M1 PRIMARY BUSINESS STRUCTURES

Sole Proprietorship (60%)

Represents approximately 60% of Philippine business registrations (as of 2022) due to its overall simplicity and suitability for small-scale operations.

Partnership (15%)

Accounts for around 15% of registered businesses (as of 2023), proving particularly popular among consulting firms and professional services.

Corporation (25%)

Accounts for approximately 25% of registered businesses, with strong representation in real estate, manufacturing, and IT-BPO industries.

Branch Office ($200,000 USD)

An extension of a foreign entity capable of conducting revenue-generating operations in the Philippines. Requires a minimum paid-up capital of USD 200,000.

Representative Office ($30,000 USD)

A non-revenue-generating entity that conducts promotional activities and market research on behalf of a parent company. Requires a lower capital investment of USD 30,000.

Cooperative

An association of individuals pooling resources to meet shared economic goals. Governed by the Philippine Cooperative Code; commonly found in agriculture and microfinance.

SOLE PROPRIETORSHIP

is an unincorporated business with one owner. There is no legal separation between the company and the owner, who receives all profits but is liable for all debts and losses.

Sole proprietorship

is the easiest type to establish and a popular choice for small businesses, individual contractors, and consultants.

Sole proprietorship

An unincorporated business that has just one owner who pays personal income tax on profits earned from the business.

Sole Proprietorship

has become the go-to choice for new entrepreneurs, freelancers, and self-employed professionals.

Sole Proprietorship

Registering a ________ is straightforward and only involves minimal fees compared to other structures.

(Sole Proprietorship) five

To remain compliant, owners must only pay their taxes as scheduled and renew permits when they expire, such as DTI registration every ____ years.

Sole proprietors

_______fully own the business, allowing owners to drive business operations in their desired direction. Moreover, the owner retains ownership of all the business's assets and profits.

(Sole Proprietorship) 8%

Owners only need to pay taxes on their income, which can either be at ___ income tax or a graduated tax rate.

Sole proprietors

are fully liable for the business’s debts and losses, which means institutions CAN SEIZE their personal belongings and assets when the company incurs a loss or defaults on a loan.

Sole proprietorships

CANT issue company shares, making it difficult to attract investors. As a result, sole proprietors opt to bootstrap their businesses or seek capital from banks.

Sole proprietor

When the _______dies, their heirs inherit the assets and liabilities. However, all business registrations and permits expire. If the heirs want to continue the same business, they must register it again as their own.

DTI business registration Step 1

Log in to the BNRS website

DTI business registration Step 2

Navigate Business Name Services and click on New Registration

DTI business registration Step 3

Fill in the details required

DTI business registration Step 4

You’ll be presented an Undertaking, which offers responsibilities as a business owner

DTI business registration Step 5

Pay your DTI registration fee using the available payment methods

DTI business registration Step 6

Check your email for your Certificate of Business Name Registration

Barangay

PhP 200

City/Municipality

PhP 500

Regional

PhP 1,000

National

PhP 2,000

Documentary Stamp Tax (DST)

PhP 30

Late Renewal Grace Period (91-180 days matapos ang expiration date)

Plus 50% ng prevailing Territorial Scope

Business Name Certification

PhP 50 + DST

PARTNERSHIP

According to the Civil Code of the Philippines, a partnership involves two or more persons who agree to provide money, property, or industry to a common fund and divide the resulting profit among themselves.

Partnership

A formal arrangement by two or more parties to manage and operate a business and share its profits.

Partnership

Constitutes an agreement between two or more individuals (or corporations) to collectively contribute monetary, material, or labor assets into a shared pool, distributing the resultant profits among the partners. This business entity operates as a distinct legal entity separate from its members.

Partnership

The ________ becomes a separate legal entity from the partners once the contract is enforceable. However, the general rule is that _______ have UNLIMITED liability. In other words, the partners’ personal assets can be used to ensure the business fulfills its obligations.

Partnership

At least two people enter into agreement to form the _______.

Partnership

They contribute resources to the business, whether it’s financial support, equipment, property skills and expertise, and so on.

