How to Set Up a Sole Proprietor Business in the Philippines (Part 1)

Nowadays a lot of SMEs are sprouting like mushrooms in the age of the Millennials. People are more aware of what business they want to engage themselves with. And with the recent economic growth, more and more people are enticed to set up a Sole Proprietorship.

What is a Sole Proprietorship?

It’s a type of Business managed and owned by a Single Individual. There are other Business Types like Partnerships and Corporations. But for the ease of starting a new business with a modest capital, this is the best option.

What are the Pro’s and Con’s of a Sole Proprietorship?

Lets enumerate some of the Pro’s and Con’s

Pro’s

Less Fuss in Set up and registration. Other Business Types can require you to register with the SEC as part of Business Regulation and Control. Sole Proprietorships don’t include this process.
Capital Requirements are minimal. Same goes with cost related to Government permits and licenses.
Decision making and profits are enjoyed by a Single Individual.

Con’s

All Liabilities, Losses, and Risks are shouldered by the Owner.
All Business Strategies originate from an Individual which may not always be best. Sometimes a business can run smoothly if there are a select number of people who can pitch in more resources like Capital, Contacts, and Ideas.
If your business becomes bankrupt, the Government and some creditors can go after your personal assets besides the one that you invested in the business.

Government Agencies where you need to register your Sole Proprietorship:

1. Department of Trade and Industry (DTI)
You will need to procure a DTI Certificate of Registration to ensure that your business name will be unique. This will avoid problems of being identified with an existing enterprise. If you have a Franchise Business, there will be additional requirements to be submitted to the DTI.

2. Intellectual Property Office of the Philippines
If you have a Trademark or Logo, you need to register this to avoid copycats from taking advantage of it once your business prosper.

3. Local Government Units where your business is situated:

Barangay
Mayor’s Office

You need to register and secure a Certificate with these Local Government Units where your business is located. Fees that you will pay may vary depending on your capitalization. Additional requirements maybe required like Contract of Lease if you are renting or a Certificate of Land Title if you own your place of business. If you are conducting business on the residence of your relatives or friends without paying rent, there will be no other requirement.

4. Bureau of Internal Revenue (BIR)
After procuring your certificates from the DTI, Barangay, and Mayor’s Office, you need to register them to the BIR. They are the regulating body that make sure you are paying your taxes correctly. You will also need to bring a photocopy of your Lease Contract or Certificate of Land Title. But if you are neither renting or owning your place of operations, this will not be necessary.

If you are engaged in multiple businesses, - ie Retailing, Professional Services (e.g. Bookkeeping), and Printing Services - you can register them all in one Certificate of Registration with the BIR. Of course, it will entail a bit more complex accounting when you consolidate your Financial Reports.

For Licensed Professionals such as Accountants, Doctors, Lawyers, and the like who are setting up a Professional Services Firm or Clinics, there will be other requirements needed to set up the Proprietorship. The BIR have a complete list of these requirements. As an example and in the case of Certified Public Accounts, their requirements usually include a Certification that you have undergone some kind of Audit Experience of the practice for a certain number of years. You would need it verified and signed by an already established CPA.

We will be showing you the rest of the Procedures on Part 2 of How to Set Up a Sole Proprietor Business.