Partnership:
- Formed by at least 2 people who enter into a partnership agreement.
- Each partner can act for the company, and their actions bind the partnership.
- Partners are personally liable for the debts of the company.
Corporation:
- Requires at least 5 people and state authorization to become a legal entity.
- Managed by a board of directors or trustees.
- Stockholders are not personally liable for the company’s debts beyond their share subscriptions.
The Articles of Incorporation must contain:
- Name of the corporation
- Purpose(s) of the corporation
- Principal office (within the Philippines)
- Term of existence
- Names, nationalities, and residences of the incorporators
- Number of directors (5-15) and their details
- Authorized capital stock and details for stock corporations, or capital and contributions for non-stock corporations
- Name of the treasurer-in-trust
- Transfer clause
- Other necessary provisions
- Notarial page
General Partnership:
- All partners are personally liable for the debts of the partnership, even with their personal property.
Limited Partnership:
- Has both general and limited partners.
- Limited partners are only liable to the extent of their contributions.
- The partnership name must contain the words "Limited" or "Ltd."
A partnership at will has an indefinite term. Any partner can dissolve it at any time, without notice.
A general professional partnership is formed for the practice of a profession, such as law, accounting, engineering, or architecture.
Typically, corporations cannot enter into partnerships. However, if the Articles of Incorporation explicitly allow it, they may enter into a partnership.
Foreign corporations may also enter partnerships if permitted by their charter or statute.
The Articles of Incorporation must include:
- Name of the corporation
- Specific purpose(s) for incorporation
- Principal office location (within the Philippines)
- Term of existence
- Names, nationalities, and residences of incorporators
- Number of directors (5-15) and their details
- For stock corporations: Authorized capital stock, number of shares, and subscriber details (if shares are par value, include the par value). For non-stock corporations: Capital and contributor details
- Name of the treasurer-in-trust
- Transfer clause
- Other necessary provisions
- Notarial page
A corporation's by-laws should include:
- Procedures for calling and conducting meetings of directors and stockholders
- Quorum and voting rules
- Proxy forms and their voting procedures
- Qualifications, duties, and compensation for directors, officers, and employees
- Time and notice for annual elections of directors
- Election and appointment procedures for officers
- Penalties for by-law violations
- Procedures for issuing stock certificates (for stock corporations)
- Other provisions necessary for corporate affairs
Stock Corporation:
- Has authorized capital stock divided into shares.
- Engaged in income-generating activities and may declare dividends.
Non-Stock Corporation:
- Has no authorized capital stock.
- Organized for charitable, educational, or similar purposes.
Authorized Capital Stock:
- The total number of shares a corporation is allowed to issue (with or without par value).
Subscribed Capital Stock:
- The total number of shares issued or subscribed by stockholders.
Pre-incorporation subscription refers to the number of shares that must be subscribed to before incorporation. This information is included in the Articles of Incorporation.
Incorporators:
- Owners of the company and signatories in the Articles of Incorporation.
Board of Directors:
- Responsible for governing the corporation and typically elected for a 1-year term.
These are the requirements:
- Must be natural persons of legal age.
- Incorporators must subscribe to at least one share, and the majority should be residents of the Philippines.
- The total number of incorporators and board members should be 5-15.
Yes, provided all requirements are met and the business is not restricted to Filipino ownership as specified in the Articles of Incorporation.
The allowable percentage of foreign ownership depends on the nature of the business.
Up to 25% foreign ownership is allowed for:
- Private radio communications network
- Private recruitment, whether for local or overseas jobs
- Contracts for the construction and repair of locally funded public works
- Contracts for the construction of defense-related structures
Up to thirty percent 30% foreign ownership is allowed for advertising companies.
Up to 40% foreign ownership is allowed for:
- Exploration, development and utilization of natural resources
- Ownership of private lands
- Operation of public utilities
- Educational institutions other than those established by religious groups and mission boards
- Culture, production, milling, processing, trading (except retailing) of rice and corn; and acquiring, by barter, purchase or otherwise, rice and corn and the by-products thereof
- Contracts for the supply of materials, goods and commodities to government-owned or controlled corporation, company, agency or municipality
- Facility operator of an infrastructure or a development facility requiring a public utility franchise
- Operation of deep-sea commercial fishing vessel
- Adjustment companies
- Ownership of condominium units
- Manufacture, repair, storage, and/or distribution of products and/or ingredients requiring Philippine National Police (PNP) Clearance
- Manufacture, repair, storage and/or distribution of products requiring Deparment of National Defense (DND) clearance
- Manufacture and distribution of dangerous drugs
- Sauna and steam bathhouses, massage clinics, and other activities regulated by law because of risks posed to public health and morals
- Domestic market enterprises with paid-in equity capital of less than the equivalent of US$200,000
- Domestic market enterprises, which involve advanced technology or employ at least 50 direct employees with paid-in equity capital or less than the equivalent of US$100,000
More than 40% foreign ownership is allowed for:
- Export enterprises
- Domestic market enterprises with paid-in equity capital of at least the equivalent of US$200,000
- Domestic market enterprises, which involve advanced technology or employ at least 50 direct employees, with paid-in equity capital of at least the equivalent of US$100,000
Business activities that are fully reserved for Filipino citizens are:
- Mass media
- Practice of professions
- Retail trade enterprises with paid-up capital of less than US$2.5 million
- Private security agencies
- Small-scale mining
- Utilization of marine resources in archipelagic waters, territorial sea, and exclusive economic zones as well as small-scale utilization of natural resources in rivers, lakes, bays, and lagoons
- Ownership, operation, and management of cockpits
- Manufacture of firecrackers and other pyrotechnic devices
Yes, the SEC can reject a business name if it is identical or confusingly similar to an existing corporation or if it’s deceptive or contrary to laws.
Registration can take 2 to 4 weeks, depending on the completeness of the requirements and the SEC processor's assessment.
The fee consists of:
- Filing Fee: 1/5 of 1% of the authorized capital stock (or subscription price), but not less than ₱2,000.
- Legal Research Fee: 1% of the filing fee, but not less than P10.
- By-laws Fee: ₱1,010.
You can calculate the registration fee using the SEC’s online calculator.
No, applications are only processed at the main SEC office. Satellite offices only receive documents for amendments or compliance.
- Partnerships: Validity depends on what’s stated in the Articles of Partnership (can be indefinite in a "Partnership at Will").
- Corporations: SEC registration is valid for up to 50 years.