Foreigners Doing Business in the Philippines: Part Two

Aside from doing business as a licensed foreign corporate entity, foreigners may establish their businesses in the Philippines under different organizational structures as may suit their needs:

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Organised under Philippine Laws

Sole Proprietorship

Owned by an individual who exercises full control and direction over the business, owns all of its assets and exclusively enjoys profits, while personally answers for all of the business’ liabilities.

Partnership

Either a general professional partnership or a limited liability partnership, depending on the agreement between the partners as to contributions of assets and answering of the partnership’s liabilities. Treated as a separate juridical person from the partners themselves.
 
Stock and Non-Stock Corporation (may be established as a subsidiary of a foreign parent corporation)

Stock corporations own capital stock divided into shares of stock held by its shareholders. They are authorized to declare and distribute dividends when the corporation has unrestricted retained earnings. Different classes of shares may grant the shareholder different rights as to ownership and control of the corporation, or preference in distribution of dividends or liquidation of the corporation. 

Non-Stock corporations are organized for public welfare, such as for charity, education, culture, science, sports, civic service, religion, or other similar purposes. In lieu of shareholders and shares, they have members and membership dues, and are not authorized to distribute income as dividends to such members.

Organized under Foreign Laws

Branch Office

Foreign corporations may establish branch offices in the Philippines. The branch office carries out business activities of the head office and derives income within the Philippines. Profits made are remitted to the head office.
 
Representative Office

Contrary to a branch office, a representative office does not derive income within the Philippines. It is fully financed by the head office, and its sole purpose is to directly deal with the clients of the foreign corporation, such as customer service, information dissemination, setting up communication enters, and marketing company products.

Regional or Area Headquarters (RHQs)

An RHQ is limited to purely administrative functions, such as supervisory, communication, and coordination activities for the subsidiaries, affiliates, branches, and customers of the foreign corporation in the Asia Pacific Region. Since it does not directly manage the subsidiary/branch offices in the Philippines, it does not derive income therein.
 
Regional Operating Headquarters (ROHQs)

ROHQs have a wider scope of services, beyond acting as the administrative arm of the foreign corporation in the region. It may engage other businesses and corporations to source raw materials, conduct research and development, marketing control, and sales promotion.

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Each organisational structure has varying requirements before and after setting up, and differ based on income, startup costs/initial investments, ownership, and tax treatments under Philippine Law.

Respicio & Co. Law Firm can help you determine which structure best suits your needs, assist you in procuring all the necessary requirements, and process your registration in the Philippines.