Labels exist for classification and for establishing an identity, most especially in terms of career. You would often hear questions like “What are you? What do you do?” and quite often, there is this compulsion to answer with an actual profession or title, like content creator, attorney, etc. Or maybe you have had labels in personal relationships, to set boundaries that tell you what you can and cannot do.
As someone making an income, think of this as having a relationship with the Philippine Tax collecting body (BIR) and the Philippine legal system. You will need a label. This is why your type of business registration is important because it tells those enforcing laws just what to expect from you, what you do, and how they should address collecting taxes from you, serving summons, and the like. It also signals to you just what you are allowed to do and provide within the limits of the law.
This business registration is a label you cannot escape, as it serves to ensure that you are taxed correctly. Any failure to comply results in penalties and even being brought to court. The first step to deciding what you should register as when you practice a profession in a gig economy or are a freelancer is to know your options, which are to register as an Independent Professional or a Sole Proprietor. Which one should you choose? Everything you need to know is listed below.
A sole proprietorship is a business type owned by a single individual. It is often the registration opted for by small or home-based businesses, where the sole proprietor has full control over the company, unlike partnerships and corporations. That said, the sole proprietor has full ownership of all the company’s assets. However, the sole proprietor is also responsible for all business liabilities. And any arrears could be taken from the proprietor’s personal assets. Sole proprietors are able to enjoy all the profits and losses of their business.
The proprietor of the business and his proprietorship, or his business, are to be considered as one in the same taxpayer with a single TIN. If you want to register as a Sole Proprietor, you must first secure a TIN. Then, you must register your trade name with the DTI, whose forms can be found online.
Next, work on obtaining Mayor’s Business permits, and register with SSS, PhilHealth, Pag-Ibig Fund, and other applicable government agencies. Additionally, you may need to secure necessary certification from other government departments depending on the nature of your business. If you are in the food industry, for example, you need to follow all DOH and FDA sanitation regulations. If all of these sound tedious, you can hire a professional accounting firm that offer business registration services to help you fill process the requirements.
Even if you are not operating an organization, like a formal business organization, but you you are still providing services to customers, that income is still taxable under Philippine Tax laws. Yes, this includes all the income that you earn while you’re working from home or remotely. You will have to register as an Independent Professional.
Noteworthy, filing an ITR is not required if your income is generated from interest on bank deposits and has already been subjected to final withholding tax. Under other circumstances, like having a gross income in excess of your total additional and personal exemptions, requires filing an ITR with the BIR forms 1701 of 1701Q.
You must register with the BIR, SSS, PhilHealth, and Pag-Ibig Fund. There is no need to register with the DTI since your full name will act as your trade name. Again, if you need to facilitate the process, it would help to get in touch with a CPA firm since they offer business registration services.
Register with the BIR to Make Things Legit
In the early stages of freelancing, working on your “label” or business registration may not be a priority. However, it is best to get it done early on, as not only will it save you from incurring penalties and being charged with tax evasion, but it will also legitimize your practice.
Having a registration means that you can issue official receipts, which many big-time clients ask for in order to properly document their own purchases, allowing you to earn a lot more. You will also be able to access government benefits, like SSS retirement benefits, PhilHealth health insurance benefits, and Pag-Ibig Fund loan programs.
Lastly, you can properly market and advertise your services, thereby improving revenue, without fear of legal punishment. If you’re ready to register your small operations, get in touch with our accounting firm as we provide business registration services. We can help you comply with the requirements and secure the registration certificate ASAP.