Types of Business in the Philippines

Are you planning to enter into business and call yourself a businessman or entrepreneur? That sounds
great! But what do you want to be… a proprietor, partner or stockholder? Do you want to offer a service
or sale tangible products? Before you proceed, it is wise to consider first the different types and forms of
business, firm or enterprise that you may undertake. You should carefully assess yourself, including your
skills, financial resources and team, to select the best kind of business to start. To guide you, the
following are the different types of business in the Philippines you may need to consider .

Different classifications of business

. Service business – this provides intangible goods or services to customers. It usually generates profit
by charging for labor or other services rendered to consumers, government or other companies. Below
are examples of service businesses:

 Firms which offer professional services, such as accounting, legal, engineering, business
consulting, customer service and architecture
 Transportation companies, such as airlines, shipping, land tours and forwarders
 Entertainment, such as artists and movie houses
 Hotels and restaurants
 Apartments
 Banks, lending companies and other financial institutions
 Telecommunication companies
 Event planners
 Medical and dental services
 Security and janitorial services
 Media, blogging and advertising
 Website developers
 Graphic designers
 Business process outsourcing (BPO) companies
 and others

2. Merchandising business – this purchase products from other businesses or manufacturers and sell
them to customers. Merchandising companies usually have merchandising inventories in their current
assets account. They usually generate profit by providing markup price on their goods available for sale.
These businesses include retailers and trading companies such as the following:

 Grocery stores
 Department stores
 Distributors
 Real estate dealers
 Car dealers

3. Manufacturing business – this converts raw materials, labors and overhead into finished products
that are available for sale to customers. Manufacturing firms includes the following companies:

 Car manufacturers
 Wine and soft drinks producers
 Electronic parts manufacturers
 Producers of drugs and other medical products
4. Other businesses. This includes businesses that can’t be classified as service, merchandising or
manufacturers. Examples are agriculture and mining companies. These companies are engaged in
producing or exploration of raw or natural materials, such as plants and minerals.

Types of business according to ownership structures

1. Proprietorship – is a business that is owned by a single individual who has full control and authority in
running this kind of business. The owner, called proprietor, owns all the assets and is solely responsible
for all the liabilities of the company. He or she enjoys all the profits but also suffers all losses of this
business. The proprietor and his proprietorship business/businesses is considered as one taxpayer,
sharing a single TIN (Taxpayer Identification Number) for tax purposes. A sole proprietorship must apply
for a business trade name and be registered with the Department of Trade and Industry.

2. Partnership – is a business that is owned by two or more individuals or partners. Under the Civil Code
of the Philippines, a partnership is considered as juridical person, having a separate legal personality
from that of its owners (partners). Partnerships may either be general partnerships, where the partners
have unlimited liability for the debts and obligation of the partnership, or limited partnerships, where one
or more general partners have unlimited liability and the limited partners have liability only up to the
amount of their capital contributions. A partnership with more than three thousand pesos (P3,000.00)
capital must register with Securities and Exchange Commission (SEC). Partnerships are generally treated
like corporations for income tax computation purposes.

3. Corporation – is a business that is owned by its shareholders (natural or juridical persons). A

corporation is composed of juridical persons established under the Corporation Code and regulated by
the SEC with a personality separate and distinct from that of its stockholders. The liability of the
shareholders of a corporation is limited only to the amount of their share capital. It consists of at least five
to 15 incorporators, each of whom must hold at least one share and must be registered with the SEC.
Minimum paid up capital is P5,000. A corporation in the Philippines can either be stock or non-stock
company regardless of nationality.

. Stock Corporation – This is a corporation with capital stock divided into shares and authorized to
distribute to the holders of such shares dividends or allotments of the surplus profits on the basis of the
shares held.

b. Non-stock Corporation. This is a corporation organized principally for public purposes such as
foundations, charitable, educational, cultural, or similar purposes and does not issue shares of stock to its
members.

Organized under Foreign Laws

The following are types of business forms in the Philippines which are organized under Foreign Laws
(source: Department of Industry)

1. Branch Office – is a foreign corporation organized and existing under foreign laws that carries out
business activities of the head office and derives income from the host country. It is required to put up a
minimum paid up capital of US$200,000, which can be reduced to US$100,000 if activity involves
advanced technology, or company employs at least 50 direct employees. Registration with the SEC is
mandatory.

