Setting up a Corporation: The How, What, and Why

If you are thinking of starting a business venture with a group of people, or you are thinking of upgrading your sole proprietorship into a corporation to reduce risks, setting up a corporation is the right move for you. Though it will take more legal documents to set up your corporation, this will protect your personal assets in case of a lawsuit or debt settlement. Let’s take a look at its specifics below.

What is a Corporation?

Simply put, a corporation is an organization comprised of a group of people authorized by the government to act as a single entity. It is advantageous for entrepreneurs to establish a stock corporation because it offers limited liabilities and risks. The incorporators and shareholders share capital expenses. In the same token, the liabilities are taken against the corporation and not the individual assets of those who established the business. 


Do keep in mind that there are two types of corporations, a stock corporation which generates income for businesses and a non-stock which is utilized by charities and non-profits. Both require at least one incorporator (based on the Revised Corporation Code) but no more than 15. A corporation is considered legal under the law entity similar to an individual, so each of the incorporators and shareholders’ personal assets are protected in case of a bankruptcy. The corporation can also enter into contracts, pay taxes, apply for a loan, sue others, and the like. 

Can a Corporation be an Incorporator?

In the Philippines, an established corporation cannot be an incorporator of any company. Although it is considered an individual entity, it cannot be used to create another corporation with other individuals. All incorporators under the law of the country must be a natural person of legal age. Neither a corporation nor partnership can be an incorporator. A corporation, however, can acquire stocks of a company after its incorporation. 

How to Set Up a Stock Corporation with SEC

To register with the Securities and Exchange Commission (SEC), you need a name verification slip secured through or by visiting the SEC in their Pasay City or Satellite Offices. You must reserve your unique business name.


Fill out the SEC Articles of Incorporation (AOI) and By-Laws (BL). Recording of the details of AOI and BL can also be done thru the SEC CRS Web Portal. If you are a new user, you have to create an account before you proceed. After filling out the necessary forms, print it out for signature. After signing, scan the documents are upload into the system for evaluation.


Wait for the approval, and once you get the go signal, you can generate a payment assessment form from the portal. Follow the instructions for payment, then upload the proof of payment. Once everything is complete, do not forget to submit the hard copy, along with the AOI and BL to the SEC Office.


Do not forget that your Treasurer must execute an affidavit stating subscribed stocks of shares subscribed and cost. Keep in mind that these are basic documentary requirements. You may need to produce more documents depending on the nature of your business. After filling out the necessary application form and complying with the above-mentioned procedures, you must wait for the release of your SEC Certificate within 2 weeks.

How to Fully Register as a Corporation?

After securing your SEC Certificate of Registration, you must go to the Barangay Hall near your business address to get a Barangay Clearance. Prepare your SEC Registration, 2 government IDs, and proof of address like your lease certificate or title. Next step is a visit to the Mayor’s Office to obtain your Business Permit. Prepare your Barangay clearance and aforementioned supporting documentation. 


Do note that you may need to comply with other requirements like a fire or sanitary permit and there are additional requirements depending on the nature of your business. For instance, a gas station will also require clearances from the Department of Energy (DoE), zoning clearances, fire safety inspection, and the like. The requirements and processes vary depending on your location so it is best to check the LGU website or speak with an LGU representative to verify the requirements to avoid delays in processing your papers.


You must also register your corporation to the Bureau of Internal Revenue (BIR) district office nearest your business. Use BIR form 1903, which is the Application for Registration of Partnership or Corporation. Prepare any required certificates and other IDs.

Noteworthy, based on RMC 57-2020, BIR Registration can now be done simultaneously with your LGU registration as the LGU papers are no longer required for BIR processing. For accuracy, double-check the RMC 57-2020 Annexes which contains an updated list of requirements.

Do not forget to file BIR form 1901 (Jan2018 version) which includes processing of authority to print. This is a requirement so you can print your receipts and invoices. For your Book of Accounts, use BIR Form 1905 to facilitate processing. Aside from paying BIR Form 0605, you must pay Documentary Stamp Taxes (DST) using BIR form 200. Once you pay the fees and comply with all the aforementioned requirements, you can claim your BIR Certificate of Registration.


You can do all these steps on your own by verifying the required documents with the corresponding government offices. You can also delegate the task to your staff or hire a reputable professional like a CPA to process your registration documents. Hiring a professional may cost a nominal fee, but it will save you time and effort. It will also guarantee that you produce the right documents, and everything is processed correctly, so you can begin engaging in business and start serving your clients.

What to Do with Employees?

If you are hiring staff members for your corporation, don’t forget to register them with the Social Security System (SSS), Philippine Health (Philhealth) Insurance Corporation, Home Development Fund (HDMF), and Bureau of Internal Revenue in case they don’t have a tax identification number yet. The above-mentioned are required by law, and compliance is mandatory. Work on these papers accordingly to ensure you stay on top of your business plans. Failure to do so will result in glitches, which will equate to downtime and lost revenue once you start your operations.


As an employer, you are also required to register with SSS, PHIC, and HDMF so you can remit the premium contributions of your employees as mandated by law. Once you’ve completed all the necessary requirements, don’t forget to make copies. Most of all, be sure to display essential certificates in your place of business and your website. This will your clients that you are compliant with all government regulations. These certifications will boost your credibility as a legitimate corporation.

If you are looking to start your corporation, don’t hesitate to get in touch with us. We will be glad to help you set things up to ensure there are no delays. With our professional and experienced team members, you can get the accurate requirements completed in no time at all, allowing you to begin serving your clients so you can generate income.