mind you are not allowed to extend these services to other entities outside of your affiliates, subsidiaries, or branches.
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