Planning to Start a Business in the Philippines?
The Philippines is hailed as the sleeping tiger of Asia, making it a mecca for new businesses that will soon be known worldwide. Consistent economic growth has been sustained over the past years, placing it at a good standing in the eyes of both local and international investors. The presence of business establishments also accounts for the country’s economic growth. It’s fascinating to note that both SMEs and large-scale companies thrive in the Philippines, capitalizing on the country’s potential.
Generally, starting a business in the Philippines can be challenging but with the right effort and mindset, anyone can be successful. A few things should be kept in mind before starting a business.
Key Factors to Consider Prior to Starting a Business in the Philippines
Without any ideas or experiences in business, you might find yourself scrambling in the dark planning for your business. Thankfully, with this guide, you will have an idea of how you will want to manoeuvre your own business. Below are factors you may want to consider in starting a successful business:
1. Business Idea
Identifying what your market needs will help shape what your business will be and what it can offer. This way, it will be much easier for you to build a comprehensive and profitable idea. Determining the right business structure (sole proprietorship, partnership, or corporation) is also necessary at the early stages of business formation. It is also vital to take note of all the legal procedures and registrations that need to be met whilst figuring out which business structure your venture will fit under.
Business owners must utilize skills that they already have and relate these to the business concept to ensure success. Consumers develop their trust in brands when businesses can validate their expertise and assure the quality of their products and services. Engaging in continuous learning is very important to acquire expertise, knowledge, and strategies that will make your services or products more credible in the eyes of the consumer.
3. Target Consumers
Ideally, you must study and understand your consumers’ needs and preferences so that your business can effectively cater to what they are looking for. Being able to communicate with your consumers gives you a good foundation. It would also be beneficial to you as your business grows in the future.
In addition, you must take into consideration how vast the market of consumers is and how you will penetrate your core market for continuous sales and return customers. Starting with one target market is ideal to see how consumers respond to your products or services and any adjustments must follow suit.
Handling your available funds will play a crucial role in your business. Estimation of your probable costs must also be considered in relation to the magnitude of how small or big your business will be. You need to have a budget set for tools, equipment, and utilities. Budgeting for your projected start-up costs will help you control and determine your profits and losses.
One of the main challenges for new businesses would be the existence of competition. This is inevitable when owning a business – therefore, you must handle this with an open mind. Learning a thing or two from your competitors will benefit your business by adopting some strategies that may eventually spearhead you above the competition. Investing your time in formulating a unique and mind-blowing concept will help you keep up with trends or possibly be a trendsetter yourself.
All these will help bring in new and fresh eyes to your business. Basically, all that you have to do is to show why you’re the better choice.
6. Online Platforms
The new age of technology has provided us with a lot of conveniences in terms of communication, banking, education, shopping, and even in business. Many startups use social media platforms such as Facebook, Instagram, and YouTube to promote and establish the existence of their brand. Taking advantage of these platforms would help increase the reach of diverse markets. Incorporating this into your marketing strategy will be highly beneficial.
Most businesses need a physical office to become a legal entity in any country. The placement of your business will make or break your chances of attracting the right amount of consumers to keep you afloat. The perfect location will be an area wherein your business is the only establishment that would cater to a specific service or product. Setting up a shop near your competitor may bring unwanted attention which you can surely live without.
Compelling Reasons to Start a Business in the Philippines
The Philippines has been one of the countries in Asia with consistent development for the past years. With multiple government projects like infrastructures in development, there is no stopping how fast this country will rise in the next few years.
Further, below are the reasons why you should choose the Philippines for your business:
1. Consistent Economic Growth
The Philippines is considered to be a developing economic country and has been able to sustain growth. According to Motoo Konishi of the World Bank, the Philippines is no longer the “sick man” of Asia but rather Asia’s “rising tiger”. This is due to recognized macroeconomic stability within the government’s finances and the battle against its existing corruption. The World Bank Organization also stated that it is “one of the most dynamic economies of East Asia” and it could “post the fastest economic growth in the next 10 years” according to Oxford Economics.
2. A Tourist Destination
In 2018, the Philippines was a venue for over 7 million tourists who enjoyed the vibrant natural lands and bustling cities all around the country. It is filled with some of the most beautiful beaches in the world and a few untouched locations spewing with culture and the arts. Tourism itself boosts the country’s economy by a huge margin, which can be good for both homegrown and foreign businesses.
In 2019, the country has accumulated a population of 106 million people, which translates to attracting more consumers. This creates more demand and fulfilment for various forms of businesses such as transportation, education, food, and more! Most businesses are taking advantage of the population by developing a consumer-driven approach to business.
Applying for a visa in the Philippines for your business trips has been made easier nowadays, in comparison to its counterparts in Asia.
