Legal Aspect

Introduction
The role of the business in the community has become an issue of greater importance in
many countries. In the Philippines, corporations and even small businesses emerged for the past
few years, providing new opportunities to the working class, delivering goods and services to
local consumers and at the same time gaining profits for the business stakeholders. Furthermore,
it is essential to register ones business to appropriate departments to legally establish it and
ensure its full and legal operation. Every business should be established in conformity with all
the pertinent legal requirements that the law set for them. As in every person lives with
responsibility, so does every business, as a juridical person, must comply with all the policies and
rules set forth by the law governing them in order to be recognize as being perfectly legal in
existence and operation.
Moreover, aside from the law mandating the registration of business, it is also
advantageous for entrepreneurs to register their business for several reasons. First, to provide
proofs that a business is really existing, in order for them to open the business very own bank
account to maintain its legal and separate entity away from the personal activities of the partners.
Second, in order to obtain loans from creditors that will definitely seek for registration papers
before they lend financial aids. Third, it is important to have a unique and legally registered
business name to establish a good reputation with suppliers and customers and to avoid
confusions on the part of them with other businesses in the same industry. Last and most
importantly, a business registration allows business owners to hire full-time employees and pay
them in accordance to state laws. Below is the procedure of giving a business a legal personality
in the form of flowchart and will be discussed in paragraph form afterwards.

To begin with, the partners must verify and reserve the company name with the Securities
and Exchange Commission (SEC). The name search can be done electronically via the SEC's
online verification system, but applicants must pay for the reservation fee on site at the SEC.
Once the reserved name was approved by the SEC, it costs PHP 40 for the first 30 days. The
company name can be reserved for a maximum of 90 days for a fee of PHP 120, which is
renewable upon expiration of the period. The partners may now proceed on having its Articles of
Partnership notarized by a duly certified notary public, which is estimated to cost PHP 500.
Afterwards, the partners should now register the company with the SEC. The following
documents are required for SEC Registration: Duly filled out Registration Data Sheet, Name
Verification Slip, Notarized Articles of Partnership and Written Undertaking to Comply with
SEC Reporting Requirements. The pre-registered Taxpayer Identification Number (TIN) is
automatically obtained from the SEC Head Office upon registration. However, the company
must still register with the Bureau of Internal Revenue (BIR) in order to identify applicable tax
types, pay an annual registration fee, obtain and stamp sales invoices, receipts and the books of
accounts.
To get the barangay clearance, the following documentary requirements should be
submitted to the Barangay: Application form, SEC Certificate of Partnership and approved
Articles of Partnership, location plan/site map and the contract of lease over the corporation's
office. This clearance is obtained from the Barangay where the business is located. The clearance
is obtained in one day, provided that the barangay captain is in the office as the captain is the
only official authorized to sign.
Subsequent step is to pay the annual community tax and obtain the community tax
certificate (CTC) from the City Treasurer's Office (CTO). Afterwards, the partners may proceed
to Business Permits and Licensing Office (BPLO) to obtain the Business Permit to Operate and
Mayors Permit. The required documents are the Duly signed Barangay Clearance and the Duly
filled out registration form provided by BPLO. The next stop of the partners is the bookstore,
special books of accounts are required for registering with the BIR. The books of accounts are
sold at bookstores nationwide. One set of journals consisting of four books (cash receipts
account, disbursements account, ledger, general journal) costs about PHP 400.
After the taxpayer obtains the TIN, the company must pay the annual registration fee of
PHP 500 at any duly accredited bank, using payment form BIR Form 0605). All newly formed

