If you are starting a business in the Philippines, you must know that you have to undergo a business registration or registration process for your business to operate thoroughly. Whether you are a foreign or individual, you must do compliance, a series of getting business permits to adhere to the country’s regulations. 

Suppose you are a budding entrepreneur or starting in the business scene. In that case, you should dive into this article, as we will give you a comprehensive guide on registering a business in the Philippines.

Register a Business in the Philippines

Understanding the Importance of Business Registration in the Philippines

Having your business registered creates a standard for your business. If you are going to build an online freelance business, or if you have an existing business that is not yet registered, you should register it now.

Let’ see some of the benefits of the business registration:

  • Government Benefits – The local government of the Philippines and other government agencies/local government units support businesses by giving free webinars/seminars, workshops, trade events, etc., to let other business owners know more about your company or industry.
  • Aversion to Unnecessary Risks or Penalties – Not registering your business and failing to secure legal documents can get you high penalties. Aside from the fines punished by law, you can also have the risk of going to jail.
  • Good Reputation – Business registration indicates that your business and company are legal, which would make customers trust your product and services.
  • Your Tax Returns Can Be Proof of Income – Tax returns only mean that you are certified to pay, which means that your business/company is earning and has passive income. Internal revenue is boosted.

These benefits can guarantee you an excellent operating business for the following years with fewer risks or problems that may occur. Also, this would create a good relationship between you and your customers, future partners/investors, etc.

Business registration in the Philippines is essential because it complies with Republic Act No. 3883, also known as the Business Name Law. Any business name not registered with the Department of Trade and Industries (DTI) is illegal.

Identifying the Business Structure that Fits Your Needs

Identifying your business structure is one of the most essential parts in starting up your business.

Below, we will review some of the business structures that you can choose from, so you can decide which is the best fit for your business.

Sole Proprietorship

This is one of the most uncomplicated business structures/entities. A sole Proprietorship means that only one person is responsible and reliable for the company’s profits and debts. It is like a one-person corporation.

The sole Proprietorship has several advantages: low cost, easy to set up, limited tax burden, and easy to exit or end the business. Sole proprietorships must register with the Department of Trade and Industries (DTI).

Corporation

There is a law that regards the separation of the corporation from its owner; it is with legal rights independent of its owner. It can be owned and sold ownership rights in the form of stocks.

There are six types of corporations:

  • S Corporation is for small businesses.
  • Shareholders own C Corporations, and they are taxed as separate entities.
  • B Corporations, also known as benefit corporations, are structured to have a positive and good impact on society.
  • Open Corporations are for trade in a public market.
  • Shareholders typically run Closed Corporations. They are sometimes referred to as privately held companies.
  • Nonprofit corporations are created to help people in some way, and they have tax exemptions. 

Remember that you need to register with the Securities and Exchange Commission (SEC).

Limited Liability Company (LLC)

The LLC provides business owners with liability protection that corporations indulge in while allowing losses and earnings to just come through to the business owners as income on their tax returns.

Many small existing businesses have this structure, but some large companies choose this legal structure.

Partnership

A partnership is a legal structure that two or more individuals own. It can be classified into two categories: a general partnership (where everything is shared equally) and a limited partnership (where one owns and the other partners contribute and earn, too).

It also must be registered with the SEC.

Cooperative

A co-op is owned by the people it serves or serves. It is also called user-owners. Choosing a co-op is complicated because it requires you to choose a business name that indicates whether you are a corporation (having these in the business name: Inc., Ltd, etc.).

A business structure or legal structure is a government classification that determines the aspect of your business. The business legal structure also determines the tax burden on your business entity after it becomes fully operational.

You need to carefully identify your business structure as early in your brainstorming for business ideas.

Cooperative

Conducting Name Verification and Reservation

Your Business Name is one of the most essential things in your business. To get known by the public, you must have a unique and appealing business name aside from your products or services.

Brainstorming ideas and creating an outline mapping with business names corresponding to your product, services, or core missions are fundamental. Get feedback on the name. And lastly, conduct a trademark search and always ensure you like the name you choose.

To verify if the name you choose is not yet registered, you need to follow these simple guidelines:

  • You can check with DTI if your preferred business name is already registered.
  • You cannot register a business name if you see that this particular business name is registered as a trade, trademark, or business name of any government agency.
  • If you are a corporation or partnership, you can check if your proposed company name is registered via the Iregister system of the Securities and Exchange Commission (SEC), or if the system is down, you can go to the Name Verification Unit at G/F Secretariat Building, PICC Complex, at Roxas Boulevard, Pasay City.

