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Starting a Small Enterprise STARTING A SMALL ENTERPRISE TABLE OF CONTENTS Page Introduction Why Be an Entrepreneur? ................................................ 3 Rewards of Entrepreneurship ........................................... 3 Risks of Entrepreneurship ................................................ 4 Process Flow: Starting a Small Enterprise ....................... 5 Analysis Are You Entrepreneurial? ................................................. 6 Additional Factors to Consider ......................................... 7 Decision-Making/Planning Determining Your Product Line ........................................ 8 Types of Business According to Ownership ..................... 8 Writing a Business Plan .................................................... 9 Financing Determining Your Financial Requirements ....................... 12 Seeking Sources of Capital .............................................. 12 Rules for Sound Financing ............................................... 14 Setting Up Choosing the Site/Location of Your Business .................. 15 Registering Your Business ............................................... 15 Hiring/Training Personnel ................................................. 22 Getting Your Business Started .......................................... 24 References ........................................................................... 25 2 INTRODUCTION Why Be an Entrepreneur? Entrepreneurship is a way of life. Being entrepreneurial means being able to identify, start, and maintain a viable and profitable business, particularly a small enterprise. People spend most of their lives working for someone else. Some people eventually rise to positions of wealth and power, while the rest languish in unchallenging and low-paying jobs. On the other hand, there are a select few who strike it out on their own; rather than work for others, they put up their own enterprise. You may ask: “Why should I risk my resources in an unpredictable business when I could hold a stable job with a permanent tenure and an assurance of a regular monthly income, without any risk?” In other words, why be an entrepreneur rather than an employee? Entrepreneurship has its own rewards, as well as its risks. Having your own business has tremendous rewards, but be sure to weigh prospective returns against the potential risks and losses. Rewards of Entrepreneurship Have Unlimited Opportunity to Make Money - When you have your own business, you will most certainly have unlimited potential to earn money. How much money you earn depends on the time and effort you put into your enterprise. Successful entrepreneurs have earned their wealth and prestige through hard work and by having the right product for the right market at the right time. Be Your Own Boss - As sole proprietor of your business, you make the decisions for your enterprise and take full responsibility for them. The quality of these decisions will translate into either gain or loss for your business. Being your own boss means you are in control of your future. You have a better grasp of what you want to be. Tap Your Creativity - A business usually starts out as an idea. You will have the opportunity to harness this creativity and turn your idea into products and processes. Overcome Challenges and Feel Fulfilled - Starting a business is by itself an accomplishment. Running a business tests an entrepreneur’s capability in securing and managing resources. How well a business turns out depends on the owner’s ability to face challenges and overcome them. 3 Risks of Entrepreneurship Risk of Failure - Small businesses are prone to risks and the possibility of failure – a single wrong business decision can bring a business to bankruptcy. Unpredictable Business Conditions - A small business is vulnerable to sudden changes in the business environment. In a fast-paced industry, a small firm may not possess the financial capability nor the organizational capacity to respond adequately to new opportunities and their concomitant problems. Long Hours of Work - A prospective entrepreneur must be ready to spend most if not all his waking hours immersed in the business. Also, family time and personal affairs may be jeopardized. Unwanted or Unexpected Responsibilities - The entrepreneur may eventually find himself saddled with management responsibilities he did not bargain for. 4 PROCESS FLOW: STARTING A SMALL ENTERPRISE Self-Analysis: Are You Entrepreneurial? Considering Other Factors Determining Your Product/ Service Line and Type of Business Writing a Business Plan Determining Your Financial Requirements Seeking Sources of Capital Choosing the Site/Location of Your Business Registering Your Business Hiring/Training Personnel Getting Your Business Started 5 ANALYSIS Are You Entrepreneurial? A successful entrepreneur possesses key characteristics that help his business grow and thrive. Extensive research by the Small Enterprise Research and Development Foundation reveals 10 Personal Entrepreneurial Characteristics (PECs) that lead to success. These are grouped into what are called the Achievement Cluster, the Planning Cluster, and the Power Cluster. Take a look at what they are and try to identify your entrepreneurial strengths and weaknesses. Achievement Cluster 1. Opportunity-seeking Perceives and acts on new business opportunities Seizes unusual opportunities to obtain financing, equipment, land, work, space, or assistance 2. Persistence Takes repeated or different actions to overcome obstacles Makes sacrifices or expends extraordinary effort to complete a task Sticks to own judgement in the face of opposition or disappointments 3. Commitment Accepts full responsibility for problems encountered Helps own employees to get the job done Seeks to satisfy the customer 4. Risk-Taking Takes moderate risks Prefers