Tagged as the rising tiger of Asia, the Philippines has experienced substantial economic growth over the past few years of around 6%. The few westernized areas of the country make it a decent choice for expats, retirees and entrepreneurs. While many expats want to live in the area, it’s important to know how to set up a business here to ensure you pick the right venture that can grow with the nation.
With economic liberalization on the way and the winds of change blowing in political arenas, now is an excellent time to consider building a business here. The good news is it’s relatively easy and inexpensive to start a business, once you understand how the government works, unnecessary bureaucracy can be avoided.
That said, there are many considerations and factors that come with operating a business in the Philippines. Follow below for a more in-depth guide.
Quick facts you need to know about doing business in the Philippines
- A foreigner cannot operate as a sole trader in the Philippines, unless their business is on the same scale as a corporation and this requires a large capital down payment.
- If you want to set up a smaller business being in a sole proprietorship is best. This is most commonly done if your spouse is Filipino or a close friend. They will have own your business in name.
- This will give you more freedom and keep costs lower and ensure you are not overly regulated by the government. An expat can only own more than 40% of the business if it is a corporation with further investment backing, assets or your partnership is later amended by the majority Filipino partner/s.
- Starting out as a partnership is often seen as a sinking ship where small business is concerned, unless you have a large amount of capital.
- Doing as above and registering as a sole trader will allow you to lease all property and have all bank accounts and purchases in your name for verification, which essentially means you are able to be fully in charge of the running and state of your business and this of course means you’re also accountable for any liabilities incurred.
- It is unwise to own property due to legalities regarding ownership and high taxation and charges you may face as an expat in the Philippines.
- Many expats assume their business could be sustained by the expat community alone. This is a misguided idea, you must aim to serve the local population as a whole. Due to cultural differences and expectations this is the reason many westernized businesses fail.
- It is only reasonable to expect some competition and resistance from local businesses. The filipinos know what they like and they understand the market better than you do even if you think you’ve done your homework. This is why many businesses such as bars often fail before they’ve even started. Be savvy, stay informed and hire financial or business advisors if necessary to help you on your way.
Setting up Your Business
Here’s an overview of the initial steps required in setting up your business:
- Verify and reserve your company name with the security and exchange commission (SEC). Registration can be done online and costs PHP 40 for the first month after your name has be granted and reserved, alternatively it costs PHP 120 for 3 months.
- Next you’ll need to pay in the minimum capital fee at the bank (5,000 pesos). While this not a legal requirement to do before you set up your business it is a requirement for your startup to be notarized which will you need to do in person at a later date.
- Register your business with SEC to receive your tax identification number. All entrepreneurs can register online through SEC i-register and must provide copies of all the documents you’ve obtained in the previous steps such as name verification, documents of assets and liabilities, notarization and any further documentation detailing ownership, including the individual personal documents for all involved.
One thing that can prove problematic when starting a business abroad is cashflow, especially when dealing when family who are back home.
When this situation arises you’ll be looking for a money transfer company that operates a professional, quick service, and which offers competitive rates. Ria Money Transfer is the obvious choice in this case, so get in touch today for more information.