Most people spend almost the entirety of their lives working for others, often climbing the corporate ladder to positions of wealth and power, while others remain stuck in low-paying, unfulfilling jobs. However, a select few choose to break free from this cycle, and they are the entrepreneurs who take the leap—to start a business and turn it into a success.
To start a business means to transform a creative idea into a thriving and profitable venture. You can create something of your own, build a brand, and generate income on your own terms. You can also create jobs, contribute to the economy, and make a positive impact on your community.
Whether you’re a local or foreign entrepreneur, this guide offers a detailed, step-by-step process on how to start a business in the Philippines. Read on, and let us know your insights and tips in the comments!
Why Start a Business in the Philippines?
When you start a business in the Philippines, you gain access to a fast-growing economy and a large consumer market. Its strategic location with proximity to key Asian markets like China, Japan, and Singapore creates significant opportunities for expansion.
The country also boasts a skilled, English-speaking workforce, especially in industries such as technology, healthcare, and outsourcing. With lower operational costs, you can also effectively manage expenses and improve profitability.
Equally, the Philippine government supports entrepreneurs with streamlined registration processes and incentives for investors. Whether you’re a local or foreign entrepreneur, the business-friendly environment fosters growth and success.
6 Important Things to Know Before You Start a Business
Before you start a business, it is important to understand the key factors that can make or break your entrepreneurial journey:
1. A business can be rewarding, but it also involves risks. While starting a business can lead to substantial rewards, it also comes with its fair share of risks, including financial instability, market changes, and unforeseen hurdles. You then need courage and wisdom to prepare for challenges and setbacks.
2. Starting a business demands long hours and sacrifices. You must also be ready to work beyond the 9-to-5 daily schedule, especially when you are just starting with your business. Your time and effort will be crucial to getting things off the ground. Expect also sacrifices along the way if you want to ensure long-term success.
3. Compliance with legal and regulatory requirements is non-negotiable. Starting and running a business means you must meet all legal and regulatory obligations, from obtaining the mandatory permits to filing tax returns and reportorial requirements on time. You need to stay compliant at all times, otherwise, suffer from penalties, fines, or even business closure.
4. A strong support network and team can drive business growth. You need to build a reliable support network of mentors, advisors, and collaborators who can help you navigate all the challenges and intricacies of running your business. As you do this, you surround yourself with the right people who can be tapped for valuable knowledge and resources.
5. Financial planning and budgeting are fundamental. You must have a clear financial plan and stick to a well-thought-out budget to effectively manage your business’s resources. Your financial strategy must ensure that you can cover operational costs and remain financially stable even in difficult times.
6. Lifelong learning is essential for continued growth and success. To stay ahead of the competition and adapt to the ever-evolving business environment, you need to commit to lifelong learning. By continuously acquiring fresh insights and developing new skills, you can keep your business innovative and successful in the long run.
How to Start a Business in the Philippines (Step-By-Step Guide)
To start a business, you need strategic decisions and careful planning to ensure its long-term success and profitability, from defining a profitable business idea to navigating legal and financial requirements.
1. Start with a Profitable Business Idea.
You can start thinking of a business idea that solves a problem or fulfills a need, although it does not necessarily have to be the most original one. You can also focus on areas where you can introduce some innovations, whether through a new product, service, or technology, while ensuring that there is a viable market.
2. Choose a Business Model and Develop a Solid Business Plan.
After you come up with your business idea, choose a business model that best fits your product or service. It may be direct sales, subscription-based, crowdsourcing, retail, e-commerce, or a hybrid model. Your business model must then be further mapped in your solid business plan, which outlines your business goals, strategies to achieve them, and the necessary resources.
3. Determine Your Business Structure.
Aside from the model, you also need to determine your business structure or type of business entity, which will affect your registration, liability, tax obligations, business operations, and many other aspects of your business. You can choose from:
Domestic Corporation. When you start a business in the Philippines, whether you are a local or foreign entrepreneur, you can set up a domestic corporation, which is registered and operates under Philippine laws. Your business will be legally separate from you and your stockholders, and your personal assets are protected from business debts and liabilities.
One Person Corporation (OPC). Alternatively, if you prefer to run your business alone but still want the benefits of limited liability, a One Person Corporation (OPC) could be ideal for you. In this case, you are the sole stockholder, director, and president, but the business remains a separate legal entity, offering the same protections as a larger domestic corporation.
