Starting a Business: Procedures

It is a MUST to obtain necessary registrations and permits if you would like to open a business in the Philippines.  While all Local Government Units (LGUs) share the same legal and institutional framework, however interpretation and implementation varies from one city or municipality to another.  Thus, steps or the business application procedure per se may be more in one city or municipality as compared to another city or municipality.

For your reference, I am posting here the procedures for a corporation starting a business in Quezon City.  The minimum capital requirement of a corporation is Php5,000.00. Here are the steps.

Step 1. Verify the availability of the company name with the Securities and Exchange Commission (SEC). It will take you one (1) day to accomplish this and the amount is about a range of Php40 – Php100.  You can also verify the availability of the company name on-line. Verification is free but reservation of the name, once approved by the SEC, costs Pph40 – Php100 for the first 30 days. The company name can be reserved for a maximum of 120days for a fee of Php120 – Php150, which is renewable upon expiration of the period.

Step 2. Obtain bank certificate of deposit of the paid-in capital from the Authorized Agent Bank (AAB).  Perhaps one day or less and no cost.

Step 3. Register the company with the SEC and receive preregistered taxpayer’s identification number (TIN).  This time processing is about a maximum of three (3) working days.  The cost of  filing fee equivalent to 1/5 of 1% of the authorized capital stock or the subscription price of the subscribed capital stock, whichever is higher but not less than PHP 1,000 + PHP 15 legal research fee (LRF) equivalent to 1% of filing fee but not less than PHP 10 + PHP 510 articles of incorporation and bylaws + PHP 470 stock and transfer book (STB) required for new corporations; fee includesregistration of the STB).

Step 4. Obtain Barangay clearance.  Another one (1) day and the cost is between Php500 – Php1,000.  This clearance is obtained from the Barangay where the business is located and is required to obtain the business permit from the city or municipality. Barangay fees vary for each Barangay since they have the discretion to impose their own taxes, fees and charges. Barangay fees may depend on: (1) The location and the area (size in square meters) of the place of business; or (2) The company’s paid-up capital and the area it occupies; or (3) Whether they issue clearance plates or certificates.

Step 5. Obtain the community tax certificate (CTC) from the City Treasurer’s Office (CTO).  This is another one (1) day and the cost is at the range of Php500 – P1,000.  Please take note however that  the company must pay an annual community tax. The basic community tax depends on whether the juridical entity is a company, partnership or association. Additional community tax (which shall not exceed PHP 10,000) depends on the value of real property owned by the company in the Philippines (Php2 for every Pph5,000) and on the gross receipts including dividends/earnings derived from businessin the Philippines during the preceding year (Php9 for every Php5,000). The CTC is issued to the company upon payment of the community tax and is a prerequisite to obtain the Barangay clearance.

Step 6. Obtain the business permit application form at the Business Permit and Licensing Office (BPLO). One (1) day processing at about Php50 – Php100 and you need the following documents (1) SEC registration; (2) Barangay clearance; (3) Locational clearance; (4) Certificate of electrical inspection; (5) Fire safety inspection certification.

Step 7. Notarize the business permit application form at the notary.  Again, one (1) day and the cost is about Php50 – Php100.

Step 8. Obtain the fire clearance from the the Bureau of Fire Protection (BFP).  One (1) day and the cost is Php200 – Php300.

Step 9. Obtain the business permit to operate at the BPLO.  Now this time processing and waiting is about six (6) days.  And the cost is about Php5,000 which includes business tax +  mayor’s permit + sanitary permit + signboard fee + plate + QCBRB + zoning clearance + garbage fee.

Step 10. Buy special books of accounts at bookstore.  Another one (1) day and cost is perhaps Php400 – Php1,000. Please take note that special books of accounts are required for registering for VAT. The books of accounts are sold at bookstores nationwide. One set of journals consisting of four books.

Step 11. Register for value added tax (VAT) at the Bureau of Internal Revenue (BIR). Timeline is two (2) days and the cost is Php550 – Php1,000 which includes registration fee + certification fee + documentary stamp tax.

Step 12. Pay the documentary stamp taxes (DST) for a day. The company must pay DST on the original issuance of shares of stock. The rate is PHP 1 on each PHP 200 or a fractional part thereof, of the par value of such shares of stock. This payment with the BIR should be made on the 5th of the month following registration with the SEC.

Step 13. Obtain the authority to print receipts and invoices from the BIR. The authority to print receipts and invoices must be secured before the sales receipts and invoices may be printed. The company can ask any authorized printing company to print its official forms, or it can print its own forms (i.e., it uses its computers to print loose-leaf invoice forms) after obtaining a permit from BIR for this purpose. To obtain the authority to print receipts and invoices from the BIR, the company must submit the following documents to the Revenue District Office (RDO) or concerned office having jurisdiction over the principal place of business: (1)Duly completed application for authority to print receipts and invoices (BIR Form No.1906); (2)Job order; (3)Final and clear sample of receipts and invoices (machine-printed); (4) Application for registration (BIR Forms No. 1901 or 1903); (5)TRU form or photocopy of TIN card; and (5)Proof of payment of annual registration fee (BIR Form No. 0605).

Step 14. Print receipts and invoices at the print shops another one (1) day of waiting is seven (7) days and the cost is Php5,000 (between Php3,500–Php7,000). The cost is based on the following specifications of the official receipt: 1/2 bond paper (8 ½ x 5 ½ cm) in duplicate, black print, carbonless for 10 booklets.

Step 15. Have receipts, invoices and books of accounts stamped by the BIR for a day and no cost.  After the printing of receipts and invoices, a Printer’s Certificate of Delivery (PCD) is issued, which the company shall have stamped as “Registered” by the BIR. RDO or concerned office having jurisdiction over the principal place of business.

Step 16. Register with the Social Security System (SSS), no cost but you have to wait seven (7) day processing. To register with the SSS the company must submit the following documents – (1)Employer registration form (Form R-1); (2) Employment report (Form R-1A); (3) List of employees, specifying their birth dates, positions, monthly salary and date of employment; and (4) Articles of incorporation, bylaws and SEC registration or the certificate of registration with the Department of Trade and Industry (DTI). Upon submission of the required documents, the SSS employer and employee numbers will be released. The employees may attend a SSS training seminar after registration. SSS prefers that all members go through such training so that each member is aware of their rights and obligations.

Step 17. Register with the Philippines Health Insurance Company (PhilHealth). No cost but a day of waiting. To register with PhilHealth, the company must submit the following documents – (1) Employer data record (Form ER1); (2) Report of employee-members (Form ER2); (3) SEC registration; (4)BIR registration; and (5) Copy of business permit. Upon submission of the required documents, the company shall get the receiving copy of all the forms as proof of membership until PhilHealth releases the employer and employee numbers within three months.

There seventeen (17) steps to accomplish everything. For the cost and number of days, go get your calculator and sum everything.  🙂