Are you ready to launch your own business this year? As we step into 2024, the prospect of creating a business beckons, offering a new slate to transform entrepreneurial ideas into reality. Whether your drive stems from a compelling passion or an innovative concept poised to challenge the existing norms, this is the perfect time to give life to your business aspirations.
The process of registering a business in the Philippines requires a methodical approach involving various entities such as the Securities and Exchange Commission, Department of Trade and Industry, Bureau of Internal Revenue, and local government units. This guide simplifies and consolidates the intricate steps in business registration, ensuring that all key considerations in establishing a smooth and legally compliant business are tackled.
STEP 1: DECIDE ON THE BUSINESS STRUCTURE
The first important step in starting a business is deciding on its structure. Entrepreneurs must choose whether to embrace the autonomy of a sole proprietorship, the collaborative spirit of a partnership, or the structural resilience of a corporation. Each structure has its own advantages and disadvantages, making it essential to think about what fits best with your intended business goals. Essentially, this initial decision shapes the identity of the business and determines the process for its registration.
|What is it?
|Sole proprietorship refers to a business owned entirely by an individual. This individual holds complete control over the business, being the sole owner of its assets and earnings.
|A corporation is an entity whereby at least two (2), but not more than fifteen (15), incorporators establish a business with a separate juridical personality.1 This means that the corporation has its own assets and liabilities that are distinct from those of its stockholders or members.2
|A one-person corporation (OPC) is a corporate entity where a single stockholder takes on the roles of the sole incorporator, director, and president.3
|A partnership comes into existence when two or more individuals commit to pooling money, property, or expertise into a shared fund, aiming to distribute the resulting profits among themselves.4
|What are the pros?
|The proprietor has complete control and is the sole owner of the business’ earnings.Sole proprietorship entails an easier process for registration.
|Obligations incurred by the corporation, acting through its directors, officers, and employees, are the corporation’s sole liabilities.5A corporation may have perpetual existence.6 A corporation can easily generate funds and raise its capital.
|The owner has complete control over the business.Generally, a minimum authorized capital stock is not required.7 The owner is not personally liable for the company’s debts and setbacks.8
|It may be formed by a mere oral or written agreement.The partners share the workload of managing the business.Raising the capital for the partnership is easier.
|What are the cons?
|The proprietor is personally liable for all the business’ debts and liabilities.Creditors can pursue both the business and personal assets of the proprietor.
|It entails a more stringent process for registration.It demands heavier tax compliance.
|It entails a more stringent process for registration.The owner is taxed like a corporation.
|It demands shared liability even if the setbacks and liabilities are caused by other partners.A partner’s situation can easily cause lack of stability or dissolution of the whole partnership.
|Where do we register?
|Registration should be done with the Department of Trade and Industry (DTI).
|Registration should be done with the Securities and Exchange Commission (SEC).
|Registration should be done with SEC.
|Registration should be done with SEC if the capital is at least PhP 3,000.00.9
STEP 2: SECURE A BUSINESS NAME WITH DTI OR SEC
The next step is securing a name for your business, through registration with DTI for sole proprietorships, or with SEC for corporations and partnerships.
While a business name is not absolutely required for sole proprietorships as one may do business under one’s own name, still securing a business name for all types of ventures provides legal protection, safeguards brand identity, and prevents others in the same industry from using a similar name. This not only boosts the credibility of your business but also plays a key role in establishing brand recognition.
DTI created a simple and convenient approach for registering business names online, which is the Business Name Registration System (BNRS). Below are the steps to register your business name through the BNRS:
- Access the BNRS website.10
- Fill out the online registration forms with all the necessary personal and business details. You will be assigned a reference code, which will be used in all your transactions on the BNRS website.
- Pay the registration fee within seven (7) days from the date of application.
- After confirmation of payment and registration of your new business, proceed to Transaction Inquiry tab and download a copy of the Certificate of Business Name.11
For onsite registration:
- Proceed to the nearest DTI office of Negosyo Center.
- Submit the accomplished Business Name Registration Form, Other Business Name-related Application Form, and Undertaking (These forms may be downloaded from the BNRS website).
- Submit a valid Government ID.12
- Pay the registration fee.
- Claim the Certificate of Business Name Registration.
It is mandatory to apply for and obtain a Certificate of Authority to Engage in Business in the Philippines (CAEB) prior to registering a business. Documentary requirements for applying for CAEB may likewise be accessed and downloaded from the BNRS website.13
Corporation, One-Person Corporation, and Partnership
SEC created a more convenient platform for registering corporations and partnerships online, which is the Electronic Simplified Processing of Application for Registration of Company (eSPARC).
The ESPARC system introduces two registration options:
|eSPARC Regular Processing
|What is it?
|Regular Processing is accessible to diverse corporation types such as domestic stock corporations, one-person corporations, partnerships, nonstock corporations, and foreign corporations. It enables you to tailor your responses on the forms in accordance with the nature and objectives of your partnership or corporation.
|OneSEC is tailored for domestic stock corporations only. This approach simplifies the process by eliminating the review and using pre-filled forms.
|How long will the process take?
|This is subject to review by a SEC officer within a 3 to 7-day timeframe.
|This process involves a one-day registration.
