True, there are thousands of businesses that are unregistered. Why go through the hassle – the tedious paper work and extra expense? — “underground” entrepreneurs might say. Most of all, by keeping off the government’s line of vision, their businesses don’t have to pay taxes – they are bound to gloat.
There are, however, more pros than cons in making a business legal and formal.
Registered businesses are eligible to avail of incentives and assistance offered by government, including low-interest loans. They are protected from dishonest suppliers and customers. They do not have to contend with harassment by policemen and other authorities and even by their own workers. Notice how sidewalk vendors perennially play hide and seek with cops patrolling the streets? Registered businesses tend to have a bigger market base: there are customers, who will not or can not do business with companies that do not issue official (BIR) receipts.
Formal entrepreneurs openly run their business. They do so with peace of mind and dignity and pride in the knowledge that they somehow contribute to nation building.
It is not really that difficult to register a business. It can be done within three to five days, if one is focused and patient.
Here are basic steps and guidelines.
I. Business Name
You have to choose your business name carefully to distinguish it from your competitors. Your name must describe the nature of your business. It is your identity in the marketplace.
How do you apply for business name?
A. Choose a business name – Think of at least three business names.
Guidelines for acceptable business names:
• The business name must preferably reflect the nature of the business
• The name must comprise solely of alpha letters and numerals
• Choose a name that is catchy and easy to remember
Names that are not acceptable:
• Those which are or whose nature of business is illegal, offensive, scandalous, or contrary to propriety.
• Those which are identical or which nearly resemble business names already registered with government office authorized to register names.
• Names composed purely of generic words.
• Names by 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
B. Search for a business name – You may use the Department of Trade and Industry (DTI) Online Search Engine to ensure that your preferred name is not similar or confusingly similar to existing registered names.
C. Register your business name – Visit the DTI Office in the area where you will put your business.
• Fill out application form with your proposed business name signed by yourself, your representative, or authorized by a special power of attorney.
• Submit 2 identical 2 x 2 id pictures taken not more than a year prior to your application.
• If your name suggests an alien nationality, present a copy of your birth certificate, voter’s id or passport for proof of citizenship.
• If you are naturalized citizen, present the original copy of your naturalization certificate and oath of allegiance or ID card issued by Bureau of Immigration and Deportation.
• If you are a franchise holder, present a photocopy of franchise agreement.
• Pay the processing fee and the documentary stamp.
II. Register Online at www.bnrs.dti.gov.ph
1. Fill out application form by typing the required information.
2. Submit online and you will receive transaction reference number acknowledgment via e-mail.
3. Submit the necessary documentation mention in the acknowledgment in DTI office in your area. The reserve business name online is only up to three working days.
4. Pay your application (processing fee and documentary stamp)
For partnership and corporations, register with the Securities and Exchange Commission (SEC) and submit the following:
Partnership:
• Name verification slip
• Articles of partnership
• Affidavit of undertaking to change name
• Filled out application form
• Filing fee depends on your capitalization
• Or gross receipts after operation
• Other fees: bylaws fee, stock & transfer book, documentary stamp
Stock Corporation
• Name verification slip
• Articles of incorporation and bylaws
• Affidavit of undertaking to change name
• Treasurer’s affidavit
• Bank certificate
• Authority to verify bank account
• Filled out application form
Non-Stock Corporation
• Name verification slip
• Articles of incorporation and bylaws
• Affidavit of undertaking to change name
• Resolution of the board of directors that the corporation will comply with the requirements of non-stock corporations
• Members undertaking
• List of contributors certified by the treasurer
• Certificate of bank deposit of at least P100,000
• Representing initial contribution
• Filled out application sheet
III. Mayor’s Permit
Now that you already have your business name, the next thing to do is to secure a permit from the local government. Go to the business licensing unit of your municipal or city hall with the following papers ready:
• Barangay clearance from where your business is located
• Contract of lease, if any
• Registration certificate from DTI or SEC
• Sketch of your location
• Community tax certificate
• Fire safety certificate issued by the Bureau of Fire and Protection.
Mayor’s permit cost varies depending on your municipality and type of business.
IV. Tax Registration
After registering your business name and securing mayor’s permit, you have to get a Tax Identification Number (TIN) from the Bureau of Internal Revenue (BIR).
Have the following ready:
• Filled out BIR forms 1901/1903
• Sketch of your location
• Photocopy of mayor’s permit
• Registration certificate for DTI or SEC
• Articles of incorporation or partnership (not applicable to sole proprietorship)
• Branch/es must present certificate of registration of the main office
• Other things to work with BIR:
o Register book of accounts
o Request authority to print receipts
o Request authority to use cash register
Pay registration fee and documentary stamp tax 1% of the subscribed capital for corporation.
V. Social Security System
Business owners must secure employer registration number and report all employees for coverage at the Social Security System. Sole proprietors should submit filled out SSS form R-1 for employer registration and SSS Form R-1A for employees listing. While partnership and corporations must submit copies of articles of partnership or articles of incorporation and accomplished form R-1 and R-1a.
Sources:
Introduction to Entrepreneurship, SERDEF and UP ISSI, 2007
How to register your business in the Philippines, Pinoybusiness.org
Photo: “mexican bakery” by scott feldstein, c/o Flickr. Some Rights Reserved