situations involving moderate risks 5. Values Efficiency and Quality Always strives to raise standards and aims for excellence Strives to do things better, faster, and at lower cost Planning Cluster 6. Goal-Setting Sets clear and specific short-term objectives Sets clear and long-term goals 7. Information-Seeking Personally seeks information on clients, suppliers, and competitors Seeks experts to render business or technical advice Uses contacts or information networks to obtain information 8. Systematic Planning and Monitoring Develops logical, step-by-step plans to reach goals Looks into alternatives 6 Monitors progress and switches to alternative strategies when necessary to achieve goals 9. Persuasion and Networking Uses deliberate strategies to influence or persuade others Uses business and personal contacts to accomplish objectives 10. Self-Confidence Believes in self Expresses confidence in own ability to complete a difficult task or to meet a challenge Additional Factors to Consider You were able to pinpoint the entrepreneurial characteristics you possess as well as those areas you need to improve on to be able to run your business smoothly. Tapping your entrepreneurial skills are well and good, but you also have other factors to consider: 1. Personal Interest - you must be genuinely interested in getting into business 2. Knowledge/Talents - your skills and knowledge should be attuned to your chosen line of business 3. Training/Work Experience - you must have at least background training or work experience to help you run a business 4. Government Support/Assistance Programs – find out the possible assistance and support you can get from the government such as incentives, financing 5. Rate of Growth of Business – consider market trends, business growth, and market share 6. Other Considerations – also consider the return in terms of income, employment generation, services, and the like 7 DECISION-MAKING / PLANNING Determining Your Product/Service Line You can now focus on what specific type of product or service you want to sell. Some of the factors given for consideration will help you come up with a great idea for a product – what specific field are you interested in? Can you apply your skills or background work experience to this field? Provided below are the different types of product/service lines: 1. Product Industries - You may choose to manufacture your own product, either for the mass market or for specialized or individual demands. Canned goods, wooden or plastic toys, and ready-to-wear garments are examples of goods produced for the mass market, while precision instruments for industrial use of made-to-order furniture are examples of specialized products. 2. Process Industries - You may decide to perform only one or two operations in the total manufacturing process. If so, you are not, strictly speaking, a “manufacturer” but rather a “process” enterprise. The activities you perform can be initial operations on raw materials (milling, corrugating, sawing, or cutting), final operations (fishing, assembly, packing, or binding), or skilled or precision operations (embroidery, testing, woodcarving). 3. Subcontracting Industries - If you choose to be a subcontractor, you will undertake subcontracting work for other industries, usually bigger ones. Bigger industries sometimes subcontract the manufacture of components, supplies, or other specialized operations to smaller shops because the quality required is not viable for their high- capacity operations. Many big companies also find subcontracting a more low-cost and faster way of manufacturing products. Also, you are assured of a market for your products. You can also avail of technical and financial assistance from the big companies. One drawback of subcontracting, though, is that you rely on only one firm or two for your survival. 4. Service Industries - You could choose to sell services. Service enterprises include repair and maintenance shops, printing and machine shops, and food catering establishments. Beauty parlors, dress and tailoring shops, recreation establishments (bowling alleys and billiard halls), and entertainment enterprises (theaters, discos, and pub houses) are also considered service businesses. Although falling under the broad classification of a service enterprise, you may consider the trading business a fifth option. The most common type of trading enterprise is retailing. Types of Business According to Ownership Would you want to run the business on your own, with a partner, or with more people? Weigh the odds: 8 Forms of Advantages Disadvantages Business 1. Single Proprietorship Easy to set up Demanding on owner's personal (one party) Decision-making time left entirely to owner Growth limited by owner's financial means 2. Partnership - Relatively easy to set up - Any personal rifts (at least two parties) - Check and balance between maintained with two partners may parties around dissolve partnership Equal profit sharing despite unequal attention and time given by partners to business. 