BUSINESS

PLAN
CHAPTER 6
 CONTENTS

01 INTRODUCING BUSINESS PLAN

02 DETAILED PLANNING PROCESS

03 ORGANIZING THE ENTERPRISE

04 PRACTICAL CONSIDERATIONS
OBJECTIVES

01 IDENTIFY THE IMPORTANCE OF BUSINESS PLANNING AND ITS ADVANTAGES, AS

WELL AS THE STEP BY STEP PROCEDURE IN PREPARING A BUSINESS PLAN

02 ENUMERATE THE FACTORS AND OTHER NECESSITIES ON HOW TO MANAGE AND

START A BUSINESS SUCCESSFULLY
BUSINESS PLAN
A business plan is a document that outlines the goals, strategies, and
steps a company or entrepreneur will take to achieve success. It includes
details about the business idea, target market, competition, marketing
strategy, and financial projections. Essentially, it's a roadmap for how the
business will operate and grow.

WHAT TO DO

HOW TO DO IT
PLANNING
WHEN TO DO IT

WHAT TO EXPECT IN THE FUTURE

ORGANIZING THE ENTERPRISE, PLANNING THE
ENTERPRISE

CONCEPT OF A BUSINESS PLAN

“A well written business plan is one that contains all information necessary for the
financing source to make a decision even without taking the entrepreneur.”
-Anonymous

“AUTHORS HISRICH AND PETERS’ DEFINITION OF A BUSINESS PLAN”

A business plan is a written document by an entrepreneur outlining a venture,

integrating marketing, finance, and human resources. It addresses short-term
concerns, potential investors, and long-term decision-making for the first three
years, including suppliers and funding requirements.
“DAVID E. GUMPERT’S CONCEPT AND DEFINITION OF A BUSINESS PLAN”
A business a document that convincingly demonstrates the ability of a business to
sell its products or services to make satisfactory profit and be attractive to potential
backers. A better definition: A business plan is a selling document that conveys the
excitement and promise of your business to any potential backers or stakeholders.

OTHER DEFINITION OF A BUSINESS PLAN FORM THE BOOKS OF

ENTREPRENEURSHIP

it is thinking ahead of objectives, strategies, financing, production, marketing,

profit prospects, and growth possibilities. However, business planning should be
realistic. This means planning is based on the available resources and is
responsive to the needs of the community.
PRINCIPLES OF PLANNING
1. Planning must be realistic. It must be based on the available resources: human,
financial, and physical resources.
2. Planning must be based of felt needs: The objectives of an entrepreneur should
fit the needs of the people in a community.
3. Planning must be flexible. Resource needs and economic conditions change.
Planning should be adjusted to such changes to be effective and relevant.
4. Planning must start with simple projects
STAGES OF BUSINESS PLANNING
(PROFESSOR PHILIP KOTLER)
1. UNPLANNED STAGE: At the start of the business, the owner-manager is busy
looking for funds, customers, materials, and equipment.
2. BUDGETING SYSTEM STAGE: Eventually, the owner-manager realizes the
need to develop and use a budgeting system. Estimated income is made to
facilitate the orderly function of the growing enterprise.
3. ANNUAL PLANNING STAGE: The owner-manager drafts and annual plan. He
can use the “TOP-DOWN PLANNING” or “BOTTOM-UP PLANNING”.
4. STRATEGIC PLANNING STAGE: As the business enterprise becomes bigger, a
long-range planning is needed.
CRITERIA OF EFFECTIVE PLANNING
1. The plan should state clearly its objectives. Such clear statement is necessary so that
those who will be involved in the execution of the plan will understand, accept, and
support it.
2. The plan should provide measures for a satisfactory accomplishment of the
objectives in terms of quantity, quality, time and cost.
3. The plan should state the policies, which should guide people in attaining the
objectives.
4. The plan should indicate what department of unit would be involved in
accomplishing the objectives.
5. The plan should indicate the time, which should be allowed for each activity. It may
be necessary to establish a target data for completing the activity.
6. The plan should specify the required resources and their corresponding costs.
7. The plan should designate the officers who will be held accountable for the
accomplishments of the objectives.
COMPONENTS OF BUSINESS PLANNING
1.SWOT ( STRENGTHS | WEAKNESSES | OPPORTUNITIES | THREATS)
-Every product or service has its own strength, weaknesses, opportunity, and threat.

