How To Register A Small To Medium Enterprise In The Philippines
Being recognized as a legitimate entity for business is extremely crucial if you want your business to succeed.
Not only will it protect your rights as a business owner, but it will also establish your participation in the economic activity in the country. While on the surface it means paying taxes to run your business, it also means you’ll have more access to different opportunities that may further help you scale your business.
If you want to jump start your business venture in the country, there’s no better way to start than to legitimize it!
1. Business license
Most small to medium enterprises in the Philippines are either in a form of Sole Proprietorship or Business Partnership. The process for each is different as follows:
a. Sole proprietorship
A Sole Proprietorship corporation will personally hold a single person responsible for the liabilities incurred in his or her business. In return, the individual gets the full benefit that their company can provide.
Single proprietorship applicants must secure a certificate of registration with the DTI. The documents needed for the application are the same as the standard requirements, but some qualification must be met by the proprietor in order to qualify.
- Must be a Filipino citizen
- At least 18 years old.
- Filipinos with names suggestive of alien nationality must submit any of the following proof of citizenship: birth certificate, PRC ID, voter’s ID, or valid passport.
If the applicant has acquired Filipino citizenship by naturalization, election, or by other means provided by law, he must submit any of the following proof of his Filipino citizenship: naturalization certificate and oath of allegiance, card issued by the Bureau of Immigration and Deportation and affidavit of election, or ID card issued by the Bureau of Immigration and Deportation.
Business name regulations
Your business name will basically set the identity of your business. For many successful businesses, they become a household name. While a business name may distinguish your business from the rest, it may also boost your success if done right (but we’re not going to teach you about that here).
Registering your business name will grant you legal rights to the name and to operate your business under that name.
However, business name registration should also follow some guidelines before they get approved, such as the following:
- The root word or words of the name shall be considered.
- Describes the nature of business
- Comprised solely of letters and/or numerals
- Punctuation that is part of English and Filipino language
Meanwhile, business names that contain the following will not be allowed:
- Those who are or whose nature of business is illegal, offensive, scandalous, or contrary to propriety.
- Those that are identical, or which nearly resemble business names already registered with the government agency authorized to register names.
- Names composed purely of generic words.
- Names which by law or regulation cannot be appropriated.
- Distinguished or suggestive of quality of any class of goods, articles merchandise or service.
- Abbreviation of names of any nation, inter-governmental or international organization
- Names which are misleading, deceptive or which misrepresent the nature of business
Department of Trade and Industry (DTI) registration process
After thinking long and hard for the right business name, the next step is the actual registration. The Department of Trade and Industry (DTI) is the government agency that governs the name registration for businesses in the Philippines.
There are two ways for you to register your business name in DTI, online and over-the-counter.
The Department of Trade and Industry (DTI) is now implementing the following registration fees for business name registration (original and renewal) depending on the territorial jurisdiction covered in the application:
- Barangay: ₱200.00
- City / Municipality: ₱500.00
- Regional: ₱ 1,000.00
- National: ₱ 2,000.00
For more information, please call DTI Direct at 751.3330.
b. Business partnership
A partnership is a legal entity that is separate from its participants. It consists of 2 or more individuals and can come in either a general partnership or limited partnership. This is also suitable for foreign companies wishing to venture into business in the Philippines, thus it requires more time-consuming regulation.
2. Business name registration
Unlike a sole proprietorship, name registration for business partnerships will be done in the Security Exchange Commission (SEC). The SEC is a government agency that oversees the registration of business entities in the country. SMEs which are forged around business-partnership will have to go through this agency.
Since a Business Partnership is a separate legal entity from that of the participants in the partnership, there will be more laws regulating it for the benefit of both individuals.
With that being said, the requirements and process will be different.
Once you’ve gathered the needed documents, the steps to register your business name at SEC are as follows:
- Verify or reserve the proposed name
- Present Articles of Incorporation and By-Laws at Green Lane Unit Ground Floor, Secretariat Bldg., PICC Complex, Roxas Boulevard Pasay City.
