Many foreign entrepreneurs who set up companies in the Philippines start as sole traders. This business form is not considered a legal entity, therefore when its profits grow, it will be required to change into a legal entity. In most cases, the sole proprietorship is turned into a limited liability company in the Philippines.
There are various steps which must be taken in order to change a sole trader into an LLC, however, these do not take long to complete as long as the business owner has all the paperwork in place.
Our company formation agents in the Philippines can guide those who want to turn a sole trader into an LLC.
Closing down a sole trader in the Philippines
The first step is changing a sole trader into an LLC is to close down the sole proprietorship, as there is no direct way of changing a non-commercial entity into a commercial one.
In order to close the sole trader, the owner must file a request in this sense with the Business Register and the Securities and Exchange Commission in the Philippines. The sole trader must also de-register with the tax authorities in order to be removed from all database of the authorities.
You can rely on our company registration consultants in the Philippines for detailed information on the documents needed to change a sole proprietorship into an LLC.
Changing the business form will also mean updating the accounting strategy. The LLC will be subject to different, more complex requirements compared to the sole trader. Our Philippines accountants can provide you with information about these mandatory requirements for taxation, filing, and annual statements so that you can be prepared for the new compliance conditions.
Registering an LLC in the Philippines
Once the sole trader is no longer active, the next step to follow is the registration of the LLC with the Business Register and the Securities Exchange Commission. This procedure is lengthier and will imply:
- preparing new incorporation documents for the LLC which must be accompanied by a company name reservation form;
- opening a corporate bank account and depositing the share capital in accordance with the types of activities to be undertaken;
- applying for new tax and VAT numbers with the authorities in charge and registering for social security purposes;
- applying for new business licenses for the activities of the Filipino company.
The Filipino LLC has many advantages over the sole trader, which is why changing the business form can bring various benefits.
Entrepreneurs who are considering changing their business form may also consider applying for permanent residency and essentially starting the process to immigrate to the Philippines. This is possible for citizens of certain countries, as well as for those who are married to Filipino citizens. Our team can give you more details about the immigration quota and the applicable conditions.
For assistance in changing a sole trader into an LLC, please contact our Philippines company formation consultants.