Concern
How can one assist in obtaining a business license in the Philippines for a foreign partner?

∇ Legal Contemplator

Starting with the basics, what does it mean to assist in opening a business license in the Philippines? A business license typically refers to permits and clearances required for a business to legally operate. For foreigners, this involves additional legal and regulatory considerations. The Philippine legal landscape around foreign investment is complex, requiring an understanding of ownership limitations, corporate structure requirements, and permit acquisition processes.

Observation 1: Foreign Ownership Restrictions

Foreigners cannot own land in the Philippines outright, and this is also reflected in limitations on business ownership. Some industries are completely closed to foreign ownership, while others are open with certain ownership caps. The Foreign Investment Negative List (FINL) details these restrictions.

But what does this mean for a foreign partner in practice? If they plan to operate in an industry that’s restricted, they’ll need a local partner to meet the ownership thresholds. For example, retail trade enterprises often require 60% Filipino ownership. This might complicate the ownership structure and require more legal formalities.

Doubt 1: What if the foreign partner insists on full ownership?

Here, one might consider the 100% foreign-owned entities permissible under certain conditions. For instance:

Export-oriented businesses (60% of goods/services produced are exported).
Businesses operating in economic zones.

So, is the business type export-focused? If not, would it make sense to adjust the business plan to align with the rules?

Observation 2: Legal Entity Options

The next question revolves around the type of legal entity. In the Philippines, foreign nationals can typically register:

Sole Proprietorship (challenging for foreigners since only Filipino citizens can own sole proprietorships).
Partnership (requires at least one Filipino partner).
Corporation (domestic or foreign).

For foreigners, corporations are often the most viable route. With the Revised Corporation Code of 2019, a corporation can now be formed with just one person (a One-Person Corporation or OPC). However, OPCs are not allowed for certain sectors.

Would an OPC work for the foreign partner’s business idea? If not, perhaps a joint venture with Filipino partners or a domestic corporation would be suitable.

Doubt 2: Is a local partner trustworthy?

This leads to concerns about ensuring proper legal agreements to protect all parties' interests. Drafting articles of incorporation, bylaws, and shareholder agreements will be critical.

Observation 3: Business Permit Application Steps

The actual process for obtaining a business license generally involves these steps:

SEC Registration (or DTI registration for sole proprietorships).
Barangay Clearance – Permission from the local barangay.
Mayor’s Permit – Issued by the city or municipality.
Tax Identification Number (TIN) from the Bureau of Internal Revenue (BIR).

Would a foreign partner face any additional hurdles? Yes, like needing a Special Investor’s Resident Visa (SIRV) or a Special Working Permit (SWP) to legally engage in the business.

Backtracking and Exploring Alternatives

What if the foreign partner prefers a less direct approach, such as being an investor rather than an operator? They could:

Enter through the Philippine Economic Zone Authority (PEZA) to benefit from tax breaks.
Consider franchise opportunities with pre-existing entities to bypass ownership challenges.

But is this realistic? This depends on the nature of the business. A manufacturing company could benefit from PEZA, but a small café wouldn’t.

Revision of Thoughts

A checklist might help clarify the process:

Research the industry: Is it open to full or partial foreign ownership?
Define the structure: Is a corporation the best route?
Ensure compliance: Does the foreign partner have proper visas and permits?

Even with these steps, the human element—finding a local partner, understanding cultural nuances, navigating bureaucracy—adds layers of complexity.

Final Answer

Assisting a foreign partner in obtaining a business license in the Philippines involves:

Identifying the industry’s foreign ownership limitations under the FINL.
Choosing an appropriate business structure (corporation, partnership, or OPC).
Registering with the SEC or DTI, obtaining local permits, and ensuring compliance with immigration laws (e.g., SIRV).
Exploring special economic zones or franchise options for simplified entry.

Engaging a local attorney or consultancy firm with expertise in foreign investments is strongly recommended to ensure a smooth process.