If you have an excellent business idea that you can’t wait to bring to life, one of the easiest ways to set up your venture is through a sole proprietorship. This is the simplest business model that doesn’t need much paperwork. The registrations process for the licenses will also not break the bank. Let’s get started!
What is a Sole Proprietorship?
As the name implies, this business model means you are the sole owner of the business. It is an unincorporated business fully owned by you so that means you are in direct control of its activities. It is popular because of its simplicity! Take a look at its pros and cons below.
• Easy setup and registration
• Lower cost of government application, certificates, permits, and licenses
• Minimal monitoring requirements
• Enjoy running the business how you see fit.
• Benefit from all the profits alone
• You shoulder all the risks and liabilities alone
• Only you will face the losses It can be exhausting to run things solo
• Creditors and government agencies will run after your personal assets in case of arrears or settlements
How to Register
How do you get started? Simple! The very first thing is registering your business name at the DTI or Department of Trade and Industry. You can use your own name or make up a brand name. However, you must search the DTI official site to ensure your chosen name is unique. If it is available, just fill up an application form, pay the corresponding fees, and wait for your DTI Certificate of Registration. This can be done through their online portal, DTI eBNRS.
The next step entails the formal registration of your business in the LGU or Local government Unit where it shall be located. Prepare two valid IDs and proof of address like your lease contract or title. You’ll need to register with the Barangay, where you need to submit your DTI Certificate, along with supplementary documents. After paying a small processing fee, you will receive the Barangay Certificate of Business Registration.
From there, you need to head to the Mayor’s office to file for your Business Permit and Licenses. You’ll need to show the DTI and Barangay Certificate, along with the other IDs as mentioned above and proof of address. You need to fill out a form and secure other necessary permits like fire and sanitary permit. Finally, you will pay the corresponding fees to receive your official business permit. Remember though that different cities may have different requirements and process, so it is helpful if you inquire with them first to avoid delay in the processing.
The last step entails going to the Bureau of Internal Revenue district office closest to your business. Prepare all the certificates you gathered, along with the other identifying documents. Fill out BIR Form 1901 or Application for Registration for Sole Proprietorship and BIR Form 1905 for the registration of the books of accounts. Then you need to pay the annual registration fee using BIR Form 0605 and Documentary Stamp Tax using BIR Form 2000 for loose stamp and for the office space lease if applicable. After this, you can claim your certificate of registration called BIR Form 2303 and claim your official book of accounts and invoices. And you’re done!
Please note that with the new circular issued by BIR through RMC 57-2020, BIR registration can now be done simultaneously with the business permit registration.
What to Do with Employees
If you are hiring staff members for your business, don’t forget to register them with the Social Security System (SSS), Philippine Health Insurance Corporation (Philhealth), Home Development Fund (HDMF) and Bureau of Internal Revenue (BIR) in case they don’t have a tax identification number yet. The government requires all of these, so compliance is mandatory. Work on these papers accordingly to ensure you stay on top of your books, and you don’t encounter any glitches once you start your business operations.
As an employer, you are also required to register with SSS, PHIC and HDMF so you can remit the premium contributions of your employees as mandated by law.
Once you’ve finally completed all the necessary requirements, don’t forget to make copies of these important documents. Most of all, be sure to display this in your place of business to show your clients that you are compliant with all regulatory requirements. These certifications will boost your credibility!
When everything is done, you can now focus on improving your business and serving your clients. If you find it cumbersome to deal with this registration process yourself because of your busy schedule, you can delegate the task to your staff or hire a business registration service provide.