When starting a business in the Philippines, whether for single proprietorship or business partnerships like corporations, there is work that needs to be done. Setting up the business with the required government agencies is on top of the list. In this post, we’ll give you the basics of incorporating a stock organization and assigning shares.
The Basics of Incorporation
A stock corporation is an entity that is created for profit. The ownership is based on stocks and owners of stocks are called shareholders or stockholders. Proof of ownership comes in the form of stocks certificates. Stockholders may or may not be actively participating in business operations; it is the incorporators who take care of the management of the business. The Incorporators are the original shareholders of the corporation. After the incorporation, stockholders whether individuals or a business entity, may be added.
There must be at least five (5) but not more than fifteen (15) incorporators when registering a business. Majority of the incorporators, who are all of legal age, must be legal residents of the Philippines. All incorporators are required to subscribe at least one (1) share of stock. Upon registration, 25% of the authorized capital stock must be already subscribed and at least Php5,000.00 must be paid-up. Given the requirements on subscription and paid up capital, incorporators must subscribe to at least 25% of the authorized capital stock but paid-up capital must not be below Php5,000.00.
Process of Incorporation
1. Verify and Reserve the Company Name with the Securities and Exchange Commission (SEC)
The verification of the availability business name can be done online but the reservation fee must be paid directly to the SEC along EDSA near Ortigas Avenue. Pay Php40.00 to reserve the name for the first 30 days. It can be extended up to 90 days, just pay Php120 every time extension is requested. Here’s a comprehensive guide on registering with SEC.
2. Prepare the Articles of Incorporation, By-Laws, and Treasurer’s Affidavit. Have the Articles of Incorporation and Treasurer’s Affidavit Notarized
If you must, consult a lawyer about these documents. Make the incorporators sign on all pages and have a notary public sign the Articles and the Treasurer’s Affidavit.
3. Deposit the Minimum Paid-Up Capital at the Bank
The SEC would not check if the minimum paid up capital of Php5,000.00 is deposited in the bank or not but the law requires it. It is better to have the paid-up capital deposited.
4. Register with the SEC and receive a pre-assigned Tax Identification Number
Registration may be done online but payment must be made directly to the SEC.
5. Get Barangay Clearance
Pay from Php300.00 to Php1,000.00 to get this clearance from the Barangay covering your place of office. This is needed when applying for the business permit from the city hall. Here’s a guide on applying for a barangay clearance.
6. Pay Annual Community Tax and Get Community Tax Certificate (CTC) from Your City or Municipal Treasurer
The community tax depends on the form of business, whether a corporation, single proprietorship, or an association.
7. Obtain Business Permit to Operate from Your City’s Business Permits and Licensing Office
8. Buy Books of Accounts to Be Used in the Business
Blank books of accounts are available in local office stores or bookstores. Here’s an article on the 3 BIR-Approved Format for books of account that you can use.
9. Go to Bureau of Internal Revenue (BIR), Specifically the Revenue District Office (RDO) Where the Head Office of the Organization Is Located to Apply for Certificate of Registration and Register the Pre-Assigned TIN from the SEC
For tax concerns, registration with the BIR is necessary.
10. Pay Registration Fee and Documentary Stamps at an Authorized Agent Bank (AAB) Within the RDO
Payments are not accepted in the RDOs. Taxpayers are to pay fees and taxes through authorized banks.
11. Get Authority to Print Receipts and Invoices from the BIR
Printers will not print official receipts and invoices if there is no authority to print documents from the BIR.
12. Have Receipts and Invoices Printed
Find your local printer authorized by the BIR to print. Sometimes, it is the RDO that assigns the printers to certain taxpayers.
13. Bring Books of Accounts and Printer’s Certificate of Delivery to BIR and Have Them Stamped
The printer will provide you with a Certificate of Delivery and this must be presented to the RDO within 30 days of issuance together with the books of accounts.
14. Register with the Social Security System (SSS)
Fill in the forms and provide list of employees. The SSS will issue SS Numbers.
15. Register with Philippine Health Insurance Company (PhilHealth)
Submit documents and forms needed that include employee records, and copies of registrations and business permits. Philhealth numbers for both employer and employees shall be released within 3 months.
16. Register with Home Development Mutual Fund (Pag-Ibig)
Submit documents to the HMDF that include Data forms, signature forms, and copies of registrations and business permits. Pay the first contribution and HDMF will issue certificates afterwards.
The whole process may take about a month to finish.
Assignment of Shares
Shareholders may be increased after the company is incorporated. Likewise, shares are transferable. Here are the steps when re-assigning shares:
1. Assignor and Assignee execute a Deed of Assignment of Shares of Stocks and have it notarized.
2. Pay the corresponding Capital Gains Tax and documentary stamp.
3. BIR issues Certificate Authorizing Registration (CAR)
4. Present CAR to the Corporate Secretary.
5. Corporate Secretary records the transfer of shares in the company’s Stock and Transfer Book.
6. Corporate Secretary ensures the submission of revised General Information Sheet.
7. The old Certificate of Stock is canceled and a new one is issued in favor of the new shareholder.