Partnership. If you want to collaborate with other business-minded people or individuals under the same profession, you might want to consider a partnership. You and your partners can pool resources, i.e., whether financial, material, or labor, and run the business together. Your business profits and losses will then be shared based on your partnership agreement.
Sole Proprietorship. If you’re looking for the simplest and most straightforward business structure, then sole proprietorship might be your right choice. You can have full control over your business and keep all the profits. However, you are also personally liable for all your business debts and losses, so your personal assets could be at risk.
Cooperative. If you’re inclined to a more community-driven approach, you might want to explore a cooperative, which is run and owned by its members. You and other people with common interest can work together to achieve collective goals through a jointly owned and democratically controlled enterprise.
Foreign Corporation. Lastly, if you run a foreign company looking to expand operations in the Philippines, you can set up a branch office, representative office, or regional headquarters. Your branch office lets you operate directly, while a representative office focuses on market research, and a regional headquarters allows you to manage operations and generate income.
4. Understand the Legal Framework.
Part of your selection of a business structure, you must also familiarize yourself with the legal frameworks, which include the laws, regulations, and compliance requirements governing business registration, taxation, and even employee rights. Understanding these will help ensure you operate legally and avoid fines or legal issues.
Legal Entity and Liability. If you choose a sole proprietorship or partnership (general), you will have unlimited personal liability, meaning you are personally liable for the business’s debts. On the other hand, if you set up a corporation, you will benefit from limited liability, which protects your personal assets from business debts.
Minimum Capital Requirements. Your business capital requirements depend on your chosen structure. For a sole proprietorship, there is no minimum capital requirement. In a partnership, the capital is based on your agreement with your partners, with no set minimum. For a corporation, it can be as low as PHP 5,000 but may also be as high as US$ 200,000 depending on foreign ownership.
Foreign Ownership. Under the Foreign Investments Act (FIA), you are allowed to make foreign investments in the Philippines with up to 100% ownership, as long as the business line or sector is not among those restricted in the Foreign Investment Negative List (FINL).
Term of Existence. Your sole proprietorship will exist as long as you are actively running the business, while a partnership can last based on your agreement with your partners and can dissolve if a partner withdraws or passes away. Your corporation, on the other hand, continues indefinitely unless you choose to dissolve it through legal processes.
Legal Documentation. For your sole proprietorship, you need to register with the Department of Trade and Industry (DTI) and get the necessary permits. For a partnership, you need to register with the Securities and Exchange Commission (SEC) and submit a partnership agreement. If you choose a corporation, you need to file the Articles of Incorporation (AOI) and Bylaws with the SEC, along with securing permits and registering for taxes. If it is a cooperative, then it must be registered with the Cooperative Development Authority (CDA).
5. Finalize Your Business Profile.
You should pick a memorable and meaningful company name that resonates with your target market and qualifies for registration with the government regulatory bodies. You have to verify and reserve your company name with SEC, DTI, or CDA. You also need to develop your mission and vision statements, create a logo, and finalize other details of your business. You might also want to consider registering a trademark with the Intellectual Property Office of the Philippines (IPOPHL) later on to protect your brand identity.
6. Pick the Right Business Location.
You need to choose the right location when you start a business, whether it is a physical storefront or an online presence. Consider its customer accessibility, rent, competition, and proximity to suppliers. If you are starting a business online, make sure your digital infrastructure supports a global reach. In terms of legal requirements, you may have either:
Physical Address. Your physical address is the traditional location where you will operate your business, e.g., a building, an office space, a storefront, etc. You may need an actual space for meetings, customer interactions, or sale of your products.
Virtual Office. You can also opt for a virtual office, which can be a cost-effective option when you start a business and want a formal address but don’t require a physical location for daily operations. In fact, it is an ideal choice for startups or home-based businesses looking to save on overhead.
7. Secure Funding.
Although you may secure funding later on after business registration, you should start determining how much capital you need to start and sustain your business at this point. You may look into different sources and create a strategy to secure the necessary funds.
Personal Savings. When you start a business, personal savings can be a good option if you have the funds available. You can have full control over your business, but it also means that you are putting your own money at risk.