The guide below combines information from both options and aims to assist you in determining the appropriate input for each field:
- Visit the eSPARC website and choose between Regular Processing or OneSEC.14
- Fill out the Application Form’s Section 1 (Business Name Verification) with necessary details such as your chosen SEC Processing Office (for the submission of signed and notarized hard copies of registration documents), company type and classification, major industry classification, and business name.
- Submit the application and wait for the business name to be reviewed automatically by the system. The system will indicate whether the review is still in progress, the review has been successfully completed, or if the business name failed to meet the review criteria.15
In case the application is denied, you may choose another business name, or submit a Name Appeal document, for SEC’s consideration.
This process grants the corporation a legal identity, allowing it to engage in business activities, enter various contracts, and afford protection to shareholders. SEC registration also signifies compliance with legal and financial regulations, thereby enhancing trust and confidence among stakeholders, investors, and the public.
While waiting for your business name to be reviewed, you may proceed to filling out other sections on the eSPARC website:
- Start by filling out the Application Form’s Section 2 (Company Details).
- – In Regular Processing, the primary and secondary purposes of the corporation should be provided.
- – In OneSEC, these are already pre-determined based on your chosen major industry classification.
- Proceed to Section 3 (Capital Structure), which focuses on creating the distribution of ownership within the corporation or partnership. Details regarding the amounts of authorized capital stock, subscribed capital stock, and paid-up capital stock for corporations, as well as the total contribution for partnerships, must be supplied.
- Proceed to on Section 4 (Company Officers), fill out information on each of the company’s officers or partners.
- For Regular Processing, upload supporting documents, if necessary, especially for certain company types (i.e.,foreign-owned corporations) that may require additional documentation.
- Submit the application, pay the fees, and download your interim certificate, application summary form, cover sheet, articles of incorporation/partnership, and by-laws.
- Claim the original Certificate of Incorporation/Recording from the chosen SEC processing office by bringing a copy of the interim certificate, proof of payment, and signed and notarized copies of the application summary form, articles of incorporation/partnership, by-laws, and cover sheet.
STEP 3: REGISTER WITH BIR
After registering with DTI or SEC, the next step is to register with other key agencies like the BIR. Obtaining a BIR registration is very crucial for conducting business activities in the Philippines since non-compliance to tax regulations can lead to severe penalties, fines, and legal repercussions. Running a business is already challenging enough, and it is not advisable to wait for the BIR to nip at your heels and closely monitor your operations.
The BIR has introduced a more accessible and user-friendly registration platform, which is the New Business Registration (NewBizReg) Portal. Applicants are simply required to prepare scanned copies of documents and submit them via email through the portal by following these steps:
- Access the NewBizReg website.17
- Ensure that all necessary documentary requirements are prepared in scanned PDF format, with the total file size of all attachments not exceeding 4MB per email.
- For sole proprietorship, the following documents are required: BIR Form No. 1901 (with attached DTI Certificate of Business Name), Government-issued ID or PRC ID for professionals who are regulated by the Professional Regulation Commission (PRC), BIR Printed Receipt/Invoice or a final and clear sample of your own Principal Receipt Invoices
- For corporations and partnerships, the following documents are required: BIR Form No. 1903, Certificate of Incorporation or Recording (in case of partnership) or License to Do Business in the Philippines (in case of foreign-owned corporations), Articles of Incorporation or Partnership, BIR Printed Receipt/Invoice or a final and clear sample of own Principal Receipt Invoices
3. Download and answer the tax type questionnaire; scan and attach the accomplished questionnaire to the email application.
4. Pay the registration fee and Documentary Stamp Tax.
5. Determine the BIR Revenue District Office where the application should be submitted by entering your business address in the portal.
6. Fill-out the necessary fields and click the Email Your Application.
STEP 4: OBTAIN A BARANGAY CLEARANCE FROM THE LOCAL BARANGAY AND A MAYOR’S PERMIT FROM THE MAYOR’S OFFICE
Securing a barangay clearance is fundamental in registering a business in the Philippines. This document ensures compliance with local regulations, verifies the legitimacy of the business location, and underscores your commitment to fulfilling obligations at the community level. The most common document required to secure this clearance is a notarized lease contract between the business and the lessor of the registered office where your business intends to operate.
Meanwhile, the process of obtaining a Mayor’s Permit guarantees adherence to local ordinances, zoning regulations, and various LGU requirements, thus acting as a tool for governance oversight. It plays a vital role in upholding community health and safety standards and is a prerequisite for acquiring additional licenses. Essentially, this document serves as proof that the business legally operates within their jurisdiction. Hence, it fosters an organized business environment that enhances community stability and well-being.
