It is ideal to establish a corporation in the Philippines as it offers many benefits that other types of companies do not have. One of the main benefits of a corporation is that it offers a limited liability thereby reducing the risks of its shareholders. However, in exchange for such benefits, the process to incorporate is slightly difficult as compared to registering a sole-proprietorship or a partnership business. In this guide, we will give you a simple outline of how you can register a corporation in the Philippines.
Intro to The Corporation Code of the Philippines
What is a Corporation?
Section 2 of The Corporation Code of the Philippines defines a corporation as an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence.
Classes of Corporations:
These are corporations which have capital stock divided into shares and are authorized to distribute to the holders of such shares the dividends and allotments of profits on the basis of the shares of the stockholders.
These are corporations which do not issue shares of stock. It can be formed as either a profit or non-profit corporation.
Corporators and Incorporators, Stockholders and Members
Corporators are those who comprise the corporation either as stockholders or members. Incorporators are those stockholders or members who formed the corporation and are mentioned in the Articles of Incorporation and are signatories thereof.
Corporators in a stock corporation are known as stockholders or shareholders while those for a non-stock corporation, are called members.
Articles of Incorporation
The Articles of Incorporation is a required document to be submitted to SEC to form a corporation in the Philippines. The Articles of Incorporation details the corporation’s name, the incorporators, the amount of capital paid in by each incorporator, their individual shares of stock, the primary and secondary purposes of the business and many more.
The by-laws of a corporation is a document to guide the internal management of the corporation. It outlines the manner of issuing stock certificates, time place and manner of calling and giving notice, and conducting regular or special meeting of the board of directors and the stockholders, the required quorom in the meetings and manner of voting, the form of proxies, and many more.
Prons and Cons of a Corporation
Pros of a Corporation:
- Owners protection from legal liability
- Ability to raise large amount of capital
- Ownership can be easily transferred to different owners
- Perpetual life
Cons of a Corporation:
- More expensive to establish as compared to sole-proprietorship
- Requires more legal paperworks and formalities to accomplish
- Double taxation
- Independent management
- Subject to more government requirements and laws
Steps on How to Register a Corporation in the Philippines
1. Reserve and register a business name in SEC (Securities and Exchange Commission)
- Visit the SEC website or make a personal appearance at their office in Mandaluyong.
2. Prepare and Register Incorporation Papers
- Submit to the SEC the completed, signed, and notarized documents as shown below:
List of Requirements & Documents needed for SEC
1. Cover Sheet
2. Articles of Incorporation
3. Corporate By-laws
4. Treasurer’s Affidavit stating the amount of the shares of stock subscribed and the amount of the subscription price which has been paid-in to him as Treasurer-in-Trust of the corporation. This affirms that at least twenty-five percent (25%) of the authorized capital stock has been subscribed, and at least twenty-five percent (25%) of the amount subscribed was paid-in to him for the benefit and to the credit of the corporation.
5. Joint affidavit of two incorporators to change the corporate name (not required if already stated in the Articles of Incorporation)
In the past, corporation applicants were also required to submit a bank certificate for the paid-up capital. This is however no longer required under Memorandum Circular No. 6 as the Treasurer’s Affidavit is already considered sufficient support for the applicant’s claim that the required capital stock has been paid.
The government agencies may require other clearances or endorsements depending on the industry in which the applicant corporation belongs. For example, banks would need clearances from the Bangko Sentral ng Plilipinas, schools from the Department of Education, hospitals from the Department of Health, and so on.
SEC Registration Tutorial – Step by Step
Recently, the SEC announces the availability of the online Company Registration System – http://crsquery.sec.gov.ph. This facility allows the registration and submission of documents online to register a corporation in the Philippines. This also allows the applicants to verify the status of their applications online. Here are the step by step guide on how you can access and register in the CRS website.
a. How to create an account
b. Verify the company name
c. Add company name
d. Add company details
3. Obtain a Barangay Clearance
- Go to the Barangay where your business is located and request for a clearance.
- You may be required to submit the following to obtain a Barangay Clearance: Certificate of Business Registration from SEC, Two (2) valid IDs and Proof of Address (Contract of Lease or Certificate of Land Title)
4. Obtain a Mayor’s Permit
- Visit the municipal office that covers the location of your office and request a business permit.
- You may be required to submit the same requirements to secure a Barangay Clearance along with the Barangay Clearance itself.
4. Register with the BIR (Bureau of Internal Revenue)
- Visit the Regional District Office that covers the location of your business.
- Request a copy of BIR Form 1903 — Application for Registration of Partnership or Corporation.
- Submit the following together with your completed Business Permits: Certificate of Business Registration from SEC, Two (2) Valid IDs, Proof of Address (Contract of Lease or Certificate of Land Title), Barangay Clearance, and the Business Permit from the Mayor’s office.
- Pay all applicable fees and register your book of accounts and receipts.
- Claim your Certificate of Registration.
While you may notice that there are lots of documents and procedures needed to register a corporation in the Philippines, currently, the registration has become easier than you have ever imagined.