How to Start a Business Legally in the Philippines
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I. Introduction
Registering business is important to shun any legal predicaments once business operations begin.
The first step is to get a certificate of registration for business name in one of these agencies (depending on the structure of the business):
Department of Trade and Industry (DTI) – for single proprietorship
Securities and Exchange Commission (SEC) – for partnerships or corporations
Cooperative Development Authority (CDA) – for cooperatives
The second step is to visit the following offices:
Homeowners Association – get a homeowners clearance for businesses inside villages and subdivisions
Barangay Hall – secure a barangay clearance to operate your business
Local Government Unit (LGU) – visit the municipality or city hall office and process your business permit
Bureau of Internal Revenue (BIR) – apply for a business taxpayer identification number (TIN), register your books of accounts, point-of-sales (POS) machines and receipts
At this point, business operations can already be started legally, but the employees have to be registered to the following agencies:
Social Security System (SSS) – secure an SSS number for employer and employees
Department of Labor and Employment (DOLE) – register for businesses with five workers or more
Home Development Mutual Fund (HDMF)/ Pag-Ibig Fund – as required by RA 7742, SSS members earning at least P4,000 a month must be registered with HDMF.
Philippine Health Insurance Corp. (PhilHealth) – all employers of are required to register their employees to this agency as stated in the New National Health Insurance Act (RA 7875 / RA 9241). PhilHealth manages and administers the government health care system.
For the detailed list of the requirements a company needs to pass in different offices see Requirements to Register your Business (Appendix A).
II. Setting up a SOLE PROPRIETORSHIP Business in the Philippines
Sole Proprietorship is a business owned by just one individual. This individual has all the authority in the company and full control of its assets. The owner of a sole proprietorship enjoys all the profits but suffers all the losses because the owner is personally responsible for the debts and answers all liabilities. This kind of business participates only in one or two primary objectives and has a very simple operation structure. One of the major advantages of having a Sole Proprietorship is the ability to use a different registered business name.
1. Verify and reserve company name by getting business name registration certificate at the Department of Trade and Industry (DTI).
Requirements:
accomplished business name registrati9on form
2pcs 2×2 colored ID picture
Tax Identification Number (optional)
list of 5 business names ranked according to preference
registration fee of Php300.00
Procedures:
1. Fill out forms–Business name Application for Sole Proprietor (16A). See Appendix B.
2. Pass requirements.
3. Evaluation of application.
4. Payment of fees.
5. Processing of application.
6. Releasing of registration.
2. Obtain barangay clearance at your local barangay hall. See Appendix C for sample Barangay Business Clearance and Appendix D for sample business permit certification.
Requirements:
It must be an existing business.
It has 50 or less employees.
Minimum: Php500.00 – small businesses
Php1000.00 – big businesses (school, gas station, hospital, clinic, hardware)
3. Obtain Mayors/Business Permit at the local municipality where the business is located. It is the Business Permit and Licensure Office (BPLO) which processes the permits. See Appendix E for Application for Mayors Permit/ Business Tax Return and Appendix F for Application for Renewal of Mayors Permit.
Requirements:
accomplished business permit application form
DTI – business name certificate
sketch of the business location
2 pcs 2×2 colored ID picture
registration fee the amount of which depends on the type of the business
4. Apply for Certificate of Registration (COR) and Tax Identification Number (TIN) at the Bureau of Internal revenue (BIR).
Requirements:
accomplished form 1901
DTI – business name certificate
Mayors Permit
registration fee of Php500.00
certification fee of Php15.00
documentary stamp tax of Php15.00
The RDO shall issue the Certificate of Registration (Form 2302)
Procedure:
1. Get a registration form (form 0605). Registration fee is php500.00.
2. Fill out necessary forms–Income Tax Return (1701), Monthly Remittance of Income Taxes Withheld on Compensation (1601-C), Monthly Percentage Tax Return (2551M), and Monthly Remittance Return of Creditable Income taxes Withheld (Expanded) (1601-E). BIR Form No. 1701 is for the computation of Income Tax. BIR Form No. 1601-C for Withholding tax on Compensation and must be paid on the 10th day of the month. BIR Form No. 2551M is for Percentage Tax monthly, and must be paid on the 20th day of the month. The tax rate applied on this form is 3%. BIR Form No. 1601-E is for Expanded Withholding Tax and is also paid on the 10th day of the month.