STEP 5: COMPLETE THE REGISTRATION WITH SSS, PHILHEALTH, AND PAG-IBIG
For corporations, partnerships, and sole proprietorships intending to hire employees, the final step in the business registration process involves enrolling with the Social Security System (SSS), PhilHealth, and Pag-IBIG.
|Why do I need to register?
|SSS registration grants employees an access to social security benefits such as sickness, maternity, disability, retirement, and death benefits. Every business is required to undergo registration with the SSS and obtain an employer number, which serves as a reference for monthly contribution remittance.
|PhilHealth registration ensures compliance with national health insurance regulations and provides your employees with access to various health care services and benefits.
|Pag-IBIG registration contributes to the financial well-being of your employees by giving them access to housing loans and other benefits.
|What are the documentary requirements?
|Employer Registration Form (R-1)
Employment Report Form (R-1A),
Articles of Incorporation/Partnership
|Employer Data Record (ER1)
PhilHealth Membership Registration Form (PMRF) for each employee
Articles of Incorporation/Partnership
Once registered, you will be issued a PhilHealth Employer Number (PEN) and Certificate of Registration as well as the PhilHealth Identification Number (PIN) and Member Data Record (MDR) of registered employees.20
SSS R-1 and/or SSS R-1A
SSS R3 forms
BIR Certificate of Registration
Articles of Incorporation/Partnership
Board Resolution with Authorized Signatories (for corporations) 21
Download the Employer’s Data Form (EDF) and Membership Savings Remittance Form (MSRF) from the Pag-IBIG website and submit them with the required documents to the nearest Pag-IBIG branch for verification. You will then receive a printed EDF with the Registration Tracking Number (RTN) for monthly contributions. Note that the Employer ID Number is only issued after completing the Pag-IBIG Employer’s seminar.
START YOUR BUSINESS RIGHT
Business registration and legal compliance is the foundation of a responsible, successful, and sustainable enterprise.The entire process may appear tedious but remember that each step is a proactive move to ensure a fail-safe venture.
To ensure a smooth and secure registration process, you may avail guidance from legal professionals; and with their assistance, let your entrepreneurial spirit finally take flight, and your business become a testament to your success and innovation!
Prepared by Samantha Famae Feril.
- Section 2, R.A. 11232.
- The Linden Suites, Inc. vs. Meridien Far East Properties, Inc., G.R. No. 211969, October 04, 2021.
- Sections 116 and 121, R.A. 11232.
- Article 1767, Civil Code of the Philippines.
- Heirs of Fe Tan Uy (Represented by her heir, Mauling Uy Lim) vs. International Exchange Bank, G.R. No. 166282, 13 February 2023.
- Section 11, R.A. 11232.
- Section 117, R.A. 11232.
- Section 130, R.A. 11232.
- Article 1772, Civil Code of the Philippines.
- https://bnrs.dti.gov.ph/ (last accessed January 31, 2024).
- Department of Trade and Industry (DTI), Registration Guide, https://bnrs.dti.gov.ph/resources/registration-guide (last accessed January 31, 2024).
- Annex 2 of the DTI Administrative Order No. 18-07, Series of 2018, provides that [t]o establish the identity of the BN owner/applicant and/or authorized representative, the following government-issued identification documents may be presented for business name registration and other business name-related transactions: 1) Passport 2) Driver’s License 3) Professional Regulation Commission (PRC) ID 4) National Bureau of Investigation (NBI) Clearance 5) Police Clearance 6) Postal ID 7) Voter’s ID 8) Unified Multi-Purpose ID 9) Overseas Workers Welfare Administration (OWWA) ID 10) Seaman’s BOOK 11) Integrated Bar of the Philippines (IBP) ID 12) Senior Citizen’s ID 13) Persons with Disability (PWD) ID 14) Government Office ID 15) Validated State College/University ID 16) Philippine Identification (PhilID or printed ePhilID). Other government-issued identification document not listed above may be accepted as long as it bears the BN owner’s/applicant’s or authorized representative’s printed full name, signature and photograph and must be valid and active at the time of application.
- DTI Memorandum Circular No. 22-06, Series of 2022.
- https://esparc.sec.gov.ph/application (last accessed January 31, 2024).
- SEC, User Guide OneSEC Processing of eSPARC, https://esparc.sec.gov.ph/docs/OneSEC%20Processing%20of%20eSPARC%20User%20Guide.pdf; SEC, User Guide Regular Processing of eSPARC, https://esparc.sec.gov.ph/docs/UserGuide-esparc.pdf (last accessed January 31, 2024).
- https://www.bir.gov.ph/newbizreg/ (last accessed January 31, 2024).
- Bureau of Internal Revenue, How to Register through NewBizReg Portal, https://www.bir.gov.ph/newbizreg/ (last accessed January 31, 2024).
- List of requirements can be seen on the Employer Registration Form (SSS R-1).
- PhilHealth, Employer Registration, https://www.philhealth.gov.ph/partners/employers/registration.html (last accessed January 31, 2024).
- List of requirements can be seen on Employer’s Data Form (EDF).