Partnership

They divide the profit among themselves; however, they see fit.

3,000

Valid registration with the Securities and Exchange Commission (SEC) with a capital of at least Php ______.

Partnership

Most notably, unlike a corporation, a ___________ between two or more people may be formed to exercise a profession. This offers an ideal set-up for the likes of lawyers, doctors, accountants, and architects.

General Partnership

Each partner shares an EQUAL responsibility in the management of the business. Everyone can make decisions that they deem to be beneficial to the business. And depending on the exact number of partners, you can generate a higher startup capital.

General Partnership

Similarly, everyone is also responsible in any event that the business fails. So, a _________ that goes underwater may draw from the personal assets of all partners to cover business debts/duties.

Limited Partnership

A __________ have varying responsibilities and liabilities. Some have unlimited liability, while some are only held responsible up to the extent of their financial contributions.

Limited Partnership

These limited partners are often referred to as silent partners/investors because they’re not involved in directly managing the business.

Limited Partnership

___________can still pool in significant starting capital for the business.

Partnership

__________ are easy to form. The requirements are largely the same as for a sole proprietorship; the only difference is the creation of the Articles of Partnership.

TRUE

Compared to a corporation, there are fewer requirements to form and maintain a partnership business.

Partnership

There is the flexibility of operation. As there are only a few owners in a _________business, certain concerns that need to be addressed can easily be solved by the partners. Agreements and resolutions as to business matters are immediately decided by the partners.

Partnership

Operations are efficient. Simply put, “Two heads are better than one.” There can be better managed because of the pooling of resources. With the presence of the ______, more ideas will also be applied in the operation of the business.

Partners

_____ are expected to have great interest in the operation of the partnership. Partners

Partnership

The possibility of bigger resources. Financial institutions may extend bigger loans to ____________ considering the combined resources of the partners. Thus, more capital can be used in production.

Partners

______have unlimited liability for partnership debts. ______face unlimited liability for partnership debts.

Partners

______may not only put their combined money and property at risk but also their individual assets as well.

Partnership

It has a limited life, or it lacks stability.

Partnership

_______ is unstable. Being a contract between the partners, it is dissolved based on their agreement, or upon the withdrawal, incapacity, or death of a partner, or for other causes which terminate a contract.

Partnership

Limited ability to raise capital. The capital is based on how much can be contributed by each partner upon registration at the Securities and Exchange Commission.

DTI SEC BIR BUSINESS PERMIT

In registering a partnership, there are four government agencies you need to visit.

Articles of Partnership

The first step of the process is to begin writing the _________ with the assistance of a lawyer. This is the basic requirement for the whole process of registering your partnership business.

CORPORATION

A legal entity that is separate and distinct from its owners.

Corporation

A _________ (in the Philippines) is a legal entity that operates independently of its owners. It is entitled to enter contracts, hire employees and pay taxes.

Corporation

Ownership of a ________ is divided into stock shares, which are issued to individuals or entities to become shareholders of the corporation.

Corporation

_________ are the closest equivalent under Philippine law of private limited companies (PLCs) or limited liability companies (LLCs), which are common in other jurisdictions. They are governed by the Revised Corporation Code of the Philippines, ensuring robust protections and operational flexibility.

Domestic Corporation

100% Filipino-owned corporations

100% Filipino-owned corporations

Fully owned by Filipino nationals, these entities are often preferred for businesses targeting local markets or sectors which prohibit foreign ownership.

Partially owned corporations

Foreign ownership can range from 25.01% to 99.99%. The extent of permissible foreign equity depends on the activity and compliance with the Foreign Investment Negative List (FINL).

Foreign-Owned Corporations

Applicable for industries open to full foreign ownership, such as export-oriented businesses or sectors requiring significant foreign expertise.

Resident Foreign Corporations (RFCs)

Have a physical presence in the Philippines, such as branches or regional offices.

Non-resident Foreign Corporations (NRFCs)

Earn income in the Philippines without a physical presence, such as through investments or leasing assets.

