BusinessHow to Close a Company / Business in the Philippines

July 8, 2024
Home » How to Close a Company / Business in the Philippines

Closing a business in the Philippines involves a multi-step process requiring coordination with several government agencies. Business closure is never a fun subject to write about, but if you are going to close a business, it’s best to do it properly to avoid any potential penalties. Here’s a comprehensive guide to ensure a smooth and compliant closure.

Step 1: Notify Employees and Government Agencies

1.1. Notify Employees and DOLE

  • Provide written notice to employees and the Department of Labor and Employment (DOLE) at least 30 days before the intended closure.

1.2. Inform SSS, PhilHealth, and Pag-IBIG

  • Notify these agencies to terminate your company’s obligations as a contributing employer.

Step 2: Clearances from Local Government Units (LGUs)

2.1. Barangay Clearance

  • Submit the required documents to the Barangay Hall and pay the necessary fees to obtain a Barangay Clearance and Certificate of Closure.

2.2. City Hall Clearance

  • Proceed to the City Hall with the Barangay Clearance, submit additional requirements, and pay fees to secure a Certificate of Closure.

Step 3: Bureau of Internal Revenue (BIR) Compliance

3.1. Requirements and Submission

  • Submit a request letter for business closure using BIR Form 1905.
  • Provide an inventory of ending goods, unused official receipts, and sales invoices.

3.2. Tax Audit and Clearance

  • Undergo a tax audit by the BIR to settle any outstanding liabilities.
  • Pay closure fees and obtain a Tax Clearance Certificate.

Step 4: Department of Trade and Industry (DTI) for Sole Proprietorships

4.1. Cancellation of Business Name

  • Submit a BN-Related Application Form, a valid ID, and an Affidavit of Cancellation to the DTI.
  • Pay the necessary fees to receive a Certificate of Cancellation.

Step 5: Securities and Exchange Commission (SEC) for Corporations and Partnerships

5.1. Dissolution Application

  • If applicable, submit the required documents to the SEC, including clearances from other regulatory agencies.
  • Pay the assessment and obtain a Certificate of Dissolution.

5.2. SEC Memorandum Compliance

  • Follow the guidelines of SEC Memorandum Circular No. 5, Series of 2022, which outlines the procedures for corporate dissolution.

Key Documents and Requirements

  • Written notice to employees and DOLE
  • Notifications to SSS, PhilHealth, and Pag-IBIG
  • Barangay Clearance and Certificate of Closure from Barangay Hall and City Hall
  • Request letter for business closure (BIR Form 1905), inventory lists, and tax clearance from the BIR
  • BN-Related Application Form, valid ID, and Affidavit of Cancellation for DTI
  • Clearances and dissolution documents for SEC

Is Assistance Available?

Properly closing a business in the Philippines is crucial to avoid penalties and legal complications. Ensuring compliance with all the involved agencies will facilitate a smooth transition and legal closure of your business operations.

For further assistance, schedule an initial consultation with one of our business experts. You may contact us through the following channels: