Bits of Law

Are you thinking of buying a second hand car? Buying second hand is cheaper, better for the environment, and grants cheaper insurance costs. But if you’ve already started looking, you may have come across offers that repeatedly say the phrase “open deed of sale.” What is an open deed of sale, and why are so many people warning you against it? Here’s what you need to know. What is an open deed of sale? Before we can learn what an open deed of sale is, we must first know what a deed of sale is in the first place. You can think of a deed of sale as a receipt – it is a legal document proving that the purchase of a property between buyer and seller is complete. A deed of sale contains the information of both the seller and buyer, such as their full name, marital status, and address. If the property in question is a motor vehicle, then it should also contain details such as its make, model, color, body type, plate number, engine number, and selling price. Finally, both the buyer and seller must sign the document and have it notarized by a lawyer. This document becomes an open deed of sale if it lacks the buyer’s information and signature. This type of deed of sale is common among those in the motor vehicle buy and sell industry. Many of these resellers don’t want to deal with the hassle of registering the vehicle to their name if they’re going to sell it soon regardless, so they leave the deed of sale open to save time and effort. Why shouldn’t I buy or sell a vehicle with an open deed of sale? There is heavy risk that comes with buying or selling a vehicle with an open deed of sale. For one, these deeds are not legal. An open deed of sale does not comply with the requirements of the Land Transportation Office for transferring car ownership. It also cannot be notarized, and any lawyer who attempts to notarize an open deed of sale may face civil and criminal liability. There are also personal risks that both buyers and sellers will be subject to with the transaction. Buyers would have no way of knowing the vehicle’s history, such as whether it has had multiple changes of ownership before. In the worst case scenario, the buyer would not know if the vehicle has an unsavory history; it may actually be a stolen vehicle that is currently being searched for, or a vehicle that was involved in a major accident. The PNP has no way of knowing whether the current driver is part of the vehicle’s history or not. However, the fact that he or she is currently using that vehicle may be enough grounds to arrest him or her without explanation. Sellers are also putting themselves in a risky position. After all, their name is still on the deed of sale, which means they will be held liable for any major incidents that the vehicle may get into. They would also have to pay for any fines and penalties levied against them for any rule violations committed by the new owner of the vehicle. The seller could even face criminal charges if the vehicle becomes involved in an incident that gets someone injured or killed. When should I agree to an Open Deed of Sale? Despite all the risks, many people still buy or sell vehicles with an open deed of sale. Sellers may still prioritize the convenience of keeping deeds open, while buyers may find vehicles with open deeds of sale at low prices. It’s tempting to wave off the risks and take the plunge regardless. If you’re in need of a vehicle, finding one in the market with a completed and notarized deed of sale is still the best course of action. However, if you’re willing to take the risk, it’s best to only agree to a transaction with an open deed of sale if: You know the seller personally. One of the only times it’s safe to agree to a transaction with an open deed of sale is when you’re dealing with someone you already trust. If you know the seller personally, then you most likely know that he or she isn’t in any shady deals. You can also make sure that the vehicle is in good condition before buying it.

Do you know the differences between patents, copyrights, and trademarks? These terms all refer to different types of intellectual property, which can help prevent your work from being stolen by anyone else. Their best way to differentiate them is to know what each one protects.  If you’re starting your own business, it’s important to protect your branding and your product for your endeavor to succeed. But which of these do you really need, and how do they differ from the other? Here’s what you need to know about patents, copyrights, and trademarks. What is a patent? A patent is a property right granted to creators of new inventions or processes. These can include simple devices like mouse traps, complex machinery for factories, or pharmaceutical drugs. An invention or solution can only be patented if it is new, innovative, and industrially useful.  While you can sell or use your invention without a patent, there is a risk that it will be copied by another party. Having your invention patented can prevent others from profiting off of it, either through making, using, or selling said invention. You can also grant other parties the rights to your invention, so long as both parties agree on mutual terms. Alternatively, you can sell your rights over the patented invention to another party. This relinquishes your rights on the creation and passes it onto the other party instead. Note that there are certain inventions and solutions that cannot be patented. These include aesthetic creations, abstract ideas, discoveries and other scientific theories, methods of treatment, animal breeds or plant varieties, computer programs, and any work against public morality. If you want your invention to be granted a patent, you’ll have to file an application to the Bureau of Patents of the Intellectual Property Office of the Philippines (IPOPHIL). Note that patent protection only lasts up to twenty (20) years from the date it was filed, and this cannot be renewed.  