ONE PERSON CORPORATION

Introduced by the Revised Corporation Code of 2019 Allows a single individual to form a corporation without the need for partners or co-owners. The sole incorporator can be a natural person, a trust, or an estate.

Key features of an OPC

No minimum capital requirement (except in certain regulated industries)

Key features of an OPC

The single stockholder acts as both the sole director and president

Key features of an OPC

Must designate a nominee and alternate nominee in case of incapacity or death

ONE PERSON CORPORATION

An ________is ideal for freelancers, consultants, or small business owners seeking the benefits of incorporation, such as limited liability, without requiring partners.

ONE PERSON CORPORATION

However, professionals in regulated fields, such as accountancy or law, cannot form an ________ for their professional practice due to specific regulations.

One Person Corporation Formation

File articles of incorporation with the Securities and Exchange Commission

One Person Corporation Formation

Open to any individual, trust, or estate.

One Person Corporation Formation

The incorporator MUST be an individual of legal age.

One Person Corporation Formation

Serve as the OPC’s single stockholder, director, and president

One Person Corporation Formation

Appoint a treasurer, corporate secretary, and other officers

One Person Corporation Formation

Designate a nominee and alternate in case of death or incapacity

ONE PERSON CORPORATION

The owner has full control and authority over the business.

ONE PERSON CORPORATION

Lawsuits can claim what is invested in the firm, but not what is not the owner’s assets.

Foreign-Owned Domestic Corporation

This domestic corporation is formed in the Philippines with more than 40% foreign equity. Foreign ownership is allowed in many industries, but some sectors are subject to limits or prohibitions under Philippine law & constitution.

Foreign-Owned Domestic Corporation

____________ must meet a minimum paid-up capital requirement of US$200,000, which may be lowered to US$100,000 in certain circumstances (e.g., if the business involves advanced technology or directly employs at least 50 employees).

Foreign-Owned Domestic Corporation

This structure is best for foreign investors planning to establish long-term operations in the Philippines.

Republic Act No. 11659

Amended Public Service Act

Corporations

_____ are subject to stringent reporting and documentation requirements.

TRUE

Incorporation involves higher setup fees, ongoing maintenance fees and operational expenses.

TRUE

Corporate income may be taxed at the entity level, and dividends taxed when distributed to shareholders.

BOARD (corporation)

Decisions must be approved by the _____, potentially slowing down processes.

two to 15

A corporation must have______ incorporators, with the majority being Philippine residents.

General Incorporation Requirements

Appoint a president, treasurer (must be residing in the Philippines as of the date of the appointment), corporate secretary (must be a Filipino citizen and residing in the Philippines as of the date of appointment) and compliance officer, if the company is vested with public interest.

100% Filipino-owned (Capital Requirements)

Minimum capital of PHP 5,000 (approximately USD 100)

Partially foreign owned with less than 40% foreign equity (Capital Requirements)

Minimum capital of PHP 5,000 (approximately USD 100)

Partially foreign owned with more than 40.01% foreign equity (Capital Requirements)

Minimum capital of USD 200,000 or USD 100,000 if employing 50 Filipino citizens or using advanced technology

Export-oriented businesses (Capital Requirements)

Minimum capital of PHP 5,000 if at least 70% of production is exported

STOCK CORPORATIONS

A corporation which has capital stock divided into shares and is authorized to distribute to the holders of such shares, dividends, or allotments of the surplus profits based on the shares held.

Stock Corporations

Has the power to declare dividends. Its board of directors may declare dividends out of the unrestricted retained earnings which shall be payable in cash, property, or in stock to all stockholders based on outstanding stock held by them.

NON-STOCK CORPORATIONS

Is one where no part of its income is distributable as dividends to its members, trustees, or officers.

Non-stock Corporations

__________may be formed or organized for charitable, religious, educational, professional, cultural, fraternal, literary, scientific, social, civic, service, or similar purposes, like trade, industry, agricultural and like chambers, or any combination thereof, subject to the special provisions of this Title governing classes of nonstock corporations.

Stock Corporation

Share issued – dividends distributed