If you are a Sole Proprietorship company, you can reserve your business name in DTI with a 200 PHP reservation fee. If you are a Corporation or partnership, you can reserve your business or proposed company name at SEC for 30 days with a 100 PHP reservation fee.

Conducting Name Verification

Obtaining Barangay Clearance and Mayor’s Permit

Some business permits you need to obtain are Barangay Clearance and Mayor’s Permit. To acquire a Barangay Clearance, you must visit your barangay hall, bring your valid government-issued ID with your place’s address as proof of residency, and then submit a duly accomplished form.

Barangay clearance is typically free, but some Barangays have filing fee/registration fees for as low as 20 PHP.

To acquire a Mayor’s Permit, you need to obtain all initial basic requirements such as SEC/DTI/CDA registration form, Finished Application Form, Least contract or land title, and Sketch of the business location/business address.

You would also need to acquire permits and clearances such as Barangay Clearance/Barangay Business Clearance, Proof of Residency/Certificate of Residence/Registration Certificate, Building Permit, Electrical Inspection Permit, and Zoning clearance.

After that, file your requirements and application to the Bureau of Permits (BP) or Business Permit Licensing Office (BPLO) at your municipal or city hall.

After filing your application, you must acquire a Community Tax Certificate (CEDULA). After obtaining a cedula, you must take an assessment facilitated by a BP/BPLO officer. After that, submit all requirements and the Official Billing Address to the designated office. You will be redirected to the cashier’s office to pay some fees. 

After paying the fees, present your paid application/registration fee/ official receipt or the payment form as proof to acquire a Fire Safety Inspection Permit from the Fire Department. 

The same goes for obtaining a temporary Sanitary Permit from the Sanitary department. Finally, once again, submit all the acquired requirements and permits to the designated office. Then that’s it; you will immediately get your Mayor’s Permit, so wait for its release.

Obtaining Barangay Clearance

Registering with the Securities and Exchange Commission (SEC)

Domestic and foreign corporations who want to start a business in the Philippines must register their company with the SEC. The same goes for a new business that wants to start a corporation or partnership.

There is a regulation in the Philippines that you must register your business and strictly follow before you can operate, trade, or buy shares of stock, interests in companies, and other financial or personal assets. If you are going for company incorporation, you must register with the SEC.

The required documents for registering a corporation with the SEC still vary depending on your company’s nature and business operations.

Here are the most basic requirements:

  • Articles of Incorporation (AOI);
  • By-laws;
  • SEC Registration form;
  • Joint Undertaking to Change Name;
  • Clearances/Permits from government agencies/local government units.

Here are the requirements for registering partnerships with the SEC:

  • Cover Sheet;
  • Your reservation payment proof/confirmation;
  • Articles of Partnership (AP);
  • Joint Undertaking to Change Name.

Stock Corporations, Domestic Corporations, Resident Foreign Corporations, Non-stock Corporations, and Partnerships are the business structures that must register with the SEC. Businesses registering with the SEC must deposit their minimum capital requirement to get approved, too.

If your application is approved, you will get an SEC registration certificate. This would allow you to start your business in the Philippines.

Securing a Tax Identification Number (TIN) from the Bureau of Internal Revenue (BIR)

Registering with the Bureau of Internal Revenue (BIR) is essential in setting up an entity in the Philippines. The taxpayer identification number/tax identification number is used to ensure that your business/company gets the appropriate credit for taxes paid.

Here is what you need to register a TIN for Self-employed/Sole Proprietor and Mixed-Income Individuals, Non-Resident Aliens Engaged in Trade, Business, Trusts, and Estates:

  • Get a BIR Form 1901;
  • Any ID/Identification issued by the following government agencies who are authorized (Birth Certificate, National ID, Passport, Community Tax Certificate, Driver’s license, etc.);
  • Prepare 500 PHP for the Registration Fee and 30 PHP for loose DST or Proof of Payment of the Annual Registration Fee (ARF);
  • BIR printed receipts, sales invoice.

All individuals engaged in trades/business should accomplish or file registration before operating the business.

Here is what you need to secure a TIN for Corporations and Partnerships (Taxable/Non-taxable):

  • Get a BIR Form 1903.
  • Photocopy of acquired SEC Certificate of Incorporation.
  • In case of partnership: Photocopy of Certificate of Recording.
  • In case of foreign corporation: Photocopy of License To Do Business in the Philippines.
  • Articles of Incorporation (AOI) or Articles of Partnerships (AOP).
  • BIR printed receipts/invoices.