3. Corporation Maximum flexibility for Complicated setting-up process (at least five parties) growth Individual stockholders may have Limited liability of individual limited influence on management shareholders Tendency to institutionalize a Greater room for bureaucracy professionalism in management Is least likely to dissolve Writing a Business Plan After you have made the preliminary decisions, you can proceed to formulate a business plan. There is no such thing as an all-purpose business plan. You should write your business plan according to the unique factors and conditions of your enterprise. However, you will find it useful to write and use a business plan along the broad guidelines suggested below: 1. State Your Objectives. This section comes first in a business plan. You tell your reader who you are, what your business goals are, and when you expect these goals to be accomplished. If you are submitting your plan to a bank, you may indicate how much you want to borrow and what you plan to do with the funds. Example of Stating Your Objectives: “Pretty in Pink” is an enterprise involved in the manufacturing and retailing of ready-to- wear ladies’ dresses. Its goals are: 1. To start manufacturing and retailing by January 2000 2. To achieve profitability by January 2001 3. To seek adequate financing for the first 18 months of operation 9 2. Describe the Business. This section gives background information on your business and how it is currently doing: For a new business. Instead of a brief history, explain what the business will be, how the idea for your business was conceived, and how the business is expected to develop. For an existing business. Provide the following information: business name, date and place of registration, when actual operations began, a brief history of your business, and names of owners, partners, or major investors 3. Describe Your Products or Services. Give a detailed description of your products or services so the reader gets a clear idea of what you are selling. Also give any applications or uses of your products that may not be apparent. In this portion of your plan, you should also note the competitive advantages your product has over other similar products, as well as identify the products you will be competing with. You should be able to state your product’s advantages and disadvantages. 4. Identify Your Potential Market - Determine who are your present or projected customers and how many. Be as specific as possible. Are you selling to bookstores? A grocery store? A small ladies’ boutique? If you are selling to the general public, you may need to group potential customers according to age, gender, income, education, and other demographic factors. You then ask yourself how you can make use of the information. If, for example, you know that your potential customers will likely be children between three to ten, what does this tell you about your location? Your advertising? Your prices? 5. Identify Your Competitors - Rather than pose as threats to you, your competition should drive you to do your best. Learn as much as you can about them. Include the following information in your plan: a. Description of competitors – Identify businesses likely to become your competitors. Name them. b. Size of Competitors – Determine your competitors’ assets and sales volume. c. Profitability of Competitors – Which of your competitors are making money? Which are losing, and by how much? d. Operating Methods – Determine the operating methods of each of your major competitors in terms of pricing strategy; quality of products and services; servicing, warranties, and packaging; methods of selling and distribution channels; credit terms; location; advertising and promotion; reputation; and inventory levels. Discuss only the items relevant to your business. 6. Consider Your Pricing Policy - In pricing your goods and services, all relevant factors should be considered, like cost of production and distribution as well as the degree of acceptance by the market. Another factor to consider is the pricing structure of your competitors. Of course, the aim of your pricing policy should be to set the price at a level that maximizes profit in the long run. 5. Determine Your Marketing Methods - Having a good product at a reasonable price is not enough. Your business plan must answer the following questions: 1 0 a. How will you promote or advertise your business? b. How will you sell your product? Will you employ salespeople? c. What channels of distribution will you use to reach your customers? d. What do your customers think of your product? How can you improve your image as an enterprise? 6. Determine Your Key Personnel - Identify the key people in your business, including you as the owner and manager. If your business is a corporation, list the names and addresses of all directors. If your business is a partnership, list the names and addresses of all the partners. 7. Identify Your Material Requirements and Sources of Supply - List down what materials you will need and where you will get them. Include only direct materials; office supplies and other indirect materials should not be included in the list. You should prepare a table for the materials. For each of them, state how many suppliers there are, who your main supplier is, and why. Your readers will see that you have carefully thought out who your best supplier will be. 8. Determine the Process and Equipment You Will Use to Manufacture Your Product - Give a detailed explanation of your production process. For each step, explain the work done, as well as the equipment and materials used. If you are presenting a complex process, include a diagram showing your work-flow. Assign positions for the jobs that need to be done and estimate how many people you need to employ for each position. Set salary rates, too. 9. Prepare a Sales Forecast - Include a sales forecast that covers at least two years of operation. For the first year, present your sales on a monthly basis. Present the forecast of the succeeding years on a yearly basis, and explain how you arrived at the figures and at the assumptions on which they are based. 10. Prepare a Budget - In manufacturing, production costs of materials, labor, service, manufacturing overhead, and other components should be budgeted. A service business should budget operational costs. Sales costs should include selling and distribution, storage, discounts, advertising, and promotion. General and administrative expenses include salaries, as well as legal and accounting costs. Projections should be prepared every month during the first year of operation and every quarter for the second and third years. 