Essentially, the processing time will depend on your nationality. However, it will be faster if there is already a visa agreement between your country and the Philippines. Presenting the required documents as soon as possible will ensure that you will be approved within two (2) to ten (10) business days.
5. English Speaking Country
Communication will be the least of your problems when you come to the Philippines. Filipinos are naturally sociable and bilingual since English is the country’s second language. Apart from Tagalog and various dialects, most locals are very fluent in understanding and speaking in English.
Before You Start a Business in the Philippines
Starting a business will be a lot of work, which is why proper planning for your application and registration would ease the possible hurdles that you may come across. A finalized business concept must be decided before processing your registrations.
1. Business Registration and Requirements
Knowing which business structure you will fall under is one of the first steps that you need to take before fully committing to your business. There are three business structures in the Philippines (i.e. sole proprietorship, partnership, and corporation). Each structure requires different documents to be fulfilled.
Organizing the required documents for the different government sectors (i.e. BIR, SEC, LGU, etc.) beforehand will save you time, money, and effort. Take note that further requirements will be asked of you if you consider hiring employees. This would mean that you would have to prepare for extra papers required by other government sectors (i.e. SSS, Philhealth, BIR, etc.).
If the business will require a physical office, you should be able to conduct research and compare prices. This way, you can determine which one suits your preference and target market the most. Of course, having the right amount of money to start your business and budgeting it right is one of the most important factors to consider. You will need to reserve a big budget for your registrations, leases, utility expenses, and employee salaries.
3. Advisors and Mentors
Seeking mentors to provide you with constructive criticism and advice will help you have a bigger view of how to run your business. Their expertise will surely lead you to find blind spots that you never considered beforehand. The mentoring will thrust you into a reality check, giving you the vital opportunity to skim out possible problems until your business starts running smoothly.
It is convenient to have someone you can trust by your side while you enter the heart-raising world of business. Keep an open mind to any opinion you will receive and incorporate the lessons you learn for the growth of your business.
4. Continued Learning
Lastly, make sure you have the right skills and sufficient knowledge of the business that you’re getting into. Making an effort to learn will definitely help you manage your business better and keep you on top of things at all times. Expertise in your business can be honed if you take necessary lectures or seminars regarding your chosen field.
Establishing a business in the Philippines will be a long process. It would require the registration of your business in multiple areas of the government. Different types of ownership will undergo various procedures and after completion of the following steps, your business will be legal and fully operational. You must also keep in mind that you will need to register/apply your employees to government benefits such as the Bureau of Internal Revenue (BIR), Social Security System (SSS), PhilHealth, and Pag-IBIG fund. Listed below are the procedures for the different business structures:
Sole Proprietorship Registration
1. Department of Trade and Industry (DTI) registration
This sector certifies the registration of your unique business name and the agreement that you will solely own that name. You can check DTI’s website for the availability of your proposed business name. You must come up with three unique business name options to write down on your application. Once accomplished, DTI will issue a Certificate of Registration.
The requirements are as follows:
- Three unique business names
- Filled application form (can be downloaded from the website)
Visit DTI’s website for more information.
2. Local Government Unit (LGU) Registration
Upon your compliance with DTI, you must proceed to the LGU where your business will be established. It is ideal to visit the LGU before your application to be aware of the requirements needed to be presented.
- Secure a Barangay clearance
Fill out an application form and submit the completed form together with your Certificate of Registration from DTI. A barangay clearance will be issued.
- Secure a Business permit from the Mayor’s office
You may check out the city’s website for requirements if available. You will need to fill out an application form and submit the completed form at the municipal office with your barangay clearance. A business permit will be issued.
3. Bureau of Internal Revenue (BIR)
A sole proprietorship must be registered to BIR to comply with tax requirements in the country. You may proceed to the nearest Regional District Office where your business will be established. Prepare for the fees. The requirements are as follows:
- Complete the BIR Form 1901
- Submit your completed form together with the certifications, business permit, and license issued from DTI and LGU offices.
- Payment for the Registration Form 060
- You must also register a book of accounts and receipts/invoices of your business
- Certification of Registration (BIR Form 2303) will be issued.
Visit the BIR website for more information.
1. Securities and Exchange Commission (SEC) Registration
This sector regulates the security of industries in the Philippines and maintains the company registrations. Verification or reservation of proposed names must be made via the SEC online website.
Some of the most important requirements are the Joint affidavit of partners and the Articles of Partnership. The FIA Form – 105 must be accomplished if your partner is a foreign national.
Visit the SEC website for more information.
2. Secure a Barangay clearance
3. Registration with the Social Security System (SSS)
This sector provides insurance programs for employees under the private, professional, and informal sectors or companies.
