Do you prefer to work alone, or would you rather have teammates by your side to fall back on? Many people often opt to go into a partnership when starting their own business. It can be considered the best of both worlds, after all. With a smaller team, you can still enjoy a reasonable size of the overall profit. Plus, you’ll have others to rely on in case any issues arise. These types of businesses also have a lot of room for capital and growth.
In the first part of this series, we discussed how you can register a sole proprietorship. Today, we’ll be discussing the second type of business entity you could create. Do you want to start a partnership business of your own? Here’s everything you need to know.
What is a partnership business?
A partnership business is a business structure wherein two or more people agree to share ownership of the business. This makes them able to split their profits amongst each other, but this also means that all partners in a business are equally liable to any losses.
Partnerships and corporations have a few similarities, namely the fact that it involves several people contributing to the business. However, it also has many differences. For example, while a partnership allows partners to transfer interest to each other, the transferee during the transaction does not automatically become a partner unless all of the partners in the corporation consent. On the other hand, in corporations, transferees involved in a transfer of shares of stock become stockholders of the corporation. Partnerships also tend to be smaller in size compared to corporations.
How do you register a partnership business?
1. Register your business in the Securities and Exchange Commission.
All partnerships and corporations are required to 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. You can also do this at your nearest SEC office.
To register in the SEC, you’ll need a Name Verification Slip and Articles of Partnership. There are also some additional requirements that you’ll need, depending on your circumstances. You’ll need a Joint Affidavit to change your partnership name, provided that it isn’t already included in your AP. You’ll also need a FIA Form-105 if one of your business partners is a foreigner.
2. Get a Barangay Clearance.
Since you’ll be setting up shop 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.
3. Register your business and employees in the Social Security System.
Unlike many sole proprietorships, you certainly will not be working alone in this business. Other people – aside from your partners – will be working in your business as employees. Because of this, you’ll need to register both your business and your employees in the SSS so you can properly remit your employees’ monthly contributions.
To register in the SSS, you’ll need to fill out SS Forms R-1 and R-1A. You’ll also need a photocopy of your Articles of Partnership, a sketch or map of your business’s location, and a Validated Miscellaneous Payment Return.
4. Apply for a Business or Mayor’s Permit
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 all the other requirements in the previous steps: a Certificate of Registration from SEC, a Barangay Clearance, and a registration with the SSS.
There are also other requirements, besides those aforementioned, that you must acquire before you can obtain a Business or Mayor’s Permit. You’ll need a Business Permit Application Form, an Authorization Letter and IDs of the owner/s, and a Community Tax Certificate. If you’re renting a space for your business, you’ll need to provide the contract of your lease; if you own the place of business, bring your land title or tax declarations. Finally, you’ll need Public Liability Insurance if your business is a restaurant, cinema, mall, etc.
5. Register with the BIR
Finally, 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.
Note that you’ll need to obtain your Business Permit and Certificate of Registration from the SEC before registering with the BIR, as they are some of the requirements you’ll need to submit. You will also need the BIR Registration Form 1903 and Articles of Partnerships.
6. Register your business with other government-mandated agencies.
You can register your business with other government-mandated agencies once it has begun its operations. 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.
We hope that this article has helped kickstart your partnership business. Look forward to our last part of our series about different business types, we will be discussing how to register a corporation.