11. Set Your Plan to Work - You are ready to set your plan to work. It is time to raise funds, obtain a license, purchase facilities and supplies, hire and train people, and start operating. Remember that if you are to succeed, you must be prepared to work long hours and must be totally committed to your business. 1 1 FINANCING Determining Your Financial Requirements You must now determine your financial needs and raise funds to meet these needs. You can begin a sari-sari store from your own personal savings. A garment factory, on the other hand, will require more elaborate arrangements for fund sourcing. Generally speaking, the financial requirements of a business may be classified into Fixed Capital, Working Capital, and Pre-operating Capital. Fixed Capital includes cost of land and building, or lease deposits of them; cost of improving the land or remodeling the building; machinery and equipment; furniture, furnishings, and fixtures. These are usually one-time expenses, meaning they are generally good for the duration of your business. Working Capital is the reserve money you need to run the business until it becomes self- supporting. This may take about one to six months or even longer. You need working capital to purchase your raw materials, pay your workers, pay for transportation, telephone, electricity, and water bills. Pre-Operating Capital includes money that you spend to register your business, acquire licenses for franchises, or pay a lawyer or a consultant. In other words, this is money you spend before your business begins to operate. It is advisable to prepare a forecast that outlines all these capital requirements. Be sure that no significant item has been overlooked. Be realistic and do not underestimate your requirements. Provide for contingencies and a margin of safety in estimating your capital requirements to avoid cost overruns later. Your capital should be enough to cover unexpected expenses. Observe the equipment and manpower requirements of other business establishments. If in doubt, ask a knowledgeable friend, an accountant or consultant to see if your estimates are realistic or not. For simple business activities like small-scale trading or home-based industries, simple estimates or financial requirements, income and profit would be sufficient. However, larger, more complex undertakings require a more in-depth study; this is called the project feasibility study. Banks usually require this for long-term loans. Seeking Sources of Capital The small businessman usually meets his initial requirements by dipping into his own savings or investing his other assets. Loans from relatives and friends sometimes supplement his initial capital. Some of these loans are extended interest-free. External sources of funds are available if you know where to look. Organizations such as banks, venture capital corporations, and savings and loan associations make lending money their business. In addition, some government institutions provide credit to small start-up enterprises at subsidized interest rates and liberal terms. 1 2 If you are looking for capital, you may first consider looking into your own resources and the loan offerings of possible creditors: Equity Capital is the amount of personal resources you - and possibly your partner put in, plus the portion of the profits you plow back into the business. It also includes resources invested by other people into your company. Equity is a permanent part of your capital structure. As such, it does not have to be paid back. Nevertheless, as your company grows, you will need to put in more equity or permanent capital. The small businessman may exhaust his own personal resources to get more equity funds for the business. Personal life insurance policies or other properties of value may be used in times of urgency. Friends, relatives, or other members of the community may also be persuaded to invest in the business. Creditors’ Equity. If you require financing from outside sources, you can avail of the loan packages of financial institutions. These are: Short-term loans. These loans are short-term financial obligations, usually lasting less than a year and normally self-liquidating. They are used to buy things that will generate funds for repayment of the loan. Some short-term loans (“clean loans”) are issued on an unsecured basis, which means they are made without collateral, since the bank relies on your credit reputation. Individual money lenders. Friends or relatives extend loans in the spirit of pakikisama or camaraderie. There are also unlicensed money lenders but beware of those who charge usurious rates of interest, like the so-called "five-six operators". Non Government Organizations (NGOs). NGOs are fast becoming popular sources of credit. Through enterprise development projects implemented by private and government finance institutions, these NGOs act as intermediary agents in various lending programs. Lending packages are available depending on the specific target beneficiaries of the individual programs. Their interest rates are usually lower than what banks offer. A review of your feasibility study and a credit investigation are customarily conducted. Most programs offer character loans and require minimum equity participation with little or no collateral. The organization closely monitors and evaluates each business project. Beneficiaries of these PVOs are commonly micro and small entrepreneurs. Special Lending Programs. Public and private agencies are confident of the strength of small entrepreneurs, and have thus created programs that would uplift their status. 