Closing a business in the Philippines requires proper legal procedures to avoid future liabilities and penalties. Business owners must go through deregistration with various government agencies to ensure compliance with regulatory requirements. This guide outlines the step-by-step legal process of business closure and deregistration in the Philippines.
1. Board Resolution or Owner’s Decision
For sole proprietorships, the owner can decide to close the business anytime.
For partnerships and corporations, a Board Resolution approving the closure is required.
If the business is a corporation, a majority vote from the board of directors and stockholders (representing at least two-thirds of the outstanding capital stock) is needed.
2. Settling Outstanding Liabilities
Before proceeding with deregistration, businesses must:
Pay all outstanding taxes, fees, and obligations to the Bureau of Internal Revenue (BIR), local government units (LGUs), and creditors.
Issue final employee compensation and benefits following the Labor Code of the Philippines.
Settle business loans, leases, and supplier contracts to avoid legal disputes.
3. Cancellation of Permits and Licenses
The following permits and licenses must be formally canceled:
Barangay Clearance – Secure clearance from the barangay where the business is registered.
Mayor’s Permit (Business Permit) – Submit a letter of closure to the LGU, along with a tax clearance certificate.
BIR Registration – File for business closure with the BIR to stop tax obligations.
DTI or SEC Registration:
Sole proprietorships must file a Business Name Cancellation with the Department of Trade and Industry (DTI).
Corporations and partnerships must file for dissolution with the Securities and Exchange Commission (SEC).
4. Business Closure with the BIR
To legally close a business with the BIR, the following steps must be taken:
File BIR Form 1905 (Application for Registration Update) to request the cancellation of registration.
Submit BIR Form 2000, 2550Q, and 1702 (or applicable tax returns) to settle final tax dues.
Secure a Tax Clearance Certificate to confirm all tax liabilities have been settled.
Surrender unused Official Receipts and Invoices for proper disposal.
5. Filing for Dissolution with the SEC (For Corporations and Partnerships)
Corporations and partnerships must submit the following to the SEC:
Board Resolution and Affidavit of Dissolution
Audited Financial Statements (AFS) reflecting the company’s final operations
BIR Tax Clearance Certificate
SEC Form F-105 (for voluntary dissolution)
6. Deregistration from Other Government Agencies
Social Security System (SSS), PhilHealth, and Pag-IBIG – Notify and submit the necessary documents to close employer accounts.
Department of Labor and Employment (DOLE) – Required if the business has employees to comply with labor termination procedures.
7. Final LGU Clearance and Closure Certificate
File a closure request with the city or municipality.
Obtain a Certificate of Business Closure after tax clearance and settlement of all obligations.
Conclusion
Business closure and deregistration in the Philippines involve multiple legal steps to ensure compliance and avoid future liabilities. Failing to properly close a business can result in tax penalties, legal disputes, and continued obligations. Consulting a legal professional can help streamline the process and ensure that all requirements are met efficiently.
Navigating the business landscape in the Philippines can be both rewarding and intricate. Whether you’re embarking on a new venture or scaling up, ensuring that your corporate endeavors are in line with local regulations is paramount.
At CBOS Business Solutions Inc., we pride ourselves on simplifying these processes for our clients. As a seasoned professional services company, we offer comprehensive assistance with SEC Registration, Visa processing, and a myriad of other essential business requirements. Our team of experts is dedicated to ensuring that your business is compliant, well-established, and ready to thrive in the Philippine market.
Why venture into the complexities of business registration and compliance alone? Allow our team to guide you every step of the way. After all, your success is our commitment.
Get in touch today and let us be your partner in achieving your business goals in the Philippines.
Email Address: gerald.bernardo@cbos.com.ph
Mobile No.: +639270032851
You can also click this link to schedule a meeting.
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