Living in the Philippines: what form of ownership is best to start a business as a foreigner?
In the Philippines, there are 3 business ownership options: sole proprietorship, partnership, and corporation. What is best for a foreigner will depend on the size of the business, your state of residence, and whether you are married to a Filipino citizen.
1. Sole proprietorship – This is the preferable business structure for a small business if you are married to a Filipino citizen. You provide full authority on behalf of your spouse and he / she owns all assets. However, your spouse will also owe and will be personally liable for all liabilities or suffer all losses. It is easy to set up and simple to register with the government.
2. Association: it is a company owned by two or more partners. One with more than Pesos 3,000 of capital must register with the Securities and Exchange Commission. All partners have personal responsibility for business affairs. It is like two sole proprietorships united. There are certain benefits for two Filipino citizen partners, but there are no benefits for you as a foreigner.
3. Corporation – This is my preferred form of ownership if the business is going to be something larger than a small hobby type business. For a small business, it is better to be in a sole proprietorship.
For a business of any size (such as a real estate property business, a franchise, a major manufacturing or export business), this is definitely the preferred form of ownership, and you, as a foreigner, can retain up to 40% of ownership, and by having yourself as the only check sign in the bank account, you effectively control the corporation.
The minimum capital required is Pesos 5,000 and is regulated by the Securities and Exchange Commission. Shareholders
liability is simply limited to your amount of capital stock. There must be at least five (5) incorporators, each of which must have at least one share. So what you do, for example, is issue 56 shares for your spouse, 4 shares for your relatives, and 40 shares for you.
The minimum initial capital for a corporation is 25% of the subscribed shares, and a minimum of 25% of the authorized shares must be subscribed at the time of registration of the corporation.
