Business Registration 101

Finally decided to start your own business? 

Thanks to our growing economy, establishing a business in the Philippines has become easier and more accessible than you think especially for young entrepreneurs. Here are a few simple steps to legally operate your business here in the Philippines and get all the necessary permits from the right government agencies.

Sole Proprietorship

This is the simplest business entity! A sole proprietorship is an unincorporated business with only one owner which appeals to young entrepreneurs and small business owners.

PROSCONS
• Low cost
• Little restrictions
• Lack of government involvement
• All responsibilities are given to one person
• Limited ability to raise funds
• Unlimited liability
Procedure on how to register a sole proprietorship business:
  1. Register your business name at the Department of Trade and Industry (DTI);
  2. Obtain a Barangay Clearance;
  3. Obtain a permit from the Mayor’s Office; and
  4. Register your business at the BIR
Basic Requirements:
  • Proposed Business Name
  • Business Address
  • Business Activities
  • Territorial Scope of business (Barangay, city, regional or national)
  • Owner’s Full Name
  • Owner’s Address
  • Owner’s Date of Birth
  • Owner’s citizenship
  • Tax Identification Number or TIN of the Owner
  • Barangay/Municipality/Regional clearance depending on the scope of business
  • A business permit from the mayor’s office
  • Business Tax Identification Number

Partnership

This entity involves two or more individuals who share responsibilities, profits, liabilities, etc. There are two types of business partnerships namely general partnership and limited liability partnership. In general partnerships, all partners share legal and financial liability equally, while limited liability partnerships limit partners’ personal liability so everyone’s assets are not at risk.

PROSCONS
• Teamwork 
• More sources of capital 
• An equal share of responsibilities
• Lack of government involvement
• Potential conflict
• Divided profits
• Unlimited liability
• Lack of separation from business
Procedure on how to register a partnership business:
  1. Register your business name at the Securities and Exchange Commission (SEC);
  2. Obtain a Barangay Clearance;
  3. Register at the Social Security System (SSS);
  4. Obtain permit from the Mayor’s Office; and
  5. Register your business at the BIR
Basic Requirements:
  • Name Verification Slip
  • Articles of Partnership (AP)
  • Joint affidavit of two partners to change partnership name (not required if already stated in AP)
  • Registration of data-sheet
  • Certificate of Bank Deposit
  • Name of the partnership
  • Principal office address
  • The contact number of the partners
  • Name, citizenship, address, birthday and Taxpayer Identification Number (TIN) of the partners
  • Capital contribution of the partners
  • Purpose of the partnership
  • Endorsement/clearance from other government agencies, if applicable
  • For partnership with a foreign national as a partner (FIA Form – 105)

Corporation

A form of business operation that declares the business as a separate and legal entity guided by a group of officers known as the board of directors.

PROSCONS
• Limited liability for shareholders
• Business continuity
• Ability to raise capital
• Centralized management
• Increased legal expenses
• Corporation formalities and reporting requirements
• Double taxation
Procedure on how to register a corporation:
  1. Register your business name at the SEC;
  2. Obtain a bank certificate of deposit for the paid-in capital;
  3. Register incorporation papers;
  4. Obtain a company Community Tax Certificate (CTC);
  5. Obtain a Barangay Clearance;
  6. Obtain permit from the Mayor’s Office;
  7. Register for taxes;
  8. Buy accounting books;
  9. Print your receipts;
  10. Have your receipts and books stamped; and
  11. Register your employees
Basic Requirements:
  • Name Reservation/Verification Slip
  • Cover Sheet
  • Articles of Incorporation
  • Corporate By-laws
  • Registration Data Sheet (capital stock / incorporators / directors / officers information)
  • Affidavit of Undertaking to Change Corporate Name
  • Treasurer’s Affidavit
  • Bank Certificate

One Person Corporation

One Person Corporation is a new type of corporation with a single stockholder. Like sole proprietorship, this ideal setup is for aspiring entrepreneurs who plan to run a corporation on their own without having business partners. An OPC’s single stockholder shall be the sole director and president who is also required to designate an alternate nominee in the event of the single stockholder’s death.

PROSCONS
• A separate legal entity
• Easy funding
• Limited liability
• Single owner
• Inability to issue different types of equity
• Owner/Single stockholder is responsible for liabilities
Procedure on how to register a one-person-corporation:
  1. Register your business name at the SEC;
  2. Submit documentary requirements for pre-processing;
  3. Pay the filing fees;
  4. Submit hard copies of signed and notarized documentary requirements together with the proof of payment of filing fees; and
  5. Claim Certificate of Registration from the SEC 
Basic Requirements:
  • Cover Sheet
  • Articles of Incorporation 
  • Written Consent from the nominee and alternate nominee
  • Other Requirements (if applicable)
    • Proof of Authority to Act on Behalf of the Trust or Estate (for trusts and estates incorporating as OPC)
    • Foreign Investments Act (FIA) Application Form (for foreign natural persons)
    • Affidavit of Undertaking to Change Company Name (in case not incorporated in the Articles of Incorporation)
    • Tax Identification Number (TIN) for Filipino single stockholder
    • Tax Identification Number (TIN) or Passport Number for Foreign single stockholder

Just a few important reminders…

Say you’ve successfully registered your business, there are still a few things that you have to keep in mind like: 

  1. Fire Safety Inspections – this is conducted by the Bureau of Fire Protection after a business owner secures/renews a business permit. 
  2. Tax Mapping – this is conducted by the BIR and is done to check if a business is complying with bookkeeping, registration, and other regulations of the BIR. Take note that penalties can range from Php 10,000 up to Php 50,000 depending on the violation. So better stay prepared with all your documents!

Whew, that was long! But we hope you learned a lot. We wish you good luck with your new business! And in case you need a business address, we have a few professional addresses that will definitely impress your customers and clients!

Sources:

www.entreprenuer.com

www.eastvantage.com

Investopedia.com

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