partnership and corporations subject to SEC registration are issued pre-generated TIN by SECHead Office, which is indicated on their SEC Certificate of Registration. The corporation only
has to register its pre-generated TIN with the BIR and report all internal revenue taxes that it
expects to be liable for. The requirements for application for COR with the BIR are:
Accomplished BIR Form No. 1903 (Application for Registration for Corporations/Partnerships),
Payment Form BIR Form No. 0605, SEC Certification of Partnership, Articles of Partnership and
Mayors Permit / Business Permit.
Afterwards, the partners next step is to obtain the authority to print receipts and invoices
from the BIR. The company must submit the following documents to the Revenue District Office
(RDO): Accomplished BIR Form No. 1906 (Application for authority to print receipts and
invoices), Final and clear sample of receipts and invoices (machine-printed), BIR Form No.
1903, Proof of payment of annual registration fee (BIR Form No. 0605).
The partners now are required to register with the Department of Health Bureau of
Foods and Drugs to obtain License to Operate. Afterwards, they may now proceed on registering
with the Social Security System (SSS). To register with the SSS, the company must submit the
following documents: Employer registration form (Form R-1), Employment report (Form R-1A),
Articles of Partnership, List of employees, specifying their birth dates, positions, monthly salary
and date of employment. The SSS shall then proceed on issuing SSS Employer and Employees
Number after the accomplishment of the process.
Afterwards, the business shall be registered with the Philippine Health Insurance
Company (PhilHealth). To register with PhilHealth, the company must submit the following
documents: Employer data record (Form ER1), Report of employee-members (Form ER2), SEC
registration, BIR Registration, Copy of Business Permit, Copy of Business Permit. Upon
submission of the required documents, the company shall get the receiving copy of all the forms
as proof of membership until PhilHealth releases the employer and employee numbers within
three months.
Lastly, the partners must register their business with Home Development Mutual Fund
(Pag-ibig). To register with the HDMF, the corporation must submit the following documents:
Employer's Data Form (EDF [FPF040]), Specimen Signature Form (SSF[FPF170], Copy of SEC
Certificate of Partnership, Copy of Approved Articles of Partnership. Upon submission of the

complete documents and payment of the first contribution to the fund, the Pag-IBIG will issue
the HDMF number and the HDMF Certificate of Registration.

Government Agencies Involved

and their Respective Duties and Responsibilities
The government has an important role in the business. It has the power to regulate
commerce, to step out and take judicial actions between the owners, investors and consumers
when things get complicated and to provide protection to them. Though the governments role
has increased over time, the business community still enjoys considerable freedom. The
government exercises its authority several ways:

Security and Exchange Commission (SEC) - Its major functions include registration of
securities, analysis of every registered security, and the evaluation of the financial
condition and operations of applicants for security issue. It also have the supervision over
all registered business entities in the country, including suspensions and revocations of
their registrations.

Barangay Hall Allows the business entity to execute its operations within the vicinity
of the proposed barangay. To ensure the location viability and to compel with local laws
implemented therein.

City Treasurers Office (CTO) - The divisions primal function is the supervision and
control of all business entities and establishment conducting businesses in Manila.
Relative to its primary function, it conducts ocular inspection, assessment and maintains
an updated list of all business establishments operating within its vicinity.

Bureau of Internal Revenue (BIR) The powers and duties of BIR includes the
assessment and collection of all internal revenue taxes, fees and charges imposed to
businesses. Enforcement of all forfeitures, penalties and fines. It is also the BIR that can
give authorization to businesses to print and issue receipts and invoices.

Department of Health Bureau of Foods and Drugs (DOH BFAD) The main
function of this department is to protect and promote the right to health of the Filipino
people and to establish and maintain an effective health products regulatory system. The
department also ensures that every food-related business is regularly inspected for
sanitary and right processing of consumables the business manufactures.

Social Security System (SSS) The SSS has four main functions they are the function
as a social safety device, function as a redistribution of income, function as
diversification of risks and social stability and economic stability and growth. This will
give the employees insurance that they receive future benefits like pension benefits in
exchange of the present contributions withheld from their salaries.

Philippine Health Insurance Company (PhilHealth) - PhilHealths mandate is to

provide health insurance coverage to all Filipinos. Members and their dependents are
entitled to Inpatient or Outpatient Medical Care, Emergency and transfer service and
other health care services. It shall serve as the means for the healthy to help pay for the
care of the sick and for those who can afford medical care to subsidize those who cannot.
It is compulsory to have the established business employer and employees be registered
on Philhealth to enjoy the benefits it can provide.

Home Development Mutual Fund (Pag-ibig) Pag-ibig Funds primary function is to

provide Filipinos low-cost housing or rentals through accumulated contributions made by
that member or through loans granted by the agency. Benefits under the PagIBIG Fund
depend on the level of savings accumulated during a members working lifetime, which
is equal to the full value of contributions plus all annual dividends earned thereon, tax
free and governmentguaranteed. The extent of dividend payments, in turn, is determined
by the investment income for the period, and whether or not the member stays active in
the

payment

of

contributions.