The requirements are as follows:
- Fill out and submit the Employer Registration Form (SS Form R-1) with the Specimen Signature Card (SS Form L-501) available on the website that must be signed by your partner and Approved Articles of Partnership from Incorporation from Securities and Exchange Commission (SEC).
- If you will be needing employees, you must submit an initial Employment Report Form (SS Form R-1A) to report his/her employees, within thirty (30) days upon hiring. The SS Form R-1A should indicate the correct ER number, the total number of employees reported, and complete employees’ details such as their respective SS numbers, birth dates, employment start dates, monthly compensation, and positions.
Visit the SSS website for more information:
4. Secure a Business Permit from the Mayor’s Office
5. Registration in the Bureau of Internal Revenue (BIR)
You may proceed to the nearest Regional District Office where your business will be established.
- Complete and submit BIR Form No. 1903 version 2018;
- Photocopy of SEC Certificate of Incorporation; or Photocopy Certificate of Recording (in case of a partnership); or Photocopy of License to Do Business in the Philippines (in case of the foreign corporation),
- Articles of Incorporation or Articles of Partnerships;
- BIR Printed Receipts/Invoices or Final & clear sample of Principal Receipts/ Invoices;
Registration of a Corporation Business
Corporations are classified into three types, stocks, a non-stock, and foreign corporation. These may vary in government requirements. Stock corporations earn profit and have stockholders to whom the profits are received. The non-stock corporation functions as a non-profit organization and is formed for fundraising, foundations, charities, religion, cultural, educational purposes, and many more. A foreign company could be a branch office of an existing company abroad.
Listed below are the common procedure for a corporation:
- Securities and Exchange Commission (SEC) Registration
- Secure a Barangay clearance
- Secure a Business permit from the Mayor’s office
- Registration in the Bureau of Internal Revenue (BIR)
Visa Application to Start a Business in the Philippines
Visa application is easy to process provided that you have all the documents needed. The country issues a temporary visitor’s visa that will give you ample time to sort out your requirements. The applicant’s passport must be valid for at least 6 months, otherwise, you will be denied the visa. The individual must personally apply at the Philippine Embassy or Consulate in the country of residence. If an extension is needed, you are required to secure an immigration fee.
Have a Feasible Business Plan Before Starting a Business in the Philippines
An intact business plan will guide you to achieve your main goals and desired profit. After committing to the main idea, it will be easier for you to layout everything that you will need to be successful in your business. This will narrow down the needs of your business in terms of physical necessities as well as workforce requirements. It would also be ideal to document every step and process that you take to keep track of important information.
Taking note of things that you can and can’t control would be a wise move to ensure that you’re always ready for drawbacks. In business, extreme highs and lows will be inevitable throughout the course of your business. A foolproof plan must include your schedules of deadlines and meetings, goals and when you expect to achieve them, and of course your finances.
Importance of a Business Plan
Planning plays a vital role in developing and monitoring the growth of your business. A layout of all your plans will direct your attention to what needs to be prioritized. Identifying your priorities will help you set an expectation and a timeline of when and how you will achieve your goals. Business is a game of time and following through with your plans only perpetuates good things for your business. This will also help you keep track of the moving parts within your business such as your workers, consumers, and your products/services.
A simple business plan will suffice when starting a business as long as you make sure that it is susceptible to change and unexpected events. This will assist you in evaluating the state of your business and come up with solutions to improve it further.
How to Start a Small Business at Home?
Living paycheck to paycheck can be tiring and it takes time away from doing what you’re passionate for. In the comfort of your own home, you can easily persevere and start a small business by utilizing your technical skills as a source of income. This also allows you to be your own boss and manage your own time.
Starting a business at home is advantageous. However, it may require more effort from you than a regular job would. This is because you are your own company in which you do all the planning, marketing, etc. Selecting a skill you’re good at is the best option to guarantee your success.
Kinds of Home Businesses You Can Begin From Home
At home, anything is possible! With the right tools and resources, you can easily carry out any work you have in mind. This may or may not require a large amount of space but storage space is a requirement when applying for a business permit.
- Cooking/Baking: Filipinos love food! This would require you to present options.
- Printing Station: Must have a quality printer and computer/laptop.
- Commissioned Art: Must be able to draw, paint, or capable of digital art.
- Crafting Trinkets: Must be knowledgeable on how to create things.
- Drop-shipping: Involves third-party goods suppliers.
- Repair: Must be skilled in repairing basic appliances, clothes, etc.
- Tutoring: Must be able to teach and should be knowledgeable of what is demanded.
- Virtual Assistant: This job utilizes a lot of technical skills and may vary from client to client (i.e. graphic designing, editing, flexibility, etc.).
- Online Freelancer: This has a broad scope of job descriptions (i.e. article writer, game tester, voice).