Accomplish the BIR Form 1903 and submit it. After that, pay the following at the New Business Registrant Counter in the BIR Office: Annual Registration Fee – 500 PHP, Documentary Stamp Tax – 30 PHP, and BIR printed receipt/invoice (if needed only). All corporations/partnerships must accomplish or file registration before operating the business.

Registering with the Philippine Health Insurance Corporation (PhilHealth)

All private sector and government employers must register and comply with Philippine Health Insurance Corporation/PhilHealth to give them the power to provide social health insurance benefits for their employees. This is important when you’re starting a business in the Philippines.

If you are registering as an individual, here’s what you need to do:

  • Go to PhilHealth express/branches or any Local Health Insurance Offices (LHIO).
  • Fill out two (2) copies of the PhilHealth Member Registration Form (PMRF).
  • Submit the application form to LHIO or PhilHealth Express.
  • Wait for the Member Data Record (MDR).
  • Wait for the PhilHealth ID card.
  • Pay if there are necessary contributions using your Philhealth card.
  • Know the schedule of payments.

If you are an employer, you must register with the Philippine Business Registry (PBR), obtain an employer registration form, and submit it. Once registered, you no longer need to go to Philhealth, and then you can register your employees once you start hiring.

Enrolling with the Social Security System (SSS)

Registering as an employer to the Social Security System (SSS) is essential, especially if you are a newly registered business. You must check your business registration documents, permits, licenses, certificates, employees’ information/data, and proof of income/Financial records of the company before registering with SSS.

Two processes for enrolling with SSS are Online Registration and In-Person Registration. For online registration, you must go to the SSS website and create/register an account. After creating an account, submit the requirements by uploading all necessary documents. Once approved, you’ll receive a confirmation from SSS.

For the in-person process, you must visit the nearest SSS branch and bring all necessary documents. After that, submit all your requirements to the SSS officer in charge. Once approved, you’ll receive confirmation.

Complying with the Home Development Mutual Fund (Pag-IBIG) Registration

According to Republic Act 9679, all employers must register their employees to a home development mutual fund or Pag-IBIG. This means that if you are an entity, your business is to Pag-Ibig first.

Here are what you need before applying:

  • Accomplished Employer’s Data Form;
  • Accomplished Specimen Signature Form;
  • Mayor’s Permit;
  • Proof of SSS certification;
  • For Sole Proprietorship – DTI Certificate of Registration;
  • For Corporations, Partnership – SEC Certificate of registration, Article of Incorporation or Article of Partnership, and by-laws;
  • For Cooperative – Articles of Cooperation, CDA Certificate;
  • For Trade – SEC Certificate, AOI and by-laws.

After getting all the requirements, go to Pag-IBIG’s website and download and complete the Employer Enrollment Form. After that, submit the duly accomplished form to the Pag-IBIG branch near you and await the status via email.

Fulfilling Other Regulatory Requirements and Compliance Obligations

In the Philippines, an Occupational Tax Receipt or OTR is a legal document issued by a local government unit / LGU to businesses, individuals engaged in trade, or occupation within the scope of their jurisdiction.

This tax is also known as a professional tax and must be acquired if you are starting a business or a professional.

On the other hand, a Professional Tax Receipt is proof of your annual payment of professional tax. This receipt would enable you to practice your profession without any issues.

These other regulatory requirements are not prioritized when registering a business but are compliance obligations.

Fulfilling Other Regulatory Requirements

Business online registration is convenient, especially now that the digital age is constant. 

Suppose you are starting a business in the Philippines and still need to learn about the procedures and steps to register your business; aside from this article as a guide, you can find some business registration services online.
They will help you register your business and polish the process through and through, starting from the application form, SEC certificate, etc.

Frequently Asked Questions

What is the difference between an Occupational Tax Receipt (OTR) and a Professional Tax Receipt (PTR)?

While both are taxes, their main difference is that OTR is for entities and individuals engaged in business, trades, or any form of business, while PTR is for individuals who are licensed for their profession and engaged in the practice of their profession.

Do foreigners need special licenses to do business in the Philippines?

Yes, all foreign business persons must obtain a License to Do Business from the Securities Exchange and Commission (SEC) before starting business operations in the Philippines.

What is Authorized Capital Stock?

It refers to the maximum number of shares a company is legally allowed.

Sources:

  1. Business Registration Requirements and Permits in the Philippines
  2. Application for TIN – Bureau of Internal Revenue