1 3 Rules for Sound Financing A small businessman should know exactly what type of capital he needs and how he can obtain it at the best possible terms. If he borrows the capital, he must know exactly how to repay it. An entrepreneur must also know when to require financial expansion. The ideal debt-equity ratio of one’s capital structure must be 40:60. This means that the debt or borrowed portion of the total capital should be contributed by the owners’ equity. A 40:60 ratio is considered ideal because it will allow the firm to acquire more credit in the future when it is ready to expand. Most banks and other financial institutions lend money only if the resulting debt-equity is 60:40 when the new (borrowed) money is infused into the business. Therefore, it makes sense to limit borrowing. Otherwise, one may be saddled with a heavy repayment burden. Fixed assets and working capital requirements during normal operations must be financed from long-term sources (one year or longer). These sources are the owner's equity and long- term loans or long-term liabilities. Short-term requirements, like additional working capital needed during peak seasons (Christmas, rainy season, school opening, etc.) should come from short-term sources, such as: trade credit (30 - 90 days); short-term bank loans (from two to three months); pawnshops (three months); and friends and relatives. 1 4 SETTING UP Choosing the Site/Location of Your Business Finding a site for your business is crucial. In the retail business, your sales potential depends on your location. Like a tree, a store draws its nourishment from the area around it. A storeowner is already half-successful if he sets up shop in a good place. You must also be able to recognize factors in some sites that are detrimental to your business. Among these are: smoke, dust, disagreeable odors and noises, proximity to garages, hospitals, drinking places and similar establishments, poor sidewalks, and old, run-down buildings. Some guidelines to help you find a good location: a. Know the population of the trading area. Is the neighborhood starting to be run down? Is the population moving away? Or is it new and on the way up? Determine the purchasing power of the population. Do they own cars? Big, affluent homes? b. Study the competition - How many stores look prosperous in the area? How many look as though they are barely getting by? How many similar stores went out of business in this area last year? How many new stores opened last year? What price line does competition carry? Pinpoint which stores will be your greatest competitors. If you intend to put up a variety store, you may find it profitable to locate your store adjacent to that of your competitors’ because the combined appeal of two or more similar stores creates greater customer traffic. c. Study the location's accessibility – See if the location is accessible to your customers, employees and of course, to you. Ask yourself the following questions: How close is the store to jeepney and bus, and other transport facilities? Are there adequate parking spaces near the store? Are the sidewalks in good repair? Is the street lighting good? Registering Your Business A new small enterprise has to be registered in various government agencies. The complexity of registration varies according to the legal form of the business. A single proprietorship is the easiest to register, while a corporation requires more elaborate procedures. Registering with the Department of Trade and Industry (DTI) The DTI-NCR administers the registration of business names. If you are a single proprietor and your business is using a name other than your own name, that business name should be registered. Business name registration with the DTI is optional for partnerships and corporations. By registering your business name with the DTI, you are assured that no other entity may legally use your business name anywhere in the Philippines. 1 5 Register your Business Name at: Department of Trade and Industry - NCR Ground floor, DTI Main Building 361 Sen. Gil Puyat Ave., Makati City or at designated Satellite Registration Centers in selected cities in Metro Manila Tel. No. 890-4854 Steps: 1. Obtain application forms (duplicate copy), preferred name slip, and index card from the Information Desk and fill these up completely. Only the owner of the business is authorized to sign all the forms. 2. Meet the following requirements (For Single Proprietorship): Must be a Filipino citizen, at least 18 years old. Filipinos with names suggestive of alien nationality must submit proof of citizenship such as birth certificate, PRC ID, voter's ID, passport. If the applicant has acquired Filipino citizenship by naturalization, election, or by other means provided by law, he must submit proof of his Filipino citizenship such as I) naturalization certificate and oath of allegiance; or II) card issued by the Bureau of Immigration and Deportation and affidavit of election or ID card issued by the Bureau of Immigration and Deportation. Must provide two recent passport-size pictures Certain types of business may have other requirements: Service and repair shops Real estate brokers Dental/medical clinic/hospitals Pawnshops Manpower services Engineering services Architectural services Other related services provided by professionals 3. Proceed to the designated window for evaluation 4. Pay required fees at the cashier Registration and Processing Fee Single - P300 Corporation/Partnership/Cooperative - P500 A penalty of P100 is imposed if the BNRS certificate is not renewed before within the 3-month grace period from the certificate’s expiration date 5. Get priority number 6. Proceed to the waiting area and wait for your number to be called by the examiners at Windows 1-10 7. Business Name Certificate is released within 10-15 minutes upon approval 1 6 Registering with the Securities and Exchange Commission (SEC) The SEC is the government agency that gives the business enterprise its legal personality. Only partnerships and corporations need to be registered with the SEC. Single proprietorships need not register. Register your business at: Securities and Exchange Commission SEC Bldg., EDSA, Greenhills, Mandaluyong City Tel. No. 726-0931 Basic Requirements of a Partnership 1. Name Verification Slip 2. Articles of Partnership 3. Undertaking to Change Name 4. Registration Data Sheet 5. If it is a Limited Partnership, the word "Limited" is added to the name. Articles of limited partnership should always be under oath only (JURAT) and not acknowledged by the partners before a notary public 6. Partnerships need clearance from concerned government agencies Additional Requirements for a Partnership 1. License of custom brokers for custom brokerage. 