Congratulations! You’ve finally found a viable business – buying and selling, making and selling or performing a service. (Thank you, Instagram!) Your first customers – family, friends and friends of friends – won’t ask you about receipts and business registration. However, if you want to grow, become a legitimate business and be able to deal in a wider circle of customers, suppliers and even financial institutions, you have to register your business.
Here are the steps and a few tips for this painstaking (but potentially worth it!) process of registering your business as a sole proprietorship (which means you’re an entity without partners):
1. Open a separate bank account.
This is not a registration step but it is necessary to separate your personal money and your business money. This will enable you to gauge the available funds of the business as well as the cash collected and spent by the business. This will eliminate the risk of you spending the business’s money in personal purchases or vice versa.
2. Secure a Tax Identification Number (TIN) with the Bureau of Internal Revenue (BIR).
This step may be skipped if you are employed. Refer to step 5 for the additional step to be able to secure a BIR Certificate of Registration and an Authority to Print receipts and invoices.
3. Register your business name with the Department of Trade and Industry (DTI).
Registering with the DTI will give you exclusive rights to your business name for five (5) years. You can apply online by visiting bnrs.dti.gov.ph. The website also allows you to search for business names to avoid revisions to your business name in the application process due to duplication.
If you intend your business to be available nationwide especially if you plan to sell online, best to choose “National” under territorial jurisdiction on the Business Name Application Form For Sole Proprietor. It’s more expensive (P1,000 registration fee + P15 documentary stamp tax) but it can save you the hassle of updating.
Again, business name registration is valid for five (5) years. Best to renew early (three (3) months prior to expiration) to avoid cancellation and penalties.
4. Register your business at your local government unit (LGU) or city hall.
The location of your office will dictate from which LGU you will need to secure a business permit. If your business address is in Quezon City, you will have register at the Quezon City Hall. If your business address is in Marikina, you will have to register at the Marikina City Hall. The list of requirements may differ in each LGU, which you may secure from the LGU’s website or at their Business Permit and Licensing Office. Common requirements along with the business permit application form are:
- Barangay Clearance which you may secure at the Barangay Hall where your business will be located;
- DTI Certificate of Business Name; and
- Contract of Lease, if renting, or Title to the Property and Tax declaration, if owned. If you are using your parents’ house, you need to secure a letter of permission from them that they are allowing you to use their residence as a business address.
5. Register your business with the BIR to secure a Certificate of Registration and an authority ot print receipts and invoices.
First, you have to determine your Revenue District Office (RDO). You may find the list of the different RDOs and their jurisdictions online. Quezon City for example is composed of at least four RDOs – RDO No. 28 Novaliches, RDO No. 38 North Quezon City, RDO No. 39 South Quezon City and RDO No. 40 Cubao. If you are not certain of the jurisdiction, you may inquire at the nearest BIR office.
Second, you have to fill out and submit BIR Form No. 1901: Application for Registration For Self-Employed and Mixed Income Individuals, Estates and Trusts with the following attachments:
- Birth certificate or any document showing name, address and date of birth of the applicant;
- Mayor’s permit, if applicable; and
- DTI Certificate of Business Name to be submitted prior to release of the Certificate of Registration
The RDO may require additional attachments such as the Contract of Lease.
You need to pay an annual registration fee of P500 and have your books of accounts (at a minimum two (2) books: cash book and a general ledger) stamped registered.
Lastly, you need to fill out and submit BIR Form No. 1906: Application for Authority to Print Receipts and Invoices with the following attachments:
- Application for Registration;
- Proof of payment of Registration Fee; and
- BIR Certificate of Registration
This will provide your registered printer the authority to print your invoices and receipts.
Note that your BIR Certificate of Registration will contain your tax types (e.g. income tax, registration fee, etc.) which will dictate your BIR filing deadlines. It is important that you calendar these deadlines to avoid incurring penalties and fines due to late filing.
6. Do the accounting or hire someone trustworthy and competent.
Accounting may not be fun but it’s critical to the success of your business.
These steps might be tedious but if you see that your business has the potential to grow, it’s worth it. Good luck, ladies!