- Pay filing fee at the Cashier located at the Ground Floor, Secretariat Bldg., PICC Complex, Roxas Boulevard Pasay City and file application with the Receiving Unit, CRMD located at the Ground Floor, Secretariat Bldg., PICC Complex, Roxas Boulevard Pasay City
- Present Official Receipt to Releasing Unit, Ground Floor, Secretariat Bldg., PICC Complex, Roxas Boulevard Pasay City to get the Certificate of Recording of the Articles of Partnership
- A filing fee of one-fifth of 1% of the Partnership`s capital but not less than ₱2,000.00 plus 1% of the amount as legal research fee.
A minimum deposit to your bank
Funds to run a business is important for a business to thrive, especially during its early stages. Possession of a certain amount of money depending on your business will be required for the business to be certified by the government. The business owner must secure a Treasurer’s affidavit from their bank to authorize the Security Exchange Commission and Bangko Sentral ng Pilipinas to examine and verify the capital funds in the bank.
The bank certificate of deposit is one of the documents that must be submitted with the SEC. Hence, you must obtain it from the bank.
SEC registration and Tax Identification Number (TIN)
Once all the documents above are accomplished, we now go back to SEC for the final registration process and the release of your (TIN). This time around, you should already have the following documents.
- Approved company name
- Notarized Articles of Partnership
- Submission of SEC form F-105 (for partnerships with foreign members)
- Licenses and clearances from necessary government offices for businesses that require special or secondary licenses to operate. (only if applicable)
- Treasurer’s affidavit
- Statement of assets and liabilities
- Partnership details including information on directors, officers, and stockholders.
Once you’ve complied with the above, wait at least 2 business day for SEC to release your TIN.
3. Barangay clearance
Local Government Code mandates that all businesses must obtain a clearance from the barangay office where their business is located. A barangay clearance is basically an approval from the local community that your business conforms to the standards of the barangay. The fee is very minimal and may vary from barangay to barangay.
Securing a process is very straight forward. Just go to the nearest barangay hall and request for a barangay clearance from the Barangay Captain or their staff.
4. Statutory benefits
Whether or not you have an employee, the law states that every Filipino who are employed or self-employed must be covered by the government’s social security plan and healthcare. If your business has employees, the more you are required to secure their benefits under these agencies
Social Security System (SSS)
SSS benefits include disability pension, retirement, funeral benefit, sickness allowance, loans, and other benefits. This is not just applicable to the employees but also to the business owner. All employers are required to register and pay their share of contribution for their employees SSS premium.
Philippine Health Insurance Corporation (Philhealth)
As required by the new National Health Insurance Act (RA 7875 / RA 9241), this is a government healthcare plan that ensures all employees are adequately covered by health insurance that will aid them in hospitalization costs and other health care needs. All employers are required to register and pay their share of contribution for their employees Philhealth premium.
Home Development Mutual Fund (Pag-IBIG Fund)
Like SSS and PhilHealth, employers must also register their business and remit their employers’ share of contribution for employees to the agency. HDMF works towards providing fund members with adequate housing through an effective saving scheme.
5. Mayor’s permit
After securing a DTI certificate of registration for your trade name (single proprietorship), SEC certificate of registration (corporations and partnerships), Barangay clearance, and registration with SSS, Philhealth and HDMF, your next step is to register and obtain a permit with the Municipality or City Mayor’s Office.
The permit affirms that your business is in compliance with the municipality or City’s ordinances and standards such as sanitary, fire and safety and other clearances. Fees for new applications may depend on their initial capital while fees for renewals depend on the applicant’s prior year gross revenues or sales.
6. Bureau of Internal Revenue (BIR)
For business partnerships, once you’ve secured the TIN for your business, you can register the company with BIR. Sole proprietorship, on the other hand, can register using their personal TIN. This is extremely significant as your business registration because it will determine your taxes and your annual registration fee.
The BIR certificate of registration shows your trade name, Tax Identification Number (TIN), line of business, and taxes that you must file or remit to the BIR (e.g., annual registration fee, annual and quarterly income tax, withholding taxes, monthly and quarterly Value Added Tax or monthly Percentage Tax, etc.,).
Registration with the BIR will give you the authority to issue official receipts to your customers, register books of accounts and obtain a separate Tax Identification Number (for partnerships and corporations).
BIR registration fee is ₱500 pesos annually.