2.OBJECTIVES - These should be specific and realistic.

3.STRATEGIES - These are ways of accomplishing the objectives.

4.TIME FRAME - An entrepreneur must be efficient in time management.

CHARACTERISTICS OF A SOUND BUSINESS PLAN

OBJECTIVE
CLEAR
LOGICAL AND SIMPLE
FLEXIBLE
STABLE
COMPLETE AND INTEGRATED
WHY DO WE NEED A BUSINESS PLAN?
1. To project general picture of the business project;
2. To serve as a guide in implementing the business or project;
3. To serve as a major input to investment decisions or major expenditures;
4. To serve as reference or guide to policy formulation and development;
5. To serve as guide for operational matters;
6. To serve as a reference for a bank loan or financing purposes;
7. to determine/estimate the detailed technical and financial requirements;
8. To serve as an overall guide for the proponent or entrepreneur.

DAVID GUMPERT BELIEVED THAT BUSINESS PLAN IS A SELLING POINT. WITH A

BUSINESS PLAN, YOU SELL THE ENTIRE COMPANY AS A PACKAGE. HE CITED THE
FOLLOWING REASONS FOR DOIN A BUSINESS PLAN AS FOLLOWS:

1. To sell yourself as a business;

2. To obtain a bank financing;
3. To obtain investment funds;
4. To arrange strategic alliance;
5. To obtain large contracts;
6. To attract key employees;
7. to complete mergers and acquisition; and
8. To motivate and focus your management team.
OBTAINING FACTS OF A BUSINESS PLAN
Here are some questionnaires to get necessary data:

1. What is unique about my product/service?

2. Who are my competitors?
3. How will my customers buy?
4. What is my share in the market?
5. What is the market potential?
6. Who are my customers and where they are located?
7. Where will I put my business?
8. How big should be my plant or place of business?
BUSINESS PLAN OUTLINE (HISRICH AND PETERS)
I. INTRODUCTORY PAGE IV. DESCRIPTION OF VENTURE
A. Name and address of business A. Product(s)
B. Names and addresses of the principals B. Service(s)
C. Nature of Business C. Size of Business
D. Statement of Financing needed D. Office equipment and personnel
E. Statement of confidentiality report E. Background of entrepreneurs