2. For foreign partnerships: - Foreign Investment Agent Application Form - Proof of Inward Remittance of non-resident alien partner or affidavit manifesting intention not to register investment with the Bangko Sentral ng Pilipinas - If the document was signed abroad, it must be authenticated by the Philippine Consular Office in the country it was executed Registration Procedures: 1. Secure name verification slip from the Records Division 2. Proceed to Cashier for payment of filing fee 3. Submit documents to the Receiving Unit of the Records Section 4. The documents are then forwarded to the Company Registration and Monitoring Department (CRMD) and assigned to processors 5. Typing pool prepares Certificate of Registration and returns to a processor (or a lawyer) and Assistant Director for initials 6. Director of the CRMD signs the Certificate of Partnership 7. The certificate of registration is forwarded to the Releasing Unit of the Records Division (ground floor), where it may be claimed by the applicant upon presentation of receipt as proof of payment of the filing fee Notes: 1. Applications of domestic corporations (stock) where subscribed capital stock are paid in cash are forwarded by the Records Division directly to the Company Registration and Pre-Need Department (CRPD). 2. Verified name is deemed unofficial unless approved by the Commission, i.e., after issuance of the certificate of incorporation 1 7 3. For businesses involving pre-need plans and commodity futures, clearance of the proposed corporate name from the Pre-need Department and Market Regulation department is required before verification of the name with the Records Division at the SEC Annex Bldg. 4. The application for registration of non-stock corporations is processed solely by the CRPD. Application under the Foreign Investment Act of 1991 or those with more than 40% foreign equity are processed first by CRMD before payment of filing fee. Registering with the Social Security System (SSS) An employer, or any person who uses the services of another person in business, trade, industry or any undertaking must be registered with the SSS. Social, civic, professional, charitable and other non-profit organizations, which hire the services of employees, are considered "employers." Register at: Social Security System (SSS) SSS Bldg., East Avenue, Diliman, Quezon City Tel. Nos. 920-6401, 920-6446 Email: email@example.com Single Proprietorships An owner of a single proprietorship business may accomplish and submit SSS Forms R-1 (Employer's Data Record) and R-1A (Initial or Subsequent List of Employees). Partnerships Any of the partners of a partnership firm should accomplish SSS Forms R-1 and R-1A and submit these forms together with a photocopy of the Articles of Partnership. The original copy of the Articles of Partnership must be presented for authentication. Corporations A corporation must accomplish SSS Forms R-1 and R-1A signed by its president or any of the corporate officers or incorporators. Submit these forms together with the photocopy of the Articles of Incorporation. The original copy of the Articles of Incorporation must be presented to the SSS for authentication. Registering with the Cooperative Development Authority (CDA) All cooperatives are required to register with the CDA as per Republic Act 6938/6939. Register at: Cooperative Development Authority 6F Benlor Bldg., 1184 Quezon Ave., Quezon City Tel. No. 373-6896 1 8 Steps: 1. Submit four copies of the Articles of Cooperation 2. Submit four copies of the By-Laws 3. Submit four copies of the Economic Survey (feasibility study) 4. Submit Bond Accountable Officers (Fidelity, Cash, or Surety) 5. Capitalization not lower than P2,000 (depending on the activities registered) 6. Minimum members of at least 15 Registering with the Bureau of Internal Revenue (BIR) Every business enterprise has to register with the BIR for taxation purposes. Below are the steps to follow: 1. Secure a permanent record file number of Tax Identification Number (TIN) from the BIR National Office in Diliman, Quezon City 2. Register the business/trade name at the BIR office nearest you. Secure and file an application form, together with supporting papers, as follows: - Mayor’s permit - Certificate of Business Name Registration from the DTI - Articles of Partnership or Corporation - Residence Certificate 3. Secure authority to print books of account, invoices, receipts, and other accounting records by filling up four copies of an application form. Attach four draft copies of the material to be printed as well as a copy of the job order. 