Setting up a sole proprietorship business is considerably faster and simpler than partnerships and corporations. Thus, this type of business organization is ideal for startups and small businesses with less complicated operations and organizational structure.
The Steps in Registering Your Sole Proprietorship Business
Step 1: Register with the Department of Trade and Industry
The first step of registration involves securing a Business Name Registration Certificate from the Department of Trade and Industry or DTI. You should go to the specific DTI office where the business is located.
Requirements and Reminders:
• One valid government-issued ID and one photocopy of this ID. Some examples of valid IDs include passport, UMID, LTO license, PRC ID, and Voter’s ID.
• Accomplished Business Name Registration Form or BTRCP FORM 16A. This is available online. Accomplish this form in duplicate.
• It is also better to prepare a list of your preferred business name. Having three or more alternate names is better.
• Registration fee depending in the territorial coverage of the business name: PhP 200 for Barangay, PhP 500 for Municipal or City, PhP 1000 for Regional, and PhP 2000 for National.
Outcome: Business Name Registration Certificate
Step 2: Secure a Barangay Clearance for Business Operation
Once you have secured your Business Name Registration Certificate from the DTI, you need to go to the barangay where your business is located to secure a Barangay Clearance for Business Operation.
You need to present your Business Name Registration Certificate, one valid government-issued ID, and proof of business address to the barangay. The fee is usually at PhP 500.
Outcome: Barangay Clearance of Business Operation and a plaque indicating registration number with the barangay
Step 3: Apply for Business Permit and License from the Municipality/City
The second step involves applying for a business permit and license to operate from the municipality or city where your sole proprietorship business is located.
Requirements and Reminders:
• General Requirements: (1) Business Name Registration Certificate from the DTI; (2) One valid government-issued ID; (3) Barangay Clearance; (4) Community Tax Certificate; and (5) Picture of the Site and Sketch of Location
• Specific Location Requirements: (1) Contract of Lease if you are renting the establishment where your business is addressed; (2) Clearance from the Homeowners Associated if the business is located in a private subdivision; and/or (3) Building Permit if it is addressed in a low-rise to a high-rise building.
• Other Permits and Certifications: (1) Fire Safety and Inspection Permit; (2) Electrical Inspection Certificate; (3) Health Clearance; and/or (4) Sanitary Permit. Note that these documents are obtainable within the municipal or city hall itself, as well as within its entire business registration process.
Additional requirements may vary depending on the municipal or city hall, as well as on the nature of the business. In addition, you need to produce an authorization letter if someone will be registering on your behalf.
The fee also depends on the assessment of the municipal or city that is generally based on your indicated capitalization amount. There are also fees for securing fire safety and inspection permit, electrical inspection certificate, health clearance certificate, and garbage collection.
Note that you may be asked to provide a sector-specific clearance depending on the nature of your business. Learning centers would need clearance from Department of Education, pawnshops from Bangko Sentral ng Pilipinas, travel agencies from the Department of Tourism, food and cosmetics from the Food and Drug Administration, and woodcraft and furniture making from Department of Environment and Natural Resources.
Outcome: Mayor’s Permit and other certificates and permits from the municipal or city hall such as fire safety and inspection permit, electrical inspection certificate, health clearance certificate, as well as a plaque indicating registration number with the municipal/city hall
Step 4: Register the Business with the Bureau of Internal Revenues
You need to register your sole proprietorship business with the Bureau of Internal Revenues or BIR for proper tax compliance. Note that you need to go to the specific BIR Provincial Office or Revenue District Office assigned to the location where your business is addressed.
If you do not have a TIN yet, you will be able to get one under this step. However, if you already have one, your business will use your existing TIN, or in other words, your taxpayer details will include information about your registered business.
Requirements and Reminders:
• General Requirements: (1) TIN if you already have one; (2) One valid government-issued ID; (3) DTI Business Name Registration Certificate; and (4) Mayor’s Permit or Application for Mayor’s Permit.
• BIR Forms: (1) BIR Form 1901 or Application for Registration for Self-Employed Single Proprietor; (2) BIR Form 0605 or Payment Form for Certificate of Registration; and (3) BIR Form 1906 or Application or Authority to Print Receipts and Invoices. Additional: BIR Form 1905 or Application for Registration Information Update/Correction/Cancellation for those with existing TIN and previous employment records.
Outcomes: BIR Certificate of Registration, Official Receipts or Invoices, Registered Books of Accounts, and the “Ask For Receipt” notice board.
Step 5: Registering Your Sole Proprietorship Business for Compliance
There additional requirements for you to register your sole proprietorship business fully, particularly to ensure that you comply with applicable laws, including labor laws such as employee-employer relationship, incentives and benefits, and social and environmental responsibilities.
Hence, if you have employees, you need to register with the Social Security System, Department of Labor and Employment, PhilHealth, and PAG-IBIG fund. As noted earlier, depending on the nature of your business, you need to secure permits from relevant government agencies or offices.
Summary: Simplified Steps in Registering Your Sole Proprietorship Business
• Step 1: Register with the Department of Trade and Industry – For securing Business Name Registration Certificate
• Step 2: Secure a Barangay Clearance for Business Operation – For obtaining a Barangay Clearance of Business Operation and the serialized Barangay Plaque
• Step 3: Apply for Business Permit and License from the Municipality/City – For securing a Mayor’s Permit and other pertinent permits and licenses, as well as the serialized Plaque from the Municipal/City Hall
• Step 4: Register the Business with the Bureau of Internal Revenues: – For obtaining a Certificate of Registration, Official Receipt or Invoices, Registered Books of Accounts, and the mandated “Ask For Receipt” notice board.
• Step 5: Registering Your Sole Proprietorship Business for Compliance – For securing compliance with the SSS, DOLE, PhilHealth, and PAG-IBIG by registering employees, as well as for complying with special-purpose permits or licenses.