2. Representative Office – is a foreign corporation organized and existing under foreign laws. It does not
derive income from the host country and is fully subsidized by its head office. It deals directly with clients
of the parent company as it undertakes such activities as information dissemination, acts as a
communication center, and promotes company products, as well as quality control of products for export.
It is required to have an initial minimum inward remittance in the amount of US$30,000 to cover its
operating expenses and must be registered with the SEC. Under Republic Act (RA) 8756, any
multinational company may establish a Regional Headquarter (RHQ) or Regional Operating Head
Quarter (ROHQ) as long as they are existing under laws other than the Philippines, with branches,
affiliates, and subsidiaries in the Asia Pacific Region and other foreign markets.

3. Regional Headquarters (RHQs) – An RHQ undertakes activities that shall be limited to acting as
supervisory, communication, and coordinating center for its subsidiaries, affiliates, and branches in the
Asia-Pacific region. It acts as an administrative branch of a multinational company engaged in
international trade. It does not derive income from sources within the Philippines and does not participate
in any manner in the management of any subsidiary or branch office it might have in the Philippines.
Required capital is US$50,000 annually to cover operating expenses.

4. Regional Operating Headquarters (ROHQs) – An ROHQ performs the following qualifying services to
its affiliates, subsidiaries, and branches in the Philippines.

– General administration and planning

– Business planning and coordination
– Sourcing/procurement of raw materials components Corporate finance advisory services
– Marketing control and sales promotion
– Training and personnel management
– Logistic services
– Research and development (R&D) services and product development
– Technical support and communications
– Business development
– Derives income in the Philippines
– Required capital: US$200,000 – one time remittance

How to Register Business Name with DTI Philippines

How to register your business name with the Department of Trade and Industry (DTI) in the Philippines? If
you are planning to establish a business, a trade name is an essential part of your business existence.
That is why you should take time for brainstorming to come up with a company name that is both unique
and appealing to your potential customers. Your trade name is what you will always use when dealing
with your clients or customers. It is the name that will be stated in your certificates of registration with
different agencies, in your official receipts and invoices, in your contracts and in other business forms.

If you are forming a single proprietorship business, it is required that you secure a certificate of
registration with the Department of Trade and Industry (DTI). Otherwise, if you’re forming a partnership or
a corporation, you should first register your business with the Security and Exchange Commission (SEC).
After securing a SEC certificate of registration, although not required, you may also wish to register your
name with the DTI to ensure that no other individuals or organizations would register a name similar to
yours.
The DTI is the primary government agency with the dual mission of facilitating the creation of a business
environment wherein participants could compete, flourish, and succeed and, at the same time, ensuring
consumer welfare. DTI also governs the registration of business and trade names in the Philippines. The
following are steps and guidelines to register your business name with the DTI:

Choose your proposed business name

Before you register your business with the DTI, you should be ready with your proposed business name.
The following are guidelines for an acceptable and not acceptable business name:

Acceptable business names:

 The root word or words of the name shall be considered.

 Describes the nature of business
 Comprised solely of letters and/or numerals
 Punctuation that are part of English and Filipino language

Names that are not acceptable:

 Those which are or whose nature of business is illegal, offensive, scandalous, or contrary to
propriety.
 Those which are identical or which nearly resemble business names already registered with
government office authorized to register names.
 Names composed purely of generic words.
 Names by which by law or regulation cannot be appropriated.
 Distinguished or suggestive of quality of any class of goods, articles merchandise or service.
 Abbreviation of names of any nation, inter-governmental or international organization
 Names which are misleading, deceptive or which misrepresent the nature of business

Steps for over-the-counter registration

A. Obtain application forms (duplicate copy) and fill these up completely. Only the owner of the business
or his/her Attorney-in-Fact (who is authorized in a proper legal instrument) is authorized to sign all the
forms.

B. Meet the following requirements (For Single Proprietorship):

• Must be a Filipino citizen, at least 18 years old. Filipinos with names suggestive of alien nationality must
submit any of the following proof of citizenship: birth certificate, PRC ID, voter’s ID, or valid passport. If
the applicant has acquired Filipino citizenship by naturalization, election, or by other means provided by
law, he must submit any of the following proof of his Filipino citizenship: naturalization certificate and oath
of allegiance, card issued by the Bureau of Immigration and Deportation and affidavit of election, or ID
card issued by the Bureau of Immigration and Deportation.
• Certain types of business may have other requirements such as service and repair shops, real estate
brokers, dental/medical clinic/hospitals, pawnshops, manpower services, engineering/architectural
services and other services provided by professionals.