II. EXECUTIVE SUMMARY

V. PRODUCTION PLAN
A. Manufacturing Process(amount
III. INDUSTRY ANALYSIS
subcontracted)
A. Future outlook and trends
B. Physical Plant
B. Analysis of Competitors
C. Machinery and Equipment
C. Market segmentation
D. Names of suppliers of raw materials
D. Industry Forecasts
BUSINESS PLAN OUTLINE (HISRICH AND PETERS)
VI. MARKETING PLAN VIII. ASSESSMENT OF RISK
A. Pricing A. Evaluate weakness of business
B. Distribution B. New technologies
C. Promotion C. Contingency plan
D. Product of Forecast
E. Controls IX. FINANCIAL PLAN
A. Pro forms income statement
VII. ORGANIZATIONAL PLAN B. Cash flow projections
A. Form of Ownership C. Pro forma balance sheet
B. Identification of partners or shareholders D. Break even analysis
C. Authority of principals E. Sources and applications of funds
D. Management-team background
E. Roles and responsibilities of members of X. APPENDIX (Contains back-up material)
organization A. Letters
B. Market research data
C. Leases or contracts
D. Price list from suppliers
BUSINESS PLAN OUTLINE FROM OTHER BOOKS OF
ENTREPRENEURSHIP
COVER SHEET: Name of business, name of principals, addresses and phone
numbers
Section 2: FINANCIAL DATA
BUSINESS GOALS
A. Sources and Application of funding
STRATEGIES
B. Capital equipment list
TABLE OF CONTENTS
C. Balance Sheet
Section 1: THE BUSINESS
D. Break-Even Analysis
A. Description of Business
E. Income Projections
B. Product/Service
F. Cash Flow Projection
C. Market
G. Deviation Analysis
D. Location of Business
H. Historical financial reports for existing business
E. Competition
F. Management
Section 3: SUPPORTING DOCUMENTS
G. Personnel
Personal resumes, personal balance sheets, cost
H. Application and Expected Effect of Loan
of living budget, credit reports, letters of reference, job
I. Summary
descriptions, letters of intent, copies of leases, contracts,
legal documents, and anything else relevant to the plan.
STEPS IN BUSINESS PLANNING
1. Evaluate your personal resources and interests, and the resources of the
community
2. Analyze your market
3. Choose a proper business location
4. Prepare a financial plan
5. Prepare a production plan
6. Prepare an organizational plan
7. Prepare a management plan

IMPORTANCE OF BUSINESS PLANNING

1. Planning can eliminate business risk.
2. Planning can minimize cost of production.
3. Planning can detect the weaknesses of the business operations.
SOME RULES TO OBSERVE
1. MAKE IT NEAT - Appearance is important and it can reflect the personality of the
maker.
2. MAKE IT GRAMATICALLY CORRECT - Be sure to have a final version of the write up
corrected or edited by professional or qualified editors.
3. MAKE IT HONEST - Do not exaggerate or lie. Tell or write exactly as it is.
4. WRITE IN LAYMAN’S LANGUAGE - Communicate in simple language and not in
technical jargon, unless it is really called for.
5. DO NOT OVER EMPHASIZE YOUR PRODUCT OR YOUR BUSINESS - Product or
service is just part of the business itself, and it requires a lot of other resources
that are dependent on one another
MUSTS FOR BUSINESS PLAN AND FEASIBILITY STUDY
1. It must be arranged appropriately, with an executive summary, table of contents, and its
chapters or major topics in the right order or sequence.
2. It must be of right length and have the right appearance - not too long and not too short,
not to fancy and not to plain.
3. It must give a sense of what the founders and the company expect to accomplish in the
immediate (3 to 7 years) and into the future.
4. It must explain in quantitative and qualitative terms the benefits to the user.
5. The company’s product or service and the business as a whole.
6. It must present hard evidence of the marketability of the product or service.
7. It must justify financially the means chosen to sell the product or service.
8. It must explain and justify the level of product development that has been achieved and
describe inappropriate detail the manufacturing process and associated costs.
9. It must portray management as a team of experienced people with the complementary
business skills.
10. It must contain believable and verifiable market as well as financial projections, with the
key data explained and documented under assumptions.
11. It must be easily and concisely explainable in a well-orchestrated oral presentation
PLANNING AND ORGANIZING THE ENTERPRISE

WHY PREPARE A PLAN?

1. Minimize, if not eliminate, the risk of losing money on a poor business

idea.
2. Save on costly mistakes.
3. Determine your financial requirements.
4. Program your activities in advance.
5. Evaluate actual performance against set targets, especially in terms of
sales, costs, and profits.
THE INTRICACIES OF ENTERPRISE PLANNING

STEP 1: IDEA GENERATION AND OPPORTUNITY IDENTIFICATION

It is important to point out that you should open your mind to all the
opportunities that you see so that you will be able to explore all possibilities.
The method used in this process is “BRAINSTORMING”.