- Monetize your audience in social media: Must know how to use live streaming, YouTube, Facebook, Instagram.
Follow the Checklist Given for Your Home-based Business in the Philippines
Organizing your thoughts and goals in a checklist will help you avoid skipping valuable steps that will help you boost your business. Checklists make it easier for you to make decisions, increase your productivity, and give much-needed motivation. Narrow down what you need by following the suggested checklist for a home-based business.
1. Determine What You Will Need
Identify what tools and equipment your chosen home business will require you to have. Below are examples:
- Crafting equipment
- Colour pencils, painting tools
- Sewing machine
- Computer and phone applications
Setting up your workplace is important especially for businesses that would require you to consistently communicate with others. An ideal location would be an organized, bright, and noise-free area. Use a spare room that has a simple background with a desk if needed.
3. Setting Up Your Business Plan
Decide on which home business you prefer and identify what you will need to make it a reality. Planning will help you foresee your risks and gains, keeping you prepared for any possible conflicts. Include your goals in a timeline so that you are motivated by expected date of completion for each goal. Take advantage of technology and hype up your products/services through the various social media platforms available.
A business plan may include:
- Status of business
4. Registration of Your Home Business
Home businesses will not exempt you from paying taxes. To be considered a legal business, the country’s law requires you to register your business to the appropriate agencies. You must also decide on which business structure your home business will fall into (i.e. sole proprietorship, partnership, and corporation).
You may need to obtain the following:
- Barangay clearance
- The business permit from the Mayor’s office
- BIR certificate
- Other documents for different government sectors depending on your business structure.
5. Open for business!
Once you have accomplished the series of comprehensive planning and processing of your paperwork, you are now ready to operate! You can shift your attention to fine-tuning your plans and manoeuvring your business to its full potential.
Selecting the Right Business Structure
In order to start a business, you must choose which type of business structure it will fall into. It can be a sole proprietorship, partnership, and/or corporation.
A Sole Proprietorship is owned by an individual and has complete authority over its decision-making and operation. The proprietor accumulates all profits of the business and also bears its losses. The sole proprietor and the business will have the same identity and the same taxpayer identification number (TIN).
This business structure can be owned by two or more individuals. Both individuals are subjected to be “of legal existence, susceptible to rights and obligations, or of being subject of juridical relations” according to the Civil Code of the Philippines.
A capital of more than P3,000 must be registered to the Securities and Exchange Commission (SEC). The income tax of a partnership is computed similarly to corporations. A partnership could either be general or limited.
- A general partnership where partners have unlimited liability for the obligations and/or debts of their partners.
- Limited partnership, the liability of a partner is only the value of their capital contribution.
This business structure is formed by multiple shareholders which could be natural or juridical individuals. Unlike the sole proprietorship business structure, the identity of a corporate business is different from its shareholders. A minimum of P5,000 capital is paid up for a corporation. The liability of the shareholder is limited to their capital contribution. A corporation could either be stock or nonstock.
- Stock corporations have their stock divided into shares. The dividends and profit allocations are distributed to the shareholders in relation to their shares.
- Nonstock corporations are usually non-profit organizations, foundations, and charities which do not need a share of stock.
- A foreign corporation in the Philippines is a representative office, branch office, regional headquarters, and/or regional operating headquarters. This is created based on foreign laws.
Are There Any Business Loans Available?
There are currently no grants available in the Philippines, but there are several business loans offered by banks and sectors of the local government. Applying for loans will require you to have a stable income and/or a regular job.
Listed below are the government and private sectors that offer business loans:
- Government Service Insurance System (GSIS)
- Social Security System (SSS)
- Pag-IBIG Fund Loans
- Bank loans
How Can 3E Accounting Help You to Start a Business in the Philippines?
With all your ideas and plans laid out, you will most likely find yourself lost within the overwhelming amount of procedures that have to be done to establish your business. With the help of 3E Accounting, you can easily establish your company in the Philippines. Both Filipinos and foreigners are eligible to acquire the assistance of 3E Accounting from applications to the development of your company and eventually direct you towards your goals.
Additionally, 3E Accounting is your one-stop solution that provides beneficial and convenient assistance for the compliance of your business requirements. With the 3E team’s aid, you can just focus on carrying out your goals and further improve your business strategy.
Their commitment to their core mission, the three E’s: efficiency, effectiveness, and economy will definitely be beneficial to you. As your company grows, 3E Accounting will be able to provide services such as Accounting, Secretarial Services, and many more. 3E Accounting is also recognized for its experienced professionals and work which has been merited through accreditations by various companies worldwide.
If you’re planning to start your own business and in need of a bit of assistance, feel free to get in touch with us. Alternatively, you can visit us at our offices scattered around the globe that are fully equipped in helping you start your business from the ground up.