C. Submit application form to the DTI Processor. The DTI Processor will check if the Business Name is
still available, if yes, you will be asked to pay the application fee.

D. Pay the required registration and processing fee.

New BN registration fees in effect

The Department of Trade and Industry (DTI) is now implementing the following registration fees for
business name registration (original and renewal) depending on the territorial jurisdiction covered in the
application:

a. Barangay: PHP 200.00

b. City / Municipality: PHP 500.00
c. Regional: PHP 1,000.00
d. National: PHP 2,000.00

E. After showing the receipt to the Processor, the Business Name Certificate will be released.

F. Your Business Name Certificate is valid for 5 years from date of registration.

Organizational Structure
The Department is headed by the Secretary of Trade and Industry (Philippines) with the following six
undersecretaries and assistant secretaries:

 Undersecretary for Competitiveness and Ease of Doing Business Group

 Undersecretary for Consumer Protection Group
 Undersecretary for Industry Development and Trade Policy Group
 Undersecretary for Management Services Group
 Undersecretary for Regional Operations Group
 Undersecretary for Trade and Investments Promotion Group
 Assistant Secretary for Competitiveness and Ease of Doing Business Group
 Assistant Secretary for Consumer Protection Group
 Assistant Secretaries for Industry Development and Trade Policy Group
 Assistant Secretary for Management Services Group
 Assistant Secretaries for Regional Operations Group
 Assistant Secretary for Trade and Investments Promotion Group
Department of Commerce and Police
 On September 6, 1901, the Philippine Commission established the Department of Commerce
(and Police) of the Insular Government. William Cameron Forbes future Governor-General of the
Philippines served as its commissioner from 1904 through 1908.
 Department of Commerce and Industry (DCI)[edit]
 After World War II, President Manuel Roxas issued Executive Order (EO) No. 94 on October 4,
1947 creating the Department of Commerce and Industry (DCI). Cornelio Balmaceda, a much
sought-after professor of economics and director of the Bureau of Commerce (BOC), was
appointed acting secretary of the newly created Department of Commerce and Industry.
 Prior to EO 94, the Bureau of Commerce was tasked to develop and promote the country's trade
and industry, under the overall supervision of the Department of Agriculture and Commerce, as
stipulated by Act 4007 by the Philippine Legislature, enacted on December 5, 1932.
 By 1972, the DCI had grown into a big organization with 10 regular bureaus and 22 agencies
under its direct supervision. The DCI was mandated to promote, develop, expand, regulate and
control of foreign and domestic trade and industry, as well as tourism.
 To have closer supervision and to ensure more effective delivery of services, President Ferdinand
E. Marcos issued Presidential Decree (PD) 189 on May 11, 1973 creating the Department of
Tourism to handle all tourism-related matters. A year later on June 21, 1974, Marcos issued PD
488 creating the Department of Industry whose principal function was to promote and enhance
the growth of the country's existing and thriving industries.
 On June 2, 1975, the Department of Trade was created under PD 721 to pursue efforts of the
government toward strengthening the country's socio-economic development, particularly in the
area of commercial activities. A key strategy of the new department was vigorous export
promotion to generate much needed foreign exchange. A Bureau of Foreign Trade was also
particularly established to push for domestic trade and marketing programs.
 In the early 1980s, thi's goal of national economic development required the need to hew
industrial promotion efforts with the expansion of Philippine trade overseas. This resulted in the
creation of the Ministry of Trade and Industry (MOTI) on July 27, 1981, which took over the
functions of the subsequently abolished Departments of Trade and of Industry.
 Drastic changes followed after the 1986 EDSA Revolution. President Corazon Aquino signed
Executive Order No. 133 on February 27, 1987 effectively reorganizing the Ministry of Trade and
Industry and renaming it the Department of Trade and Industry (DTI). This was further
strengthened by the issuance of Executive Order 292 (Administrative Code of 1987). Other latter
legislations have also amended its functions and structures.