Part 3: Importance of Securing the Legal Requirements
In this series we talked about matching the type of business with the appropriate government agency to register to and the different government agencies involved in registering your business. In this last article, we will discuss why it is important to secure all legal requirements for your business.
The legal requirements previously discussed are only the essential requirements for starting a business in the Philippines. There may be other special permits, clearances, or registrations from or with other government agencies that may be necessary, depending on the kind of business and projects a business owner plans to engage in.
It is very important to secure these essential legal requirements. The consequences of operating a business without the said legal requirements range from the closure of business, to the imposition of monetary fines, and finally, to imprisonment.
Local government units in different cities and municipalities have different penalties for businesses operating without the required mayor’s or business permit, such as surcharge and interest on the amount of fees due. However, one common penalty that may be imposed is the closure of the business. Confiscation of the business property and assets may also be done.
As for failing to register a business with the BIR, the said violation is penalized by a fine ranging from P5,000 to P20,000, imprisonment of six months to two years. There is also a compromise penalty of P2,000 to P20,000, depending on whether the business is located in a city or in a municipality. (Section 258, National Internal Revenue Code of 1997)
For failing or refusing to register the employees or to deduct contributions from the employees’ compensation and remit the same to the SSS, the penalty is either a fine (ranging from P5,000 to P20,000) or imprisonment for six years to twelve years.(Section 28(e), Social Security Law, as amended by Republic Act No. 8282)
Any employer who fails or refuses to register employees with PhilHealth or to deduct contributions from the employees’ compensation or remit that same amount to PhilHealth is penalized with a fine of P5,000, multiplied by the total number of employees of the business. (Section 44, National Health Insurance Act of 1995, as amended by Republic Act No. 10606)
On the other hand, any employer who fails or refuses to register employees with the Pag-IBIG Fund or to collect or remit the required contributions is penalized either with a fine of not less than but not more than twice the amount involved, or imprisonment of not more than six years. The employer may be both fined and imprisoned, depending on the discretion of the court.(Section 25, Home Development Mutual Fund Law of 2009)
Originally published at foundersguide.com
