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2022 Guide in Registering your Business as Sole Proprietor

2022 Guide in Registering your Business as Sole Proprietor

Many business owners opt to start their new business under a Sole Proprietorship. The setup process can be a little easier, quicker, more efficient and less paperwork with minimal cost.
 

What is a Sole Proprietorship?

A single proprietorship is the simplest form of business organization in the Philippines. It is operated by just one owner who has complete authority over the business and is personally responsible for all of its assets and debts.
 
While sole proprietorship owners get to enjoy all profits earned by their business, they are also fully responsible for losses, debts, and liabilities.
 

Sole Proprietorship vs One Person Corporation

Since sole proprietorship is operated by one owner, it has no separate legal personality from the proprietor conducting the business, and the assets of the sole proprietorship are similarly owned by the proprietor conducting the business. The obligations that the sole proprietorship incurred in conducting the business may be enforced against the proprietor. A sole proprietorship is registered with the Department of Trade and Industry.
 
Since an OPC is a corporation with a single stockholder, it has a legal personality separate and distinct from the sole stockholder of the corporation. The assets of the OPC are not owned by its sole stockholder unless the OPC is not adequately- financed and/or the assets. The obligations of the corporation cannot be enforced against its sole stockholder unless the situation warrants piercing the veil of corporate fiction. An OPC is registered with the Securities and Exchange Commission.
 

How to set up a sole proprietorship in the Philippines?

To start a sole proprietorship, you’ll need to go to three different government agencies: The Department of Trade and Industry (DTI), your Local Government Unit (LGU) or Barangay, and the Bureau of Internal Revenue’s Revenue District Office in the city where you plan to set up your business.
 
Keep in mind that you cannot be officially registered as a sole proprietorship if you do not have complete documents and requirements from these three agencies.
 
Here’s a brief overview of the steps required to set up a sole proprietorship in the Philippines:
 

1. Register your business name with the Department of Trade and Industry (DTI) 

  • Come up with a name for your business then check on the DTI website if this is available
  • If the name is available, fill out the Business Name Registration Form (BNRF) on the website, then download and print a hardcopy
  • Submit the completed form to the DTI branch where you’re setting up the business, along with your TIN and five other potential business names, ranked according to your preference
  • Pay the registration fees
  • After submission of the form and payment of fees, wait one to two days for the Certificate of Registration

 

2. Register the business with the barangay where your business is located and secure a Barangay Certificate of Business Registration

  • Get a registration application form at the barangay office
  • Complete the form and submit it to the barangay office, along with the following documents:
    • DTI Certificate of Registration
    • Two valid IDs
    • Proof of Address for the business, which could be a Contract of Lease or a Certificate of Land Title
  • Pay the registration fee
  • Wait around two days to claim the certificate

 

3. Register the business with the mayor’s office and obtain a Mayor’s Permit

  • Get and accomplish a registration application form at the municipal office
  • Submit the completed application form together with the following:
    • DTI Certificate of Registration
    • Barangay Certificate
    • Two valid IDs
    • Proof of address
  • Pay the necessary fees, which may include the following:
    • Plumbing inspection fee
    • Electrical inspection fee
    • Building permit fee
    • Sign board permit fee
    • Sanitary permit fee
    • Retail permit fee
    • Garbage collection fee
    • Occupational tax
    • Occupational police/health clearance fee

 

4. Register the business with the Bureau of Internal Revenue and obtain a Certificate of Registration

  • Obtain the following BIR forms online or at the BIR Regional District Office (RDO) of your business’s location:
    • BIR Form 1901 Application for Registration for Sole Proprietorship
    • BIR Form 0605 (Payment form)
    • BIR Form 2000 Documentary Stamp Tax on Lease
  • Complete and submit the forms at the RDO for assessment, along with the following:
    • DTI Certificate of Registration
    • Barangay Certificate
    • Mayor’s Permit
    • Two valid IDs
    • Proof of address
  • After your registration is assessed, pay the assessed fees at a bank accredited by the RDO. Submit the accomplished BIR Forms 0605 and 2000 to the bank.
  • After the payment is made, go back to the RDO and submit the payment forms, proofs of payment, and the other documents mentioned above. Make sure your documents are complete or the BIR may not process your application.
  • You will be given a claim stub that states when you can claim your BIR Certificate of Registration (COR), usually after three to five days.
  • Upon claiming your COR, you will also be given an “Ask for Receipt” notice that is recommended to be prominently displayed in your business premises

 

5. Register your book of accounts with the BIR

  • You will need the following books, which you can buy at any bookstore:
    • Journal
    • Ledger
    • Cash receipt book
    • Cash disbursement book
  • Download BIR Form 1905 and BIR Form 0605 from theBIR website or get them from the RDO
  • Accomplish the forms and bring them to the RDO registration section along with your books for stamping

 

6. Apply for an Authority to Print (ATP) Receipts and Invoices with the BIR

  • Get a list of BIR accredited printing presses in your district
  • Accomplish BIR Form 1906, which you can get online or at the BIR RDO
  • Submit the form to the RDO along with your BIR Certificate of Registration and BIR Form 0605 (payment form)
  • Have your receipts printed and wait around 7 to 14 days for their completion

 

Advantages of a Sole Proprietorship

 

  • Easier to set up, register and manage
  • Sole proprietor has complete control of the business
  • Sole proprietor acquires all assets and profits of the business
  • Requires a minimum amount of capital
  • Minimal regulations and compliance requirements from government agencies
  • Lower cost in registering for government permits and licenses
  • Minimal regulations and monitoring requirements

 

Disadvantages of a Sole Proprietorship

 

  • Sole proprietor manage and operate the business on your own which sometimes leads to exhaustion
  • Sole proprietor is subject to personal liability for the debts, losses, and liabilities of the business
  • Personal lawsuits against the sole proprietor can potentially consume all their personal assets and negatively affect the financial aspects of the business
  • Lawsuits filed against the business are also deemed as lawsuits filed against the owner
  • As sole proprietor, creditors of the owner or of the business itself can reach both the business and the owner’s personal assets, and if such lawsuits are successful, the owner is obligated to pay the damages with his or her own money

 
You know what’s best for your business. Make your business into a corporation today. Let Filepino guide you through this process. Email us at [email protected]