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Introduction to Business Banner

A business is essentially an activity of providing either goods or services for a profit. While that is the primary goal, a business also enables job creation and contributes to the overall growth and development of the economy.

There are many different types of businesses, ranging from small businesses such as sole proprietorship, to large businesses that are regarded as multinational corporations.

In recent years, there has been an increase in online businesses as well largely due to the lockdown during the COVID pandemic, which resulted in Filipinos needing to shop online for their daily necessities. That aside, home-based businesses such as handmade products, or dropshipping became popular too since these businesses do not require any physical presence.

 

Considerations to Starting a Business

There is always risk and uncertainties when starting a business and in order to minimise that, careful planning and consideration of various factors are required. To help you with it, here are some areas of consideration:

The type of product or service
What do you want to sell, and how competitive is the current market?

Target market
Who are your target customers and what are their demographics and interests?

Financial resources
How do you want to start your business based on your budget?

Human resource
Do you need to hire additional headcounts to help run the business?

Legal
Do you have the appropriate license and permits to operate your business?

 

Types of Businesses

As covered briefly in the introduction, there are several types of businesses and below is an explanation of each type:

 

    1. Sole Proprietorship – The business is owned and operated by one person.
    2. Partnership – Two or more people operate the business together where resources and profits are shared.
    3. Corporation – A group of people that acts together as a single entity. ‘Shareholders’ are the term used to describe its owners.

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Types of Business Size Classifications

Apart from the type of business, it can also be further classified into business size. How it’s being classified is based on the number of employees and its total assets. The table below better illustrates the breakdown of each business size classification:

 

Business Size Employs Total Assets
Micro 10 not more than P3,000,000
Small 11 – 99 P3,000,001 – P15,000,000
Medium 100 – 199 P15,000,001 – P100,000,000
Large 200 or more P100,000,001 or above

 

How to Set Up a Business in the Philippines

Knowing how to set up a business in the Philippines is important too. It’s always good to understand the process to prevent any delays or restrictions that can impact the time, money and effort invested in the business.

It can be quite a tedious process if you do not know how to start and that’s why we’ve created the list below to help you understand better.

Do note that the application process should follow in the same order below.

1. Find and Establish A Business Address

The first step for all types of business is to register for a physical address as this information will be required when applying to the various government agencies.

2. Secure Barangay Clearance

Barangay is the smallest administrative unit in the Philippines. All businesses are required to obtain clearance from the Barangay they belong to and below is the following items they require:

 

    • A valid government-issued ID (at least 2)
    • DTI or SEC certification
    • Contract of lease (if office space is rented) or title and tax declaration (if office space is owned)

3. Local Government Unit (Lgu) Registration

Known locally as a mayor’s business permit. To secure a license to operate in a city (e.g. Makati, Pasig, Quezon City) the following list of items are required:

 

    • Locational Clearance (obtained from the Zoning Administration Division within city hall)
    • DTI or SEC certification
    • Contract of lease (if office space is rented) or title and tax declaration (if office space is owned)
    • Barangay clearance
    • Comprehensive general liability insurance

Additional requirements may be needed depending on the nature of your business.

4. Bureau of Internal Revenue (BIR) registration

The next step is to fulfill tax compliance requirements. Identify which BIR Revenue District Office (RDO) your business will be subjected to. A city or a portion of a city may be under the jurisdiction of an RD. This is indicated by a set of numbers (e.g. 47 for East Makati, 43 for Pasig).

And provide the following form based on your business type:

 

    • BIR Form 1901 (for single proprietorship)
    • BIR Form 1903 (for partnership and corporation)
    • BIR Form 0605 (Tax payment form)
    • BIR Form 2000 (Documentary stamp tax)
    • BIR Form 1905 (books of account registration)
    • BIR Form 1906 (Authority to print receipts)
    • BIR Form 2303 (Certificate of registration)
    • DTI or SEC certification and other relevant documents
    • Barangay clearance
    • Mayor’s business permit

Additionally, there are requirements when registering employees to the BIR:

 

    • Employee TIN
    • Birth certificate or any government-issued ID
    • Certificate of employment or company ID
    • Marriage certificate (if employee is married)
    • Birth certificate of dependents (if applicable)

5. Social Security System (SSS), PhilHealth, and Pag-IBIG (housing fund)

It is mandatory for all types of businesses to register as employers with SSS, PhilHealth, and Pag-IBIG. Your employees are required to be registered with these agencies too.

For SSS employee registration (prerequisite for Pag-IBIG):

 

    • SSS number of employee
    • Valid primary ID or two secondary IDs
    • SSS Application form or R1A Form

For PhilHealth employee registration:

 

    • PhilHealth identification number
    • PhilHealth member registration form or PMRF (for both PhilHealth members and non-members)
    • PhilHealth report of employer members or ER2 Form

For Pag-IBIG employee monthly contributions:

 

    • Pag-IBIG membership ID
    • Membership savings remittance form or MSRF (filed monthly, with names and membership details of employee)

 

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