What is a copyright? Copyright protects an owner’s literary, scientific, or artistic creations. Books, songs (with or without words), illustrations, photographs, cinematographic works, and computer programs are some of the many works that copyright protection covers. If you’d like to have your work protected under copyright law, you will need to register it with the Intellectual Property Office (IPOPHIL). In the Philippines, copyright protection lasts for the entirety of the author’s lifespan, plus an additional fifty (50) years after the author’s death. Once such copyright protection expires, it enters the public domain, granting the public free access and rights to use it in any way they want. Derivative works, which are based on works that already exist, are also protected by copyright. Creators who want to create something based on an existing piece will not be violating the original piece’s copyright protection. Examples of derivative works include adaptations, translations, or other alterations of literary or artistic works. Collections of works, such as a short story collection, are also considered derivative works. While copyright protection covers a fast number of literary, scientific and artistic creations, there are some works that are unprotected. These include: In addition, no copyright shall subsist in any work of the Government of the Philippines. This is all according to the Intellectual Property Code. What is a trademark? A trademark identifies your brand and helps differentiate it from your competitors. A trademark can be a word, phrase, symbol, or a combination of the three. However, unorthodox trademarks exist, such as sounds, colors, and even smells. A unique trademark is a great way to help consumers remember your brand. Some well-known examples of trademarks include Nike’s check mark symbol or Pepsi’s blue and red circle. A registered trademark prevents your competitors from using not only your trademark, but also anything similar to it. This can help you set your brand apart from the crowd. It also prevents anyone from imitating your brand to ruin its reputation or get its consumer base.  Similar to copyrights, you can file a trademark application with the Intellectual Property Office of the Philippines. Trademark protection in the Philippines only lasts ten (10) years from the date of registration, but you can also renew it every ten (10) years. A trademark can thus theoretically last forever as long as it keeps getting renewed. Now that you know the differences between the different types of intellectual property, you can identify which ones apply to your brand so you can protect your work accordingly.

Having ownership of a corporation can open up many new possibilities for your business, especially compared to having a sole proprietorship or a partnership. You might not want to have personal liability on your business anymore, or perhaps you’d like to seek out investors by offering them stock. A corporation can offer you growth that the other two business entities can’t achieve. In the final part of this series, we’ll be discussing the final type of business entity that you can create. If you’re thinking of incorporating your business, here’s what you need to know. What is a corporation? A corporation is a business structure that is its own legal entity. This means that it exists independently of its owners and/or incorporators and has the same rights and obligations of an individual. Its ownership is divided into stock shares; individuals and other businesses who possess the stock of a corporation are its owners or stockholders. A corporation differs from a partnership because partnerships aren’t considered a legal entity. Additionally, partnerships only require two or more individuals to form, while corporations need a minimum of five and a maximum of fifteen. What are the advantages and disadvantages of a corporation? There are several advantages to incorporating your company. Firstly, any risk and liability you may encounter will only affect the corporation itself, and owners are not personally liable. It can also easily be passed down to different owners and live indefinitely, ensuring that it will continue to persist even after its owners are no longer around.  On the other hand, it does have its own disadvantages that you should consider if you want to incorporate your company. It is the most challenging business structure to set up in terms of expenses and paperwork. It also generally has a higher capital requirement and operation cost. Finally, corporations are subject to more compliance requirements and laws compared to partnerships and sole proprietorships. How do you establish a corporation? There are many similarities between the steps for establishing a corporation and a partnership, so expect to see many of the same steps that we’ve discussed in our previous article regarding partnership businesses. Here’s what you need to do to establish a corporation:  All partnerships and corporations must secure a certificate of registration with the Securities and Exchange Commission, or SEC, in order to operate. You can start off by going to their website to check the availability of the name of your business and fill out the application form. However, you can also do this at your nearest SEC office. To register your business in the SEC, you’ll have to prepare and notarize a few documents. These are your organization’s by-laws and articles of incorporation, the joint affidavit of at least two incorporators, and an affidavit of your organization’s treasurer. You’ll also need your name reservation/verification slip, your cover sheet, and your registration data sheet. Since you’ll be setting up your organization in your barangay, it’s important to get your business a barangay clearance. This ensures your community that your business adheres to the standards of their local Barangay. To complete your application, you’ll need your Certificate of Business Registration from the SEC, two (2) valid IDs, and a proof of address. This can be the contract of your lease if your location is rented, or your Certificate of Land Title if