What is a Domestic Corporation?

A domestic corporation is a type of business entity organized and exists under the prohibitions of Philippine Law. It is a separate and artificial being created under the guidance of the Philippine Corporations Code and is a different juridical personality from stakeholders and associated corporations. 

The Philippines does not offer businesses the option to register as a Private Limited Company (PLC) or Limited Liability Company (LLC). Nevertheless, the domestic incorporation serves as its closest equivalent. 

This type of business structure separates personal and organizational assets and liabilities. This means that a domestic corporation is responsible for its debts. Shareholders are held accountable only to the extent of their shares in the business. 

 

Requirements for Registering a Domestic Corporation

• The complexity of registering a domestic corporation is influenced by the percentage of foreign influence within an operation. Likewise, minimum capital requirements are also determined by foreign presence. 
• For corporations that are 100% Filipino-owned, Exporting 60% of products or With at least 60% local ownership: the minimum capital requirement is $100 or Php 5,000. 
• For domestic corporation with 40.01% Foreign Equity: corporations in which foreign stakeholders are a majority are required to invest a capital of $200,000. 

Organizational Structure of a Domestic Corporation

There should be 2 to 15 directors or shareholders that own at least one share of the company. Likewise, the majority of these shareholders should be residents of the Philippines. However, they aren’t required to be citizens or naturalized citizens of the country.

• Shareholders: Shareholders are individuals that own at least one share of the company. They are responsible for managing the company. However, they may choose to relinquish decision-making to the board of directors.  Shareholders are essentially owners of a business. They gain profit when the value of the operation increases.

• Directors: Directors are people within the company making executive decisions. Shareholders vote and elect the board of directors. They usually hold the position for a year or until the shareholders decide to reshuffle. In domestic incorporation, directors must:

• • Be a natural person of legal age
  • Own at least one share of the company
  • Must not have been convicted of a criminal offense punishable by an imprisonment sentence of more than six years
  • Must not have violated the Corporations Code for a consecutive five years
  • If you need nominee directors for your company, take a look at our Nominee Director services.

• Corporate Officers: As the shareholders assign the board of directors, the board of directors vote and elect the corporate officers:

• • President: The president of a corporation serves as the signatory of the entire operation. He or she is appointed and reports to the board of directors. In the Philippines, corporation presidents must be a natural person of legal age, own at least one share, and be part of the board of directors.

• • Treasurer: The corporate treasurer is assigned to take care of a company’s financial requirements. This includes annual statements, financial reports, and any other documents that involve finances. The treasurer must be a resident of the Philippines.

• • Corporate Secretary : The corporate secretary is in charge of a company’s administrative responsibilities. He or she must be a Filipino Citizen. If you’re looking to fill in the role of corporate secretary, take a look at our Corporate Housekeeping services.

 

Domestic Corporation Registration Process

The process of registering as a domestic corporation depends on the type and the extent of foreign equity in the company. Nevertheless, for the most part, the process involves the following steps:

 

Name Registration

The first step in domestic corporation registration is registering the corporation name with the Securities and Exchange Commission or SEC. As with most business names, the corporation name must be unique to the company. Likewise, the name cannot be deemed inappropriate or obscene.  

LGU Registration

Once the business has been registered with the SEC, it is time to secure documentation with the companyLocal Government Unit or LGU the business is located in. Registration includes:

• Mayor’s Permit
• Barangay Clearance
• Business Permit from the Business Permit and Licensing Office

 

BIR Registration

With the LGU documents and SEC registration in tow, the next step is registering the corporation with the Bureau of Internal Revenue or BIR. This governing body will issue the company a corporate taxation registration. 

 

Employee Registration

The tediousness of the last step depends on the number of employees working for the corporation. Corporations are required to register each of their employees to the following government programs:

• Philippine Health Insurance Corporation (PhilHealth) health insurance
• Home Development Mutual Fund (HDMF or Pag-Ibig Fund) housing loan benefits
• Social insurance from the Social Security System (SSS)

 

The process of incorporating a business in the Philippines takes a lot of effort, paperwork and back and forth visits to government agencies.

Thankfully, you don’t have to deal with the complexities of domestic corporations on your own. Reach out to us today at Loft to learn more about our Business Registration services.