4. Register book of accounts, invoices, receipts, etc. Registering with the Department of Labor and Employment (DOLE) Business establishments with five or more employees are encouraged to register with DOLE, the agency which monitors compliance with labor laws. Registration is mandatory for firms which employ 50 or more workers. The Bureau of Local Employment administers the registration of establishments. To register, secure and fill up a registration form. Corporations are required to attach a photostat copy of the SEC Certificate of Registration. Registering with the Local Government All businesses, whatever the legal form, are required to secure a mayor's permit or municipal license from the municipality or city where they are located. Various cities and municipalities have different registration procedures, but the following steps prescribed in Quezon City would be typical: 1. Go to the Business Permit and Licensing Office of Quezon City Hall. Secure an application form from the Public Assistance Office 2. Submit three copies of the form together with a simple sketch of your business location Support application with a Certificate of Business Name Registration from the 1 9 DTI-NCR if you are using a firm name A partnership or corporation must submit the corresponding Articles of Partnership or Incorporation duly registered with the SEC together with a photostat copy of the Certificate of Registration with the SEC and the current class "C" certificate in the case of corporations 3. Proceed to the City Treasurer’s Office for any payments to be made. Present Mayor's Permit for issuance of municipal licenses Business establishments are required to exhibit the mayor's permit conspicuously in the business establishment. Registering with Other Agencies Depending on the type of products they manufacture or handle and on their market orientation, certain firms are required by law to register with other government agencies: Bureau of Food and Drugs (BFAD) For manufacturers of drugs, Philinvest Corporate Center, Alabang, cosmetics, and food products Muntinlupa Tel. No. 807-0721/ Fax No. 807-0751 Email: Bfad@doh.gov.ph Garments and Textile Export Board (GTEB) For all manufacturers of 4/F, New Solid Bldg., 357 Sen. Gil Puyat Ave. garments and textile for Makati City exports. Tel No. 890-4810/ Fax No. 890-4653 Email: Gteb@dti.gov.ph National Food Authority - Regulatory For rice, corn, and flour Division dealers. 10th flr., Matimyas Building, E. Rodriguez Sr., Quezon City Tel. 712-1719 / 712-1705 Fiber Industry Development Authority For processors and traders of Asiatrust Bank, Annex Bldg., fibers and fiber products. 1424 Quezon Avenue, Quezon City Tel. 373-7489 / 373-9241 Bureau of Fisheries and Aquatic Resources For those engaged in the (BFAR) export of fish and fish products Arcadia Building, Quezon Avenue, Quezon and other aquatic products. City Tel. 372-5057 / 373-7452 Bureau of Animal Industry (BAI) For exporters of animals and Visayas Avenue, Quezon City animal by-products Tel. 927-0971 / 926-8814 Bureau of Plant Industry (BPI) For exporters of plant and San Andres, Malate, Manila plant products Tel. 525-7857 / 524-0768 2 0 Bureau of Forest Development For exporters of forest FMB Building, Visayas Avenue, products (e.g., logs, lumber Diliman, Quezon City products, plywood etc.) Tel. 927-4788 / 925-2138 National Tobacco Administration For those engaged in the NTA Bldg., Panay Ave., cor. Sct. Reyes St. production or export of flue- Quezon City cured Virginia-type tobacco, Tel. No. 374-3987/ 374-2505 Burley tobacco, and Turkish/Oriental tobacco products. DTI- Bureau of Product Standards (BPS) For commodity clearance for 3/F, Trade and Industry Bldg., 361 Sen. Gil producers, manufacturers or Puyat Ave., Makati City exporters – their products will Tel. No. 890-4965/ 890-4924 be tested to ensure that they Fax No. 890-5131 meet established standards. Email: firstname.lastname@example.org National Subcontractors Exchange For businesses interested in (SUBCONEX) DTI – NCR tie-ups with export-oriented 12/F, Trafalgar Plaza, 105 H.V. dela Costa St. firms as sub- Salcedo Village, Makati City contractors/suppliers provided Tel. No. 811-8231 to 33 they fall under any of the Email: email@example.com following sectors: garments and handwoven fabrics, gifts and housewares, furniture and fixtures, footwear and leather goods, fresh and processed foods and jewelry. Intellectual Property Office (IPO) For firms that want to register IPO Bldg., 351 Sen. Gil Puyat Ave. Makati City their patents and trademarks. Tel./Fax No. 890-4862; 890-4942 Email: firstname.lastname@example.org DTI - Bureau of Trade Regulation and For enterprises engaged Consumer Protection (BTRCP) directly or indirectly in the 2/F, Trade and Industry Bldg., 361 Sen. Gil servicing, repair or Puyat Ave. Makati City maintenance of vehicles, Tel. No. 896-5785; Fax. No. 890-4949 engines and engineering Email: email@example.com works, electrical components, electronics, air-conditioning and refrigeration, office machines and data processing, equipment, medical and dental equipment. Technical personnel (e.g., mechanics or technicians) are also within the scope of the BTRCP. 2 1 Hiring/Training Personnel Your workers are essential to your business. Remember that without workers, you cannot have a business. Even if you're running a very small operation, you cannot expect to do everything yourself. As manager, you must see to it that you have the right employees, and that you train them well, and motivate them to do their very best at work. Know your employees’ rights: Equal Work Opportunities for All. Male and female employees are entitled to equal compensation as well as equal access to promotion and training opportunities. It is unlawful to discriminate against female employees. It is also unlawful to hire a woman on condition that she should not get married, or to stipulate expressly or tacitly that a woman employee shall be deemed dismissed if she gets married. Security of Tenure. Every employee shall be assured security of tenure. No employee can be dismissed from work except for a just or authorized cause, and only after due process. Work Days and Work Hours. Work Day refers to any day during which an employee is regularly required to work. Hours of Work refer to all the time an employee renders actual work, or is required to be on duty or to be at a prescribed workplace. The normal hours of work in a day is eight hours. This includes breaks or rest period of less than one hour, but excludes meal periods, which shall not be less than one hour. Three types of Leaves 1. Service Incentive Leave (SIL) - an employee is entitled to a five-day leave with pay after one year of service. 