you own your own location. Similar to your Barangay Clearance, you’ll need a Business Permit or Mayor’s Permit so that you can run your business in your municipality. These permits are also proof that your business meets the standards of the Local Government Unit, or LGU. Note that these permits do have an expiration date, as they must be renewed once a year. Note that you’ll only be able to get these permits after you’ve secured the other requirements in the previous steps: a Certificate of Registration from SEC and a Barangay Clearance. You’ll also need two (2) valid IDs and a proof of address, similar to what you provided when applying for your Barangay Clearance. You’ll need to register with the Bureau of Internal Revenue or BIR to comply with tax obligations. Registering with the BIR will also grant you permission to issue official receipts, register books of accounts, and obtain a separate Tax Identification Number for your business.To complete your registration, you’ll need to accomplish BIR Form 1903 – Application for Registration (For Partnerships/Corporations). Besides your complete BIR Form, you’ll also need to submit your previously completed Certificate of Registration from the SEC, Barangay Clearance, and Business or Mayor’s Permit. You’ll also need proof of address and a valid ID. Then, register your account books and up-to-date invoices. After this, you’ll finally get your BIR Certificate of Registration. Finally, register with these government-mandated agencies as an employer. You will need to register your employees with the Philippine Health Insurance Corporation (Philhealth) and the Home Development Mutual Fund (HDMF) and remit their shares of contribution to the aforementioned agencies. Philhealth is responsible for providing your employees with health insurance, while the HDMF administers the Pag-IBIG Fund, which provides affordable financing for its members’ housing needs. You’ll also need to register both your business and your employees in the SSS so you can properly remit your employees’ monthly contributions.  This concludes our series about establishing your own business. Whether you plan on opening a sole proprietorship, partnership, or corporation, we hope that our guides have given you insight on the process you’ll have to go through.

What do you know about audits? An audit is an evaluation of a company’s process or quality system to ensure that it complies with rules and regulations. Audits can be done internally by the employees of the company, an independent auditor, or an outside firm.  Many people associate the word “audit” with financial audits, wherein an independent party evaluates a company’s financial statements. However, there are many different types of audits used to evaluate a company. Here are the three common types of audits. Financial Audit As aforementioned, financial audits are a thorough evaluation of an organization’s financial statements and accounts. This is to make sure that a company is representing their finances truthfully and accurately. It’s also done to ensure that the company is complying with the laws of the government. During a financial audit, your auditor will most likely review your account balances, transactions, financial statements, historical documents, internal documents, financial statements, and financial commitments such as loans. Besides government compliance, you can gain several benefits from getting an audit. An audit can point out any accidental errors and discrepancies, but it can also possibly detect cases of real financial fraud. Financial audits can also take an overall look at the organization’s financial performance to see which areas need improvement and which can be streamlined and optimized. Internal Audit Internal audits evaluate the organization’s internal controls, which are described as the accounting processes used by the company’s finance department. This includes its risk management, corporate governance, and accounting processes. Similarly to the other types of audits, one of its main goals is to ensure compliance with the set rules and regulations.  There are several types of internal audits. Risk management, for example, focuses on detecting and preventing cases of fraud or abuse. It can also check the organization’s work culture, ethics, and morale and evaluate what can be improved. Environmental audits evaluate the organization’s impact on the planet, so that it can strive to turn to more eco-friendly strategies in the future. While internal audits usually aren’t compulsory, it can help managers learn more about their organization’s potential, its strengths and weaknesses, and what direction it is currently going. By doing so, business owners can take steps towards improving their company further. Internal audits are done by the company’s in-house auditing team. Operational Audit Finally, operational audits examine the organization’s day to day and overall operations to check its efficiency and effectiveness. This type of audit goes beyond financial concerns and takes a look at the organization as a whole.  Your auditor would want to observe different aspects of your organization, depending on the type of operational audit. For example, department audits can specifically look at the procedures and processes of the marketing team or HR team. If changes are implemented around the company after an initial operational audit, a follow-up audit may be done later on. Similarly to internal audits, operational audits are all about finding new ways to make business operations smoother and easier. Auditors can offer managers a new perspective on their business operations, find blind spots that you may have swept past, and offer changes with its own opportunities and risks. Unlike internal audits, however, operational audits cannot be done in-house. Instead, companies would hire an expert to do the audit for them. If you’re looking for trustworthy auditors to perform audits for your business, consider booking a consultation with Sadsad Tamesis Law and Accountancy Firm.