All ideas should be considered regardless of how silly they are. If you
do this process with some friends, you can generate at least 50 ideas in 30
minutes
THE INTRICACIES OF ENTERPRISE PLANNING
STEP 2: INFORMAL SCREENING
You do not have to study each idea in-depth. Instead, consider obvious
criteria, like your personal interests, your own experiences in relation to the
proposed project, and the amount of money your are willing to invest.

If you now have ten ideas, continue the screening process until you are
down to three - the best three, that is. This time, choose the best ideas based
on the following criteria:

Marketability of the product

Availability of raw materials
Availability of technology for making the product
Availability of skilled workers
Investment requirement
Perceived profitability
Government priority or support
Environmental considerations
PLANNING AND ORGANIZING THE ENTERPRISE
STEP 3: ANALYSIS OF THE SITUATION
There are three sub-areas to be analyzed: the resource of the
entrepreneur and the firm, the environment, and the entrepreneur’s values
represented by the aspirations, goals, vision and mission of the firm.

RESOURCE ANALYSIS - This simply requires the would-be entrepreneur to

evaluate what knowledge, skills, and material resources that is available to use
in the business. These resources are known as the 7"Ms”: MONEY, MATERIALS,
MANPOWER, MACHINES, METHODS, MANAGEMENT, and MOMENT(TIME).
You either have these resources, have them in limited amounts, or have non
of them at all.

ENVIRONMENTAL ANALYSIS - There are many factors or conditions in the

environment, which can affect the business that you are planning to set up.
There are factors which have a positive effect in your business and you may
consider them as “OPPORTUNITIES”. On the other hand, you may take note of
conditions, which will affect your business negatively; these are otherwise
known as threats.
PLANNING AND ORGANIZING THE ENTERPRISE
THERE ARE MANY THINGS IN THE ENVIRONMENT, WHICH MAY EITHER BE OPPORTUNE
OR THREATENING TO YOUR PROSPECTIVE BUSINESS. THESE INCLUDE:

THE ECONOMIC SITUATION - Income levels of the population affect purchasing ability,
and in turn, affect your potential sales revenue.
THE SOCIO-CULTURAL ENVIRONMENT - indicates the preference of the prospective
customers.
THE TECHNOLOGICAL ENVIRONMENT - If good, will enable one to make products
cheaper, faster, of better quality. Or packaged more attractively, hygienically, or
sturdily.
THE POLITICAL ENVIRONMENT - Which could affect the business climate in the
locality.
THE PEACE and ORDER SITUATION
THE PHYSICAL CLIMATE
THE AVAILABILITY OF INFRASTRUCTURE FACILITIES
POPULATION TRENDS
PLANNING AND ORGANIZING THE ENTERPRISE

VALUES ANALYSIS - Requires the would-be entrepreneur to examine his

aspirations or vision and mission about the business. It also represents
the kind of service he wishes to provide his customers.

Resource analysis will tell us what the company is capable of

doing at the start of the business; in other words, it indicates what a firm
“CAN DO”; environmental analysis will tell us what the firm “MAY DO”; and
value analysis will tell us the firm “WANTS TO DO”.
 MARKET PLAN
A market plan is a strategy that outlines how a business will attract and
retain customers. It includes the target audience, marketing goals,
tactics (like advertising or promotions), and budget. The plan helps
guide how the business promotes its products or services in the market.
 PRODUCTION PLAN
A production plan outlines how a business will manufacture its products
or deliver its services efficiently. It includes the schedule, resources (like
labor and materials), equipment, and processes needed to produce
goods. The plan ensures that production runs smoothly, meets demand,
and minimizes costs.
STEPS IN PRODUCTION PLAN
1. PRODUCT SPECIFICATION
2. PRODUCTION PROCESS
3. PRODUCTION MACHINERY and EQUIPMENT
4. RAW MATERIALS AND OTHER SUPPLIES
5. UTILITIES, LOCATION, LAYOUT and WASTE DISPOSAL METHOD
6. PRODUCTION SCHEDULE
7. MANPOWER REQUIREMENTS
8. SCHEDULE OF THE INVENTORY
 ORGANIZATION PLAN
An Organizational Plan in entrepreneurship outlines how a business will
be structured, managed, and operated. It is a crucial component of a
business plan, providing details on the company's internal framework
and how it will achieve its goals. This plan helps ensure that the business
is organized effectively to support its strategy and operations.
HOW TO WRITE AN ORGANIZATIONAL PLAN
1. DESCRIBE THE FORM OF OWNERSHIP OF YOUR FIRM - If your business will be sole
proprietorship, partnership, corporation, or cooperative.
2. PREPARE THE ORGANIZATION STRUCTURE - Usually it is done through an organization chart,
and organized according to the four functional areas.
3. PRESENT THE PRE-OPERATING ACTIVITIES THROUGH A GANTT CHART - The registration for the
business, The preparation of the business plan, The negotiations for financing, The construction
of the building, or preparation of the production location, hiring of personnel, and so forth.
FOUR FUNCTIONAL AREAS

