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From Where We Sit

A new year, a new business

Atty. Eleanor L. Roque Atty. Eleanor L. Roque

The new year always bring new hope and a new perspective. It is as if we are all bright and eager to start the year with a clean slate. For some, the new year also inspires them start a business.

If you’ve watched the South Korean drama series “Start-up,” you probably got the urge to start your own business. For those unfamiliar with it, the show centers on aspiring entrepreneur Seo Dalmi, who crosses paths with a venture capitalist and three tech developers nicknamed Samsan Tech. Dalmi’s goal is to become the CEO of her own company, which she eventually achieves with the help of Nam Dosan and his fellow developers while getting mentored on the side by business expert and venture capitalist Han Jipyeong.

Besides entertaining viewers with its endearing plot, the show also teaches them lots of business concepts and processes on how to launch a business, examine business risk, and analyze various markets and competition. It gives viewers great insight on what it takes to start a business. If you want to become a business owner, you may want to watch this show.

With coronavirus vaccines expected to become available in the Philippines soon, we hope that life would eventually go back to normal this year. Viable business opportunities will once again ignite the passion of our young entrepreneurs. Some industries predicted to thrive next year include agriculture and infrastructure. Now is the best time to formulate business ideas and craft business models catered to these two industries to increase your chances of success in 2021.

In any country, graduating from a business course or knowing business concepts is not enough. Besides knowing the theories on running a business, there are numerous regulatory guidelines and policies an aspiring business owner should consider if he or she decides to set up an enterprise. These include business registration, arranging ownership, catering to investors, and setting up taxes.

Registering your business

Once you finalize your business concept and name, you should decide on whether your business is a sole proprietorship, partnership, corporation or cooperative.

Once you’ve decided, you’ll need to know the registration requirements for the business type you’ve chosen. Registration documents vary for each business structure, and operations cannot start unless these are secured. For single proprietorships, the enterprise should apply for a business name and register with the Department of Trade and Industry. For partnerships or corporations, a certificate of registration must be secured from the Securities and Exchange Commission. For cooperatives, they must be registered with the Cooperative Development Authority.

Next, a business must also comply with the registration requirements of other government agencies. For a business operating inside a village or subdivision, a homeowner’s clearance is often needed; so’s a village clearance. Once these requirements are completed, securing a business license or mayor’s permit from your local city hall is the next step. You must apply for a taxpayer identification number from the Bureau of Internal Revenue and register books of accounts, as well as secure an authority to print invoices or official receipts. If your business has employees, it must be registered as an employer with the Social Security System, Home Development Mutual Fund, and Philippine Health Insurance Corp.

Considering foreign ownership

Once your business is up and running, you are on your way to success. Depending on your need for capital, expertise or entry to foreign markets, you may consider taking in foreign investors. The business landscape in the Philippines encourages foreign investments. Foreigners can invest in all activities except those listed on the Foreign Investment Negative List, which identified businesses or activities requiring partial or full Filipino ownership.

Under Negative List A, the Constitution specifies that certain businesses and industries have restricted foreign ownership. Sectors such as mass media, small-scale mining and private security agencies prohibit foreign equity, while others have a certain limit. Negative List B restricts foreign ownership to businesses and industries involving security and defense that may post health risks and have a negative moral impact. There are also restrictions placed to protect small and medium enterprises.

Land and properties owned by foreign investors/corporations

Corporations with partial foreign ownership are allowed to acquire private land as long as the foreign equity does not surpass 40 percent. Foreign investors can own real properties, such as buildings and condominium units, subject to certain limitations on total foreign ownership. They can also fully own the building as long as they don’t own the land on which it stands. These can also be leased according to conditions set by the Investor’s Lease Act.

Enterprise incentives

Tax incentives are also available to registered enterprises, foreign investors and corporations investing in activities the government has identified as investment priorities. Incentives include fiscal and nonfiscal ones set by different authorities and implementing agencies. Available incentive schemes depend on the location, business activity and registration. For example, foreign companies and investors can apply for accreditation with the Philippine Economic Zone Authority to claim benefits. There is a bill seeking to standardize the available incentives that is anticipated to be approved early this year.

Resilience is key

Starting a business will surely present birth pains and challenges along the way. These should not discourage aspiring business owners. The pandemic is a great example of how businesses are still pushing forward despite adversities. The key to life, as well as running a business, is having a strong sense of resilience and adaptability.

A business’ capability to stay strong despite many setbacks is what makes it stand out against the rest. A business owner must be able to identify opportunities behind every challenging situation. The measures taken to ensure resilience and adaptability include a sound business concept, talented people, expert advisors, and a solution-oriented management.

Operating a business seems overwhelming when you first think about it. It takes a lot of courage, hard work and perseverance. As we start the new year, are you ready to start your new business?

Atty. Lea Roque is a principal of the Tax Compliance and Advisory Division of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing firms in the Philippines with 24 partners and more than 900 staff members. We’d like to hear from you! Tweet us: @GrantThorntonPH; like us on Facebook: P&A Grant Thornton; and email your comments to lea.roque@ph.gt.com or pagrantthornton@ph.gt.com. For more information, visit www.grantthornton.com.ph.

 

As published in The Manila Times, dated 06 January 2021