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.
Victorino Q. Abrugar is a marketing strategist and business consultant from Tacloban City, Philippines. Vic has been in the online marketing industry for more than 7 years, practicing problogging, web development, content marketing, SEO, social media marketing, and consulting.
Hi there, I have a question. I have 3 rental houses. I’ve been renting them for awhile but it’s just lately that I register my business. Now my problem is I don’t have records anymore of all the expenses I spent constructing the houses. I heard they are needed for tax purposes so I can post the depreciation amount. Can I just get an affidavit stating the value of the house? Will it be acceptable to BIR? Thanks for any help.
I am 47 years old, been a government teacher for a long time and now thinking of putting up a small business of my own with the help of my older children. We’re in the process of registering. I initially thought it would be good to register as a Partnership so my single children who would have families of their own in the future would have clear rights with the business income. But ALL people who learn of that discourages me and tells me to register the business as Sole Proprietorship instead. They say for it’s for Tax purposes too. I dont understand though. May you please write a blog post that would address this please? Thank you Vic. More power to you.
Hi Vic, Google brought me here when I was searching for registration of business which is an internet type business, I cannot see any relevant information on the BNR website too. My situation is I am doing a business on the internet I am a software developer and I made an online software that brings me clients worldwide, now I want to register my business in the Philippines to show to my client that my company is legal, due to the nature of this business I can operate this at home, so I don’t need to rent an office as this will add some expenses, I understand that this is required but office is only for those who accept local or walk-in clients, but my clients are not here on the Philippines. All I need is just a Business Name registration, thanks.
You may use your home-office as your business address for business registration purposes. But remember that registration with the DTI will only give you a registered business name or trade name, and and not actually a registered business or a license to operate as a business. You still have to be registered with the BIR and other applicable government offices.
Hello There,
My Fiance and I are thinking about making our website (a payment gateway like paypal) to be legalized over in the Philippines. Is this possible?? ALso after we can make it legalized we wnated to open a checking account as well as merchant account in the bank for our business too, since paypal blocked our accounts we can no longer run the business without a payment gateway, so we are thinking about making one and having it legalized over here in Phils.. if it’s possible, what are the requirements for this? Hope to hear from you soon.
Regards,
Sheila