2. Maternity Leave - the leave granted on the occasion of childbirth, abortion, or miscarriage of a female member of the SSS who has paid at least three monthly contributions within the 12-month period immediately preceding her childbirth or miscarriage. 3. Paternity Leave - a male employee can go on leave for seven days with full pay when his legitimate spouse gives birth or suffers a miscarriage. Wage and Wage-Related Benefits. Wage is the amount paid to an employee in exchange for a task, piece of work, or service rendered to an employer. This includes overtime, night differential, rest day, holiday and 13th month pay. It also includes the fair and reasonable value of board, lodging, and other facilities customarily furnished by the employer. Safe Working Conditions. Employers must provide workers with every kind of on-the-job protection against injury, sickness, or death through safe and healthful working conditions. Rest Days and Holidays. Rest Day refers to any rest period of not less than 24 consecutive hours after not more than six consecutive work days. Holidays or Special Days are classified as such by law or declared by competent public authority, whether or not it falls on an employee's Work Day or Rest Day. Right to Self-Organization and Collective Bargaining. Every worker has a right to self- organization, i.e., form or join a legitimate worker’s organization, association, or union of his choice free from interference from the employer or from the government. Except for those classified as managerial or confidential, all employees may form or join unions for purposes of 2 2 collective bargaining and other legitimate concerted activities. An employee is eligible for membership in an appropriate union on the first day of his or her employment. Workers' Participation and Tripartism. Workers have a right to participate in policy and decision-making processes in matters directly affecting them. They have a right to take part in tripartite activities with government and employers’ organizations. Through their organizations, workers are entitled to representation in tripartite decision-making functions as defined by law, including fixing of wages and resolution of labor disputes. 2 3 GETTING YOUR BUSINESS STARTED Now you can start your business. Remember that being an entrepreneur also means you have a social responsibility to your employees and to the community you serve. This means that you must pay decent wages, give your customers their money’s worth, and compete fairly in the market. Keep in mind that business is uncertain. Not everything will go according to plan. When the unexpected happens, don’t blame other people, the government, a poor business environment, or bad luck. Successful entrepreneurs learn from their failures. Once you have made up your mind, have laid down your plans, and are determined to face the challenges ahead, you are ready to join the ranks. WELCOME T O THE WORLD OF BUSIINESS! WELCOME T O THE WORLD OF BUS NESS! 2 4 References Agbayani, Agueda. Commercial Laws of the Philippines. Philippines: AFA Publications, Inc., 1987. Almonte, Crispina and Co, Myrna. How to Register Your Business. Philippines: Small Business Guides, SERDEF, 1987. Co, Myrna. “Advertising for Small Businessmen.” Small Business Entrpreneurs April-June 1985. Code of Commerce of the Philippines. Crispino, Aquilles. Managing the Financial Aspects of the Enterprise: Introduction to Entrepreneurship. Manila, Philippines: EDCEL, PACSB, SERDEF, UP-ISSI, 1986. Department of Trade and Industry, Bureau of Export Trade Promotion. Philippine Exporter’s Manual. Vol. 3. Makati, Philippines: 1998. Department of Trade and Indsutry, Bureau of Small and Medium Business Development. Laws and Regulations Affecting SMEs: The Laws in Brief. Makati, Philippines: 1988. Department of Trade and Industry website: (accessed 2002) http:// www.dti.gov.ph/ncr/register_bn.html http:// www.dti.gov.ph/bsmbd/howtostart_abusiness.html http:// www.dti.gov.ph/bsmbd/register_business.html Department of Labor and Employment website: http:// www.dole.gov.ph/htmlknowrights.html Employers Confederation of the Philippines and International Labor Organization. Improve Your Business Handbook and Workbook. Manila, Philippines: 1985. Fiber Development Authority. FIDA Administrative Order No. 1. Ministry of Industry, Technical Services Division. Compilation of Registration and Licensing Procedures and Requirements. Philippines: 1980. Philippine Jaycee Senate and UP Institute for Small-Scale Industries. How to Start and Manage a Small Enterprise. Manila, Philippines: Mozar Press, Inc., 1981. Punzalan, Josefina, et al. Fundamentals of Accounting. Philippines: University of the East Publications, 1965. Ramirez, Efren. Philippine Laws on Business Organization. Cebu, Philippines” Cornejo & Sons, Inc., 1980. Santos, Emmanuel. Philippine Business Laws. Manila, Philippines: 1989. SEC website (accessed 2002): http://www.sec.gov.ph/Registration_Stock.htm http://www.sec.gov.ph/registering_a_partnership.htm 2 5 Small Enterprise Research and Development Foundation. Operating Manual on Laws and Regulations Affecting Small-Medium Industries for Government Extension Workers. Manila, Philippines: 1980. Small Enterprise Research and Development Foundation and UP-ISSI. You, Too, Can Start Your Own Business. Quezon City, Philippines. SSS Website (accessed 2002): http://www.sss.gov.ph/regi/regi1001.htm Stegall, Donald, et. Al. Managing the Small Business. Illinois: Richard E. Irwin, Inc., 1976. Sterne, George. How To Start Making Money in a Business of Your Own: George Stern Profit Ideas. California: 1984. Tate, Curtis Jr., et. Al. Producing Your Product or Services: Successful Small Business Management. Texas: Business Publications, Inc., 1978. Technonet Asia. Entrepreneur’s Handbook. Singapore, 1987. U.S. Small Business Administration, Management Aids No. 4019. Date Published: March 2003 Published By: 2 6
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