1. MARKETING - Marketing in entrepreneurship means promoting your

business to attract customers and sell your products or services. It
involves understanding what your customers want, creating products
that meet those needs, and communicating effectively to encourage
people to buy from you.
2. PRODUCTION - Production in entrepreneurship means making the
goods or services that a business offers to its customers. It's the
process of turning ideas into real products or providing services that
people can use or buy.
3. FINANCE - Finance refers to managing the money needed to start,
run, and grow a business. Ex. Budget, Funding, Financial Plan.
4. ADMINISTRATION - Administration is about managing the daily
operations of the business to keep everything running smoothly. Ex.
Hr, Office management.
 FINANCIAL PLAN
The Financial Plan translate into monetary terms the various plans you
have for the business. from the marketing plan, you get information on
sales; from the production and organization plans, you get information
on expenses. From these varied data, you can compute whether your
business can make money or not.

A financial plan is a detailed strategy that outlines how a business will

manage its finances to achieve its goals.
TOTAL PROJECT COST

1. TOTAL FIXED ASSETS - Include building, land, and equipment used in the
business.
2. WORKING CAPITAL - Working capital refers to amount of funds you need to
pay for expenses, such as materials and suppliers, labor, and utilities needed
for production within a relatively short period (say two weeks or one month)
after which the products can be sold; thus, generating funs for use by the
business.
3. PRE-OPERATING EXPENSES - registration fees and fees paid to a consultant
or researcher who prepared the feasibility study. Pre-operating expenses are
the costs incurred before a business officially starts its operations.
SOURCE OF FINANCING

This section of the financial plan will simply indicate where the funds for the
business will come from. The funds may come from him and other co-owners, if
any, in which case they are known as “Equity Contribution”. It may come from
borrowing money from relatives, friends, banks, and other Sources. These
sources of borrowed funds are known as "Creditors".

Equity Contribution- Equity contribution refers to the money or assets that

owners or investors put into a business in exchange for ownership shares or
equity.
FINANCIAL STATEMENTS
The financial plan usually includes the following financial statements:

PROFIT and LOSS STATEMENT(P&L) - presents details regarding sales

and expenses incurred or will be incurred by the business as of a
given date.
BALANCE SHEET - presents details of what the business owns(assets)
and its value. It presents the equity contributions of owners and
liabilities to the creditors.
CASH FLOW STATEMENT - presents in detail the projected cash
expenses and disbursement for a given period
FINANCIAL ANALYSIS
Basically consists of computations of profitability, liquidity,
and marketability(if applicable) of the enterprise based on the
information from the profit and loss statement and the
balance sheet.
A business, like a person, requires regular check-ups to ensure its
health. Just as a person undergoes tests for heart, lungs, and
cholesterol, a business owner should monitor profitability,
liquidity, and marketability. These indicators reveal how "fit" or
"ailing" a business is. For instance, consistent losses or cash
shortages suggest problems that need addressing. Once
identified, appropriate solutions can be implemented, much like
prescribing medication or therapy for a person’s health issues.
SOCIAL-COST BENEFIT ANALYSIS
Requires you to look at the benefits and the costs that will
accrue to society in general if your prospective business is
established.

