Suck at money? Congrats. You’re part of the 99 percent of people in their 20s floundering when it comes to finance. Adulting is hard, and money is harder—especially when it’s your own and not your parents. My Two Cents is here to break down everything you need to know about finance, business, and entrepreneurship. We’ll tackle all the basics, from how to get a business permit to how to invest in stocks, to educate the fledgling adults on how to not go broke.
Welcome to the idiot’s guide to money. Lesson No. 28: How to close a business.
We’ve written about how to register a business, how to get a business permit, and business ideas for budding entrepreneurs. And it’s beyond bizarre that the pandemic is making us write something we hope most never have to experience: how to close a business.
The economic effects of the pandemic and quarantine are finally catching up on us. Just this week, the Department of Labor and Employment announced that over 2,000 companies have already reported closures, and those numbers are expected to go up in the coming weeks and months. Not all companies were prepared for a two-month closure, much less working at half capacity when enhanced community quarantine was lifted.
And so, business owners have had to make the hard decision to close their businesses to save themselves from further losses. If you’re one of these business owners, this is how you report a business closure with all the concerned government offices.
1| DOLE, SSS, PhilHealth, and Pag-IBIG
After giving your employees one-month notice that the company is closing, send a written notice to the Department of Labor and Employment at least one month before the date you plan to formally close the business. DOLE will also request that you ensure termination pay to your employees amounting to at least 1.5 months pay for every year of service.
After delivering the letter to DOLE, inform SSS, PhilHealth, and Pag-IBIG of the impending closure so they’ll be updated when you no longer have to continue paying contributions.
2| Barangay Hall
After the preliminary steps are done, the real work begins. Closing a business is much like opening a business in that you have to start at the lowest office and work yourself to the top. Start at the Barangay Hall, bring your requirements, pay the necessary fees, and await to claim your barangay clearance and certificate of closure.
Note: Local government units may differ in their processes and requirements, so make sure to check with the LGU first.
Requirements:
- Valid ID
- Letter of request to close business
2| City Hall
After the Barangay, head to City Hall where your business is located. Submit the necessary requirements, pay the fees, and await to claim the city hall clearance.
Note: Local government units may differ in their processes and requirements, so make sure to check with the LGU first.
Requirements:
- Valid ID
- Barangay clearance
- Barangay certificate of closure
- Latest business permit
- Business plate
- Notarized affidavit of closure
- Original and photocopy of BIR form 2303
- Latest ITR
- Financial statements
- Latest VAT and OPT returns
- Book of accounts
3| Bureau of Internal Revenue
The process of closure at BIR is a little more complicated. You will need to bring all of your requirements (of which there are many) to the regional district office (RDO) where your business is located. After submitting your requirements, you will need to pay the fees and wait to claim your tax clearance.
Requirements:
- Letter of request for business closure
- Original and photocopy of BIR form 2303
- Book of accounts
- List of inventory of unused receipts and invoices
- All unused sales invoices and receipts
- Latest ITRs last three years
- BIR Form 1905
- City hall certificate of closure
4| Department of Trade and Industry
After getting your tax clearance from BIR, it’s time to officially cancel your business name, which is pretty much the end of the line for companies with sole owners. The steps are simple: Gather your requirements, go to the DTI head office, and wait for the certificate of cancellation of business name.
Requirements:
- Letter of request for cancellation of registered business name
- Notarized affidavit of cancellation of registered business name
- Original business name certificate of registration
- Certified photocopy of SEC certificate if your business is a corporation or partnership
5| Securities and Exchanges Commission
Going to SEC is only necessary if your business is a corporation or partnership. In that case, you will need to bring your requirements to the SEC and wait to claim the certificate of dissolution from SEC.
Requirements:
- Notarized director’s certificate
- Articles of incorporation/partnership
- Audited financial statement
- BIR tax clearance certificate
- Notarized affidavit of notice of dissolution
- List of creditors
- Endorsement/clearances from necessary government agencies
The matter of closing a business is just as, if not more, difficult than opening one. There are suppliers and employees to inform, it will be time consuming, and the government paperwork part is only the beginning.