Bank Loans. You can also consider bank loans, which can provide you with a larger capital, but before getting qualified, you may need a good credit score and may even be required to offer collateral.
Investments. Particularly if you are setting up a corporation, you can seek investors, such as angel investors or venture capitalists, who can provide financial support even at the early stage of your business in exchange for equity or shares.
Government Programs and Grants. Interestingly, you may also be able to take advantage of government programs and grants to support your startup business, particularly if it falls under a priority industry. You can even accept the assistance without the need to give up equity or take on debt.
Crowdfunding. You can also raise capital from the public through online and offline platforms. You can secure the necessary funding in exchange for rewards or equity, although you may need a strong marketing effort to convince backers and generate support for your business startup.
8. Register Your Business and Obtain the Necessary Permits and Licenses.
You’re halfway there to starting your business! Now, it is time for you to register with the relevant government agencies, obtain the necessary permits and licenses, and legalize your operations without any restrictions.
SEC, DTI, or CDA Registration. When you start a business, you must register with the right government agency based on your business type. This could be the Securities and Exchange Commission (SEC), Department of Trade and Industry (DTI), or Cooperative Development Authority (CDA), depending on whether you are setting up a sole proprietorship, partnership, corporation, cooperative, or offshore office.
Business Permits (Barangay and Mayor’s Permits). After obtaining your registration certificate, the next step is to secure the necessary business permits, such as the Barangay Business Permit and Mayor’s Permit, from the local government units (LGUs) where your business will operate. This will ensure compliance with local regulations and ordinances on health, safety, sanitation, and environmental protection.
BIR Registration. Additionally, you must apply for registration with the Bureau of Internal Revenue (BIR) to obtain your BIR Certificate of Registration (COR). This certificate will include your Taxpayer Identification Number (TIN), VAT registration (if applicable), and other tax-related details. You will also need to register your books of accounts, print official receipts and invoices according to BIR standards, and comply with other tax regulations.
Secondary Licenses (if applicable). If you plan to operate your business in regulated sectors, such as banking, insurance, pharmaceuticals, or lending, you must obtain secondary licenses from relevant regulatory bodies. For example, you need to register with the Bangko Sentral ng Pilipinas (BSP) for banking operations or the Food and Drug Administration (FDA) for pharmaceuticals.
Employer Registrations. Finally, you must register your business with the statutory agencies, such as the Social Security System (SSS), PhilHealth (PHIC), and Pag-IBIG Fund (HDMF), to comply with labor laws and provide your employees with the necessary benefits and protections.
9. Open a Business Bank Account.
When you start a business, it is important to open a separate business bank account to manage your finances effectively. This will simplify tracking expenses, paying taxes, and maintaining your personal and business funds.
You may consider certain factors when opening a corporate or business bank account, such as internet banking availability, deposit requirements, ease of making transactions, monthly fees, other provided services and facilities, types of currencies, and the bank’s reputation. In particular, it is also important to check if the bank offers:
an authorized agent bank (AAB) internet banking facility linked to the BIR electronic Filing and Payment System (eFPS) for the filing and payment of BIR tax return;
a BancNet’s eGOV facility, a web-based electronic filing and payment facility for corporate clients to perform online filing and settlement of statutory contributions (i.e., SSS PhilHealth and Pag-IBIG premiums) and loans through a member-bank; and
a payroll and other inter and intra-banking facilities for the salaries of employees and bank transactions with the clients.
10. Hire Employees and Enroll Them with Statutory Agencies.
Once you have hired your first employees, it is mandatory that you register them with the appropriate statutory agencies, such as the SSS, PhilHealth, and Pag-IBIG Fund (even the BIR), that manage social security, healthcare, and housing benefits.
Social Security System (SSS). For new employees without an SSS number, have them register with SSS and submit the SSS Form R1A. For those with an existing number, just collect their details and submit the completed Form R1A to SSS.
Philippine Health Insurance Corporation (PhilHealth). You must have new employees fill out a PhilHealth Member Registration Form (PMRF), while existing members should provide their PhilHealth ID number. As an employer, you need to submit the PhilHealth ER1 form and employees’ PMRFs within 30 days of hire.
Home Development Mutual Fund (Pag-IBIG Fund). You must have new employees register with Pag-IBIG after registering with SSS. Then, submit the Member’s Contribution Remittance Form (MCRF) and mark them as NH when filing contributions.