Example: employment generated (You will providing jobs to

the unemployed), and taxes paid (you will contribute to
government revenues which can in turn be used in building
roads and other facilities for the benefit of the general public).
This benefits are quantified in your business plan.
ORGANIZING THE ENTERPRISE
The most important of all, a business is all about PEOPLE. It is made
up of “warm bodies” without which business will not run and will not
even be conceived. Who are these “warm bodies?”.

Well, the owner (or proprietor) is one; he is the most important

person in the business. Also important are the managers and
supervisors. And last, but certainly not the least, are workers, or
those who are known collectively as the rank or file. These workers
are the ones that man the production lines and keep your
administrative and marketing operations going. Together these
“warm bodies” are known as your ORGANIZATION.
SMALL BUSINESS ENTERPRISE IS MANAGEABLE

According to (Stanley and Morse), a small enterprise is sometimes

defined as a “manufacturing or service enterprise wherein the owner
manager is not actively involved in production but performs the
varied range of tasks involved in guidance and leadership without
the help of specialized staff”.

There are two kinds of small business:

MICRO BUSINESS: Where the owner is the principal worker and

he employs one or more assistant.
BIGGER SMALL: Where the owner mainly directs the work of
BUSINESS the employees.
SMALL BUSINESS ENTERPRISE IS MANAGEABLE

The Magna Carta for Small Enterprise (R.A. 6977)- defines small and
medium enterprise as any business activity or enterprise engaged in
industry, agribusiness, and/or services, whether single
proprietorship, cooperative, partnership, or corporation.

Value feeling Categories:

MICRO: less than - Php 50,000

COTTAGE: Php 50,001 - Php 500,000
SMALL: Php 500,001 - Php 5,000,000
MEDIUM: Php 5,000,001 - Php 20,000,000
FEATURES OF A SMALL BUSINESS ENTERPRISE
1. LOW CAPITAL, HIGH LABOR: Lacks funds for big machines, often in retail services.
2. SPECIALIZED SERVICES: Skilled in specific tasks like repairs and tailoring,
catering to specific client needs.
3. Thrives in small or overlooked rural markets where demand is limited. As
Corporations cannot survive in a community where demand is limited.
4. ADAPTABLE: Can easily adjust to economic changes without significant losses,
often without a feasibility study.
5. CLOSE TO CUSTOMERS: Operates near the market, with quick responses to
customer needs.
6. FAMILY LABOR: Often run by family members, with relatives and locals hired as
the business grows.
7. FAMILY FINANCED: Funded by family savings or loans, sometimes supported by
relatives or close friends.
8. COMMUNITY-BASED: Small in size relative to the industry, unable to dominate
the market.
CHOOSING YOUR OWN ROLE IN THE BUSINESS
In choosing your own responsibilities and tasks in your business organization,
consider the following factors:

1. EDUCATION Entrepreneurs tend to manage areas aligned with their

AND TRAINING: education, like engineers in production or accountants in
finance.
2. EXPERIENCE: Leverage your past work experiences to guide your management
role, whether in production, marketing, or finance.
5. INTEREST Even without formal training, your natural interests and talents
AND APTITUDE: can guide you to success in roles like sales or production
management.
4. YOUR TIME: Consider the time you can realistically dedicate to various
management roles, balancing them with personal responsibilities.

5. THE ADVANTAGE Avoid becoming too focused on one area, like production,
OF HAVING A at the expense of other aspects like marketing or finance,
BROAD VIEW: to maintain a balanced business approach.
CHOOSING PEOPLE TO WORK WITH YOU
Recruiting Workers: Clearly define performance standards and professional
relationships, especially with those close to you.
Determining Employee Requirements:
1. First of all, list down the different tasks that have to be done in the business.

