You started it as a hobby, and then you’ve decided to start a small business out of it. It can be online, such as website development, search engine optimization, graphic designing or selling stuff on the Internet. It might also be something you’ve started at home without the Internet, such as scented candle making, cake baking, dressmaking, or providing talent lessons to interested students. Now, with your growing customers or clients, you might want to register your small business with the right government agencies to make it legal. I’m not entirely saying that your small business is illegal, but operating a business and earning significant income without the proper license to operate might be against some laws, especially tax laws. To learn how to legalize your small business, here are some discussions and resources to guide you.
Start registering your business
You can register your business with the right government agencies either as a sole proprietorship, partnership or a corporation. These different types of businesses have their own characteristics. A sole proprietorship is fully owned and controlled only by its sole owner – the proprietor. A partnership is owned by multiple owners called partners. A corporation, which is a separate legal entity from its owners, is owned by shareholders or stockholders. You may read our post about the “advantages and disadvantages of forming a corporation” to learn more about establishing a corporation.
If you don’t have partners or co-owners on your small business, you can opt to register your business as a sole proprietorship. This type of business is the easiest and least expensive to register compare to partnership and corporation. It is also easy to dissolve and can be transformed into a partnership or a corporation if decided in the future.
Business registration in the Philippines
If you’re doing business in the Philippines, you may read our article on how to register a business in the Philippines. This article will give you resources on how to register your business with the different Philippine government agencies and units, such as SEC (Securities and Exchange Commission) for corporations and partnerships, DTI (Department of Trade and Industry) for registering your business name, Mayor’s Office for getting Mayor’s business permit, and BIR (Bureau of Internal Revenue) for registering your business, official receipts, and books of accounts.
The BIR requires every business establishment in the Philippines to display their certificate of registration, proof or BIR return for payment of current annual registration fee, poster “Ask for BIR Receipt” or “Notice to the Public to demand receipts/invoice, and others that the bureau may require. They also conduct regular tax mapping to examine if these requirements are followed by businesses and may imposed penalties once a business doesn’t adhere to it.
Benefits of registering your small business
Every business should be run with the proper authority or license to operate. A number of small business owners or professionals who generate income from their business or practice of profession don’t want to register or legalize their business to avoid paying and spending on taxes and licenses. But avoiding the law will not make any business go far in terms of success. There are many advantages of registering even a small business. Some of these advantages are the following:
1. You will have your own official receipts and invoices which your customers or clients will insist to ask
2. You will not be penalized or imprisoned by the tax authorities and other licensing agencies for not registering your business
3. A registered business will invite more customers, suppliers, investors and even creditors
4. You can open business bank accounts
5. You can also apply for small business loans
6. You can hire full time employees just like other registered companies
7. You can maintain your business reputation and promote it to the public
8. You can pay taxes and contribute with the government
9. You can also have your own income tax return as your proof of income for obtaining loans and for transacting with the government agencies
10. and many others.
Now, if you want to be a business person with integrity and legality, it would be wise if you can start legalizing your small business now. Finally, a legal business is not only achieved through registration, business owners should also consistently fulfill their tax, licensing and reportorial obligations.