[ESTABLISHING A BUSINESS ENTITY IN THE PHILIPPINES]
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ESTABLISHING A BUSINESS ENTITY IN THE PHILIPPINES I. Types of business entities As a general rule, foreign equity is allowed to conduct and participate in business in the Philippines, through any of the following modes: 1. By investing in a domestic stock corporation.
3. By establishing a domestic branch office or a Philippine affiliate. A branch office in the Philippines is an extension of an already-established foreign business entity, usually engaged in exactly the same activities as the foreign “parent” corporation. As a mere extension, and operating only through a license, a branch office does not have its own legal personality separate and distinct from the foreign business entity. Because of this, the foreign “parent” corporation will most likely be held responsible for any liabilities which the local branch incurs, even beyond the investment of the foreign business entity. An affiliate office may be an entity which is formed in the Philippines by the foreign business entity, or an existing Philippine business entity which is constituted as an affiliate. It has the same objective as a domestic branch, which is to be an extension of the foreign business entity. 4. By establishing joint venture arrangement with a local corporation. A joint-venture arrangement is essentially a business partnership between two or more companies, but it is not a legal entity in itself unless the joint venture partners decide to incorporate a joint venture corporation. Usually, but not always, a new corporate entity is born out of the joint venture arrangement, specifically to carry out the business or single undertaking which necessitated such a new corporate entity in the first place. 5. By establishing a Philippine representative office. A representative office is a promotional or marketing office for a foreign business
A domestic corporation is a corporation which is organized under Philippine law. It is an artificial being which has a personality separate and distinct from the shareholders, thus, the liability of shareholders is limited only to their capital contribution. Other than their capital contribution, the shareholders’ other assets are beyond the reach of the corporation’s creditors. Foreign capital may invest in a domestic corporation either by acquiring shares of stock in an existing domestic corporation, or by contributing capital to one that is still in the process of incorporation. 2. By operating through a local subsidiary which may be owned entirely or partially by the foreign business entity. A local subsidiary is a domestic corporation, incorporated under Philippine law, which is wholly or majority- owned by the foreign business entity. It is considered domestic because of its local incorporation but is also seen as foreign because of its ownership and the fact that it acts in furtherance of the interests of the foreign “parent” corporation. However, as it is deemed a domestic corporation pursuant to law, it enjoys a legal personality separate and distinct not only from its shareholders, but also from the foreign “parent” corporation.
ILN Corporate Group – Establishing a Business Entity Series
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