Bookkeeping refers to the constant and consistent recording of an organization’s complete financial transactions. This includes purchases, sales, receipts, and payments. Bookkeepers should create an organization’s record before they begin creating transactions, so that each one can be properly recorded.  But is bookkeeping that important? What benefits does it offer an organization? Here are four reasons why bookkeeping is essential for all corporations. Organized Record Keeping Sometimes having unorganized records feels worse than not having any records at all. The chaos of going through your files, especially under a deadline, can add an unnecessary amount of stress to workload. Doing your books often and keeping all of your records in one place cuts out a lot of work and stress for everyone in your team, letting you find what you need in no time. This is especially applicable if you do your bookkeeping digitally, as everything can be stored in one file and searched in less than a few seconds. Budgeting and Forecasting Creating and adhering to a budget is one of the key ways to make your organization succeed. Bookkeeping can help your budgeting in two different ways. Firstly, consistent bookkeeping will tell you how much you spend and gain in a given time, which can help if you’re trying to create a new budget within the organization’s limits. Secondly, bookkeeping keeps track of where your money comes and goes. Having such a clear visual can help you see if you’re adhering to your budget or not, and if you’re going overboard with your expenditures. Audit Readiness Your company must always meet the government’s rules, policies, and procedures in order to keep running legally. To ensure this, you’re required to submit a financial audit once a year. Seeing as that’s a whole year of activities, it may be challenging to retrieve those documents as the deadline approaches. Bookkeeping, whoever, records all financial transactions from the beginning of your organization’s life till the end. Having a bookkeeper means you have easy access to your records, meaning you’re fully prepared at all times for the day of your financial audit. Risk Management A company that doesn’t keep records of its transactions is seriously prone to data theft, financial discrepancies, and financial fraud. You may not know that you’re a victim of such crimes until it’s too late. Bookkeeping lowers these risks significantly by keeping close track of all of the organization’s legitimate transactions. Any discrepancies would be immediately found out, lowering the risk and probability of this crime ever occurring to you.

What is the fastest way for a foreigner to become a Filipino citizen? There are several ways a foreigner can attain citizenship, depending on their circumstances. Someone born and raised in the Philippines can attain citizenship through judicial naturalization. Meanwhile, a foreigner of any other circumstance may go through administrative naturalization. However, there are some special cases wherein a foreigner can become a Filipino citizen through legislative naturalization. Our previous articles have discussed judicial naturalization and administrative naturalization. In the final part of our series about naturalization, we will be discussing legislative naturalization. Here’s what you need to know.  What is Legislative Naturalization? Legislative naturalization is another way to gain Filipino citizenship. It is a direct grant of citizenship by Congress to qualified foreigners. One can only attain citizenship through legislative naturalization if he or she has made a significant contribution to the country and its people. This is in contrast to judicial and administrative naturalization, which call for the possession of various qualifications. They also require the filing of petitions accompanied by specific requirements, as can be seen in the previous articles. Qualifications to get Naturalized If you have read our previous article on judicial and administrative naturalization, these qualifications may look familiar. This is because the modes of acquiring citizenship through naturalization have identical qualifications. However, for legislative naturalization, since citizenship is directly granted by Congress, those qualifications do not need to be strictly met. It is the prerogative of Congress, based on one’s significant contribution to the country, to grant such citizenship. However, nothing bars Congress from using the same qualifications as a guide in granting citizenship, which we will be reproduced here: In addition, the ten (10) years of continuous residence required under the second condition can be reduced to five (5) years if the petition has any of the following qualifications: Process of Achieving Citizenship Achieving citizenship through legislative naturalization is a process that mirrors that of passing a bill. The process begins with the filing of a bill by a member of one of the two houses of Congress. The two houses of Congress are the House of Representatives and the Senate of the Philippines. A naturalization bill must undergo three readings in the house of Congress where it originates. For example, if a member of the Senate of the Philippines filed the naturalization bill, the bill must then pass three readings in the Senate. These readings must also all take place on separate days. This process is covered by Section 26, paragraph 2 of the 1987 Constitution. If the bill passes all three readings and receives a majority affirmative vote from the members, it will be transmitted to the other house of Congress and undergo the same procedure. For example, if a bill is approved by the Senate of the Philippines, it must then be transferred to the House of Representatives. The bill must also pass all three readings on separate days in the House of Representatives. If the bill is approved by both houses of Congress, copies of the bill will also be transmitted to the President of the Philippines. If the President approves of and signs the bill, the bill officially becomes a law.  Once the bill has been approved by the President, all the applicant needs to do is wait for the publication of the naturalization law, take the Oath of Allegiance, and receive the issued Certificate of Naturalization by the Bureau of Immigration. This grants the applicant Filipino citizenship, and he or she will attain the full rights and responsibilities of a Filipino citizen.