Business Registration

Registering a business in the Philippines can be tedious and takes a lot of time, but with GL Inc., we’ll lift this burden off your shoulder to ensure that your business starts as early as possible. Our team of experienced CPAs will focus on registering your business to the proper government agencies.

Here is an overview on Business Registration Philippines:

Business Name Registration

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If you are a single proprietor your business name should be registered. By registering your business name with the DTI, you are assured that no other entity may legally use your business name anywhere in the Philippines.

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If you’re registering a corporation or a partnership, you must register your business with the Securities and Exchange Commission (SEC). The SEC is the government agency that is responsible for securities laws and regulating the securities industry in the Philippines. The commission has the jurisdiction and supervision over all corporations, partnerships or association who are grantees of primary franchises and or a license or permit by the Government.

A corporation or partnership must secure a certificate of registration with the SEC in order to have the license to operate a business. That certificate is also required by the Bureau of Internal Revenue and Mayor’s office to get registration and license from them.

 

CONSEQUENCES OF NOT REGISTERING THE BUSINESS

Someone else can use your name. If they register their business name as theirs, you will have to change your business name an all associated information relating to your business (letter head paper, envelopes, tax documents, advertising, etc). That will certainly cost you more than just the fees associated with registering your business name. There is no tax associated with registering your business name, just a fee. Taxes are paid from your business income – if any. Also, if you are forced to change your business name because someone else registered and uses the name, you will most likely lose your customers. They will look for your business name, and find it. But they won’t find YOU. They will find the other business – your competition.

Mayor's Permit

You will obtain this at your respective Local Government Unit (LGU), which is either the City Hall (for cities) or the Municipal Hall (for towns and municipalities). The permit affirms that your business is in compliance to the municipality or City’s ordinances and standards such as sanitary, fire and safety and other clearances.

FAILURE TO SECURE MAYOR’S PERMIT

  • Forced to Close
    A business caught operating without a license could be forced to cease operations.
  • Fines and Fees
    Not having a business license is illegal, but how large a legal infraction it is considered depends on the industry, location and depth of licensing requirements.
  • Lawsuits
    If you conduct business without a license, and a customer decides he is not pleased with the product or service offered him, he can sue in small claims court, using fraud as one reason for the lawsuit. The fact is, doing business without a license is a fraudulent act.
  • Loss of Reputation
    If a business is caught operating without a license, this can cast doubt on the business’ ability to conduct business in an ethical or competent fashion. Customers could be left to draw the conclusion that if the business did not follow procedures to operate legally, they might not follow customer directives either.

Tax Matters

Bureau of Internal Revenue

The BIR certificate of registration shows your business 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.,).

It is here where you will get your permit to print your Official Receipts or Invoices. The BIR will be requiring you to register your book of accounts and these should be stamped with the Seal of the BIR.

 

Penalty for failure to register business with the BIR

How much is the penalty if you started business operation but you fail to register your business with the Bureau of Internal Revenue (BIR)? According to Revenue Memorandum Order No. 19-2007 issued on August 10, 2007, which prescribes the Consolidated Revised Schedule of Compromise Penalties for violations of the National Internal Revenue Code (NIRC), the criminal penalty and the amount of compromise penalty imposed for not registering a business with the BIR are as follows:

  • Criminal penalty imposed
    Fine of not less than P5,000 but not more than P20,000 and imprisonment of not less than 6 months but not more than 2 years.
  • Amount of compromise
    If the subject establishment is located in the ff:

    1. Cities 20,000*
    2. 1st class municipalities 10,000*
    3. 2nd class municipalities 5,000*
    4. 3rd class municipalities 2,000*

    * Penalties provided are inclusive of all other violations

Source: ftp://ftp.bir.gov.ph/webadmin1/pdf/36076Annex%20A.pdf

Registration of Local Benefits

  • Social Security System (SSS)
    Employer is required to register their business and employees with the SSS. An employer who does not report employees is violating the Social Security Law. Registering employees ensures that, as an employer, you are lawfully remitting your employer’s contribution to the agency for the benefits of your employees. The Social Security System is aimed at providing protection for the SSS Member against socially recognized hazard conditions, such as sickness, disability, maternity, old age and death, or other such contingencies not stated but resulted in loss of income or results of financial burden.BASIS: Republic Act 1161 – Social Security Law
  • Philippine Health Insurance Corporation (Philhealth)
    Employer is required to register their employees with PhilHealth and remit their share of contribution to the agency. Aside from being mandatory, this is also to ensure that employees are covered by health insurance that will aid them in hospitalization costs and other health care needs. BASIS: Republic Act 9241 – an act instituting a national health insurance program for all Filipinos and establishing the philippine health insurance corporation for the purpose.
  • Home Development Mutual Fund (Pag-IBIG Fund)
    Like SSS and PhilHealth, employer is also required to 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. BASIS: Republic Act 9679 – Home Development Mutual Fund Law of 2009

CONSEQUENSES OF FAILURE TO REGISTER AS EMPLOYER

The SSS itself may sue employers’ that failed to register their companies as employer, failed to remit and report their employees’ contribution. Example of this was the article written March of 2013 by Rain Castro via InterAksyon.com