CHAPTER 9

• Legal considerations


  Requirements the startup venture must comply with to avoid legal issues later
• Intellectual property (IP)


  Properties the new business should figure out and ensure to do it exactly right
• Ideas in your mind have no patent value. They must be expressed or reduced to practice before it is too late
• Before a business could start its operation it must secure the necessary documents for legality
• Enterprise by asset size (in pesos)

  • Micro (up to 3 million)
  • Small (Between 3 & 15 million)
  • Medium (Between 15 & 100 million)
  • Large (Above 100 million)
• Enterprise by number of employees

  • 1-9 employees
  • 10-99 employees
  • 100-199 employees
  • Above 199 employees
• Percentage of enterprises by size

  • Micro: 89.63%
  • Small: 9.50%
  • Medium: 0.44%
  • Large: 0.43%
• Benefits of doing business in the Philippines

  • Domestic and regional market opportunities
  • Favorable economic conditions
  • Comfort of travel
  • Business conducted in English
• Business structures in the Philippines

  • Sole proprietorship
  • Partnership
  • Corporation
  • Cooperative
• Sole proprietorship


  The simplest form of business entity where one person is responsible for all a company's profits and debts
• Advantages of sole proprietorship

  • Easy setup
  • Low cost
  • Tax deduction
  • Easy exit
• Partnership


  Entity owned by two or more individuals, can be general or limited
• Advantages of partnership


  • Easy to form
  • Growth potential
  • Special taxation
• Corporation


  The law considers a corporation as an entity separate from its owners, with its own legal rights
• Types of corporations


  • C corporations
  • S corporations
  • B corporations
  • Closed corporations
  • Open corporations
  • Nonprofit corporations
• Advantages of corporations


  • Limited liability
  • Continuity
  • Capital
• Cooperative


  The business must register with the Cooperative Development Authority (CDA)
• Business registration


  1. Apply for business name and register with DTI (sole proprietorship)

  2. Obtain Certificate of Registration from SEC (partnerships and corporations)

  3. Obtain homeowner's/barangay clearance

  4. Obtain business license/mayor's permit
• Requirements for sole proprietorship registration

  • Copy of government ID
  • Proposed business name registration form
  • Payment of registration fees
  • Employee data form
  • Municipality permission letter
  • Location and barangay clearance
  • Community tax certificate
  • Fire safety and electrical inspection certificate
  • Occupancy certificate and building permit
  • Contract of lease
• Requirements for partnerships and corporations registration

  • Secure unique business name
  • Accomplish SEC application form
  • Draft and notarize required documents (Articles of Incorporation, By-laws, Treasurer's Affidavit)
  • Deposit minimum paid-up capital
  • Obtain necessary licenses/permits
• LGUs


  Local government units, can be cities or municipalities
• The procedures for obtaining a permit may differ based on the local regulations and ordinances the city or municipality seeks to implement
• The annual basic and additional community tax can be paid at the City Treasurer's Office (CTO)
• The basic tax would depend on the business activity and must not be higher than PHP 500
• Other clearances or certificates that some companies need to secure

  • Location clearance
  • Fire safety and inspection certificate
  • Mechanical permit
  • Certificate of electrical inspection
  • Sanitary permit
• Requirements for getting a Mayor's Permit in the Philippines

  • Application Form
  • Certificate of Registration from SEC/DTI/CDA
  • Barangay Business Clearance
  • Community Tax Certificate (CTC or Cedula)
  • Contract of Lease/Transfer Certificate of Title
  • Sketch/Pictures of the business location (3 copies)
  • Public Liability Insurance
  • Locational/Zoning Clearance
  • Certificate of Occupancy (Building and Unit)
  • Building Permit and Electrical Inspection Certificate
  • Sanitary Permit
  • Fire Safety Inspection Permit
• A business tax payer identification number (TIN) from the Bureau of Internal Revenue (BIR) must be obtained along with an SSS number (for the business and employees)
• Documents required for registering a company with the SEC

  • Company name verification slip
  • Articles of incorporation (notarized) and by-laws
  • Treasurer's affidavit (notarized)
  • Statement of assets and liabilities
  • Registration data sheet with particulars on directors, officers, stockholders, and so forth
  • Written undertaking to comply with SEC reporting requirements (notarized)
  • Written undertaking to change corporate name (notarized)
• Taxes required to be paid to the government as per the Certificate of Registration issued by BIR (BIR Form 2303)


  • Corporate income tax
  • Value-added tax
  • Withholding taxes (on compensation, fringe benefits, etc.)
• Registering a business with the BIR

  1. Gives the authority to print the official receipts and invoices

  2. Formally register the Tax Identification Number (TIN) provided for the company in the Certificate of Registration issued by SEC

  3. Register the books of accounts required to annually register with BIR to serve as official record of the business transactions for the fiscal year
• Applying for Sales Invoices/Official Receipts through BIR Form 1906 - Authority to Print Receipts and Invoices


  1. BIR Form 1906 (Authority to Print)

  2. BIR Certificate of Registration (Form 2303)

  3. Final and clear sample of Principal and Supplementary Commercial Receipts and Invoices

  4. BIR Certificate of Registration of Accredited Printer

  5. BIR Annual Registration Fee (Form 0605) of Accredited Printer

  6. Job order

  7. Quarterly report of Accredited Printer
• Registering books of accounts and having them stamped by the RDO where the business is registered

  1. BIR Certificate of Registration (Form 2303)

  2. New sets of books of accounts (General Journal, General Ledger, Cash Receipt, Cash Disbursement, Subsidiary Sales Journal, Subsidiary Purchase Journal)
• The BIR examiner will usually advise the owner the types of books and taxes applicable to a business upon the initial taxpayer's briefing
• Any new venture must also apply for registration in other government entities
• Bureau of Internal Revenue (BIR)


  The taxing authority in the Philippines in authority for regulating taxation and collecting internal revenue taxes
• For new employees without a Tax Identification Number (TIN)


  The owner needs to require the employee to file BIR Form 1902 to the Revenue District Office (RDO) where the company is registered
• For new employees with existing TIN

  1. If the employee already has an existing TIN from his previous employer and it is registered with the same RDO as the company, either the employee or HR personnel needs to submit a BIR Form 2305 to update his information

  2. If the employee obtained his TIN from their previous employer and it is registered in a different RDO as the company, the employee needs to submit a BIR Form 1905 in the RDO where his previous employer is registered
• The updated BIR Personal Income Tax Table under TRAIN Law
• PhilHealth


  The Philippine Health Insurance Corporation, a government agency that provides health and hospitalization subsidies to its members
• For employees - Applying for PhilHealth membership


  Each new employee needs to fill-up and sign a PhilHealth Member Registration Form (PMRF) and submit it to the PhilHealth office where the business is registered