How to start a small business in the Philippines

Choose your structure: sole proprietor, OPC or corporation

Many micro businesses, such as a sari-sari store, carinderia or online shop, start as sole proprietorships. You register only a business name with DTI, for ₱200 to ₱2,000 depending on scope, plus ₱30 documentary stamp tax, and the registration lasts five years.^[1]

A One Person Corporation (OPC) has a single stockholder, and only a natural person, trust or estate may form one. The Revised Corporation Code removed the minimum capital stock for OPCs and ordinary stock corporations, unless a special law requires one. A regular corporation may have up to 15 incorporators.^[2]

SEC registration costs more than DTI. For an OPC, the filing fee is 1/5 of 1% of the authorized capital stock but not less than ₱2,000, plus a legal research fee of 1% (minimum ₱20) and ₱100 per name reservation. The SEC's OneSEC system aims for one-day approval of registration applications for domestic stock corporations.^[3,5]

Example: you plan a small trading business with ₱1,000,000 authorized capital as an OPC. 1/5 of 1% of ₱1,000,000 is ₱2,000, which equals the minimum, so the filing fee is ₱2,000, plus ₱20 legal research fee and ₱100 name reservation.^[3]

Register and get your permits

Once the name or SEC registration is done, two tracks can run side by side. The local track is the barangay business clearance, then the mayor's permit, because the city cannot issue a business permit without the barangay clearance. The BIR track does not need the mayor's permit, since BIR removed it as a mandatory requirement. BIR registration is due on or before the start of business: your first sale, or 30 calendar days after your DTI, SEC or mayor's permit papers are issued, whichever comes first. Our step-by-step registration guide has the fees and links for each office.^[6,8,16,17]

Your type of business may need more. Food businesses need a sanitary permit and health certificates, and every business needs a fire safety inspection certificate. Find your kit under business kits.

Know your BIR taxes before your first sale

If you are not VAT-registered and your annual gross sales are ₱3,000,000 or less, you pay a 3% percentage tax on gross sales, filed on BIR Form 2551Q within 25 days after the end of each quarter.^[9]

Sole proprietors with gross sales of ₱3,000,000 or less can instead choose the 8% income tax. It replaces both the graduated income tax and the percentage tax. If the business is your only income, the 8% is on gross sales above ₱250,000. Example: gross sales of ₱600,000 for the year. Subtract ₱250,000 to get ₱350,000, and 8% of that is ₱28,000 income tax, with no separate 3% percentage tax. If you also earn a salary, there is no ₱250,000 reduction: 8% of the full ₱600,000 is ₱48,000, and your salary is taxed separately at graduated rates.^[10,11]

Quarterly income tax returns (Form 1701Q) are due 15 May, 15 August and 15 November, and the annual return (Form 1701) on or before 15 April. BIR classifies a business with gross sales under ₱3,000,000 as a micro taxpayer.^[10,12]

When you hire your first worker

SSS employer coverage takes effect on your first day of operation, and you must report employees for coverage within 30 days from hiring. You also register with PhilHealth and Pag-IBIG, and pay at least the minimum wage for your region.^[13]

Minimum wage depends on region and type of business. In NCR, Wage Order NCR-28 set the daily minimum at ₱755 for non-agriculture from 26 September 2026, and ₱718 for retail and service businesses with 15 or fewer workers. Check your own region on the NWPC site. See hiring your first employee.^[14]

Stay legal every year

Your mayor's permit is valid for one year. Cities may renew in the first month of the year or on the permit's anniversary. Under the Local Government Code, local taxes, fees and charges are paid within the first 20 days of January, or of each quarter if paid quarterly. Late payment can draw a surcharge of up to 25% and interest of up to 2% a month.^[7,6]

Your DTI name lasts five years, and BIR registration is one-time. What repeats is the filing: percentage tax every quarter (unless you chose 8%), quarterly income tax, and the April annual return.^[1,8,9,10]

Sole proprietorship vs OPC vs corporation

Questions people ask

Should I start as a sole proprietor or an OPC?

Compare the registration costs in the table above, then think about who will own the business and how big you plan to grow. Read the full comparison before deciding.

How much capital do I need to register a corporation?

The Revised Corporation Code says stock corporations and OPCs are not required to have a minimum capital stock, unless a special law requires it.

Is the 8% income tax always better?

Not always. It is computed on gross sales above ₱250,000, or on all gross sales if you also earn a salary, with no deductions for expenses. If your costs are high, the graduated rates may come out lower. Compare both before you choose.

What happens if I miss the January renewal?

Cities can add a surcharge of up to 25% of the unpaid amount and interest of up to 2% a month under the Local Government Code. See late renewal.