11. Market and Promote Your Business.
At this point, you have completed all the basic legal requirements to start a business in the Philippines. You need to develop a comprehensive marketing strategy to promote your business and build brand awareness by leveraging a mix of digital marketing, social media, traditional advertising, and even influencer partnerships.
12. Explore Tax Exemptions and Other Government Incentives.
While running your business in its initial stages, you might want to explore government grants, tax exemptions, and other incentives that can benefit your business, help reduce your financial burden, and provide valuable resources to support your growth.
PEZA Accreditation. You can apply for PEZA Accreditation with the Philippine Economic Zone Authority (PEZA) to unlock valuable business opportunities. This includes benefits like investment and tax incentives, regulatory support, access to infrastructure, and export promotion, which can significantly support and grow your business.
BOI Registration. You can also benefit greatly from registration with the Board of Investments (BOI), as it offers incentives like tax holidays, priority sector support, enhanced market access, and additional investment opportunities, all of which can help your business expand and succeed.
PhilGEPS Registration. You can gain an advantage through Philippine Government Electronic Procurement System (PhilGEPS) registration and by participating in bidding for government projects. This can open doors to various procurement opportunities and help your business grow by accessing government contracts and expanding your client base.
BOC Accreditation. You may also need Bureau of Customs (BOC) accreditation if your business involves importing or exporting goods. This accreditation not only ensures compliance but also helps ensure smooth and efficient transactions, making it easier for you to conduct international trade without delays or complications.
13. Understand Taxation and Other Ongoing Compliance Requirements.
Your compliance with business laws and regulations does not end with your registration. You should continuously educate yourself about business taxation and other regulatory requirements, comply with all of them, and avoid penalties.
Corporate and Partnership Reportorial Requirements. If you’ve formed a corporation, partnership, or OPC, you must maintain proper corporate books, which normally include financial statements, records of meetings, and shareholder documents. You must also submit annual financial statements (and General Information Sheet or GIS, for corporations) to the SEC and BIR.
Tax Filings and Other Compliance. You must file quarterly and annual tax returns with the BIR, including income tax, VAT, and other applicable returns. You are also responsible for withholding and remitting employee income taxes, maintaining proper books of accounts, and complying with receipt and invoice issuance rules.
Business Permit Renewals. You must renew your business permits annually with the local government units (LGUs) and pay local business taxes and other fees. Your failure to renew these may result in penalties or business suspension.
Labor Law Compliance. As an employer, you must comply with the Labor Code of the Philippines and ensure your employees’ rights, wages, working hours, and other employment conditions are properly met. You must also provide your employees with contracts that outline their terms of employment, compensation, and other benefits, in compliance with the law.
Employee Benefits and Social Security. Upon hiring employees, you must also enroll them with SSS, PhilHealth, and Pag-IBIG Fund and ensure their contributions are remitted on time. You are responsible for both the employer and employee share contributions.
Health and Safety Compliance. If your business involves physical workspaces (e.g., factories, offices, or retail), you must ensure compliance with health and safety regulations, which include meeting fire safety requirements, sanitation rules, and other health-related standards to protect your employees and customers.
Other Industry-Specific Compliance. Depending on your business type, there may be additional compliance requirements specific to your industry. For example, food businesses must adhere to food safety standards, while manufacturing businesses might need environmental clearances or permits.
Starting a business often involves significant financial investment. There is always a possibility of losing the capital if your business does not succeed. As an entrepreneur, you will be responsible for the legal and operational challenges. If you’re the sole proprietor, your personal assets could also be at risk in case of business failure.
Despite the risks, starting a business can offer you substantial rewards. You can have the freedom to make informed decisions, set your own goals, create a brand that resonates with your target market, and even achieve financial independence and personal fulfillment. If you manage your business well, these rewards can far outweigh the initial risks.
… and you might just need our assistance.
At FilePino, we simplify the process of registering your business, ensuring compliance with all legal requirements. Our team of experts provides end-to-end support — from company registration to regulatory compliance — so you can focus on your investments and growth strategies.
Ready to start a business in the Philippines? Set up a consultation with FilePino today! Call us at (02) 8478-5826 (landline) and 0917 892 2337 (mobile) or send an email to info@filepino.com.