MARKETING: Identify who will sell, deliver, promote, and handle customer
service.
PRODUCTION: Determine who will produce, operate equipment, maintain
quality control, and manage inventory.
FINANCE: Assign roles for record-keeping, accounting, payroll, receivables,
payables, and petty cash.
ADMINISTRATION: Decide who will manage supplies, sales contracts, permits,
personnel records, and communications.
In business planning, the financial analysis will determine if the project will be
implemented or not.
CHOOSING PEOPLE TO WORK WITH YOU
2. After identifying the tasks, assign those you’ll handle personally. The remaining tasks
will need to be assigned to employees. Translate these tasks into job titles, and
determine how many employees are needed for each role. Some roles may be
combined. Here’s an example of positions and staffing:

Sales Manager: 1
Sales Assistant: 2
Cutter/Designer: 1
Sewers: 4
Inspector/Stock Clerk: 1
Bookkeeper/Secretary: 1
Driver/Messenger: 1

As mentioned above, it is assumed that the entrepreneur will be the general

manager, production manager, finance manager, and personnel manager.
CHOOSING PEOPLE TO WORK WITH YOU
3. For each job position, define the necessary qualifications including skills,
education, experience, and personal characteristics. Consider age, gender,
and other specific requirements if relevant to job performance.

Example for Sales Manager:

GENDER: Male/Female

EDUCATION: Business/Marketing Graduate

SKILLS: Ability to lead, motivate, and manage a sales team.

EXPERIENCE: Preferably 3-8 years of experience in sales, with at least a few years
in leadership or management roles.
PERSONAL TRAITS: Persuasiveness, Resilient, Adaptability.
CHOOSING PEOPLE TO WORK WITH YOU
4. At this stage, decide on the salaries and wages for each
position. This is crucial because:

LABOR Lower wages can reduce labor costs, potentially

VS. PROFIT:
COSTS increasing profits.

EMPLOYEE Competitive wages are key to motivating employees to

MOTIVATION: work hard and remain with your company. Low wages
may lead to higher turnover and less dedication.

5. Once you have done Nos. 1 to 4 above, you can begin the
process of recruiting, screening, and selecting the people to
work with you in your new business.
CHOOSING THE LEGAL FORM OF YOUR BUSINESS
SOLE PROPRIETORSHIP
A sole proprietorship is a business owned by only one person. It is the
simplest organization to form. Most business, including large ones,
started as a sole proprietorship.

PARTNERSHIP
A partnership is formed when two or more partners come together to be
joint owners of a business. A partnership allows the pooling of resources
(money and other business assets) and talents (skills , experience,
management know-how).
CHOOSING THE LEGAL FORM OF YOUR BUSINESS
CORPORATION
A corporation or a company involves five or more persons owning the
business. A corporation is a ‘legal person’ in the eyes of the law.

COOPERATIVE
A cooperative is a group of enterprise. It is made up of a number of
producers, traders, or consumers who want to produce or trade as group
so that they may avail themselves of economies of scale, which
individually, they will not able to obtain.
THE PROS AND CONS OF EACH LEGAL FORM
SOLE PROPRIETORSHIP
ADVANTAGES DISADVANTAGES

Allows you to be your Make you liable to all the risk

own boss and losses
Allows you to keep all Has limited access to capital
profits and other resources
Easy to start Demands long hours of hard
Gives you complete work on your part
control Does not allow sharing of
responsibility
THE PROS AND CONS OF EACH LEGAL FORM
PARTNERSHIP
ADVANTAGES DISADVANTAGES

More money available Control of business is shared

More “heads” contribute and is thus limited
to the success of the Profit are shared and are
business thus reduced
Losses are shared among Consequences of a poor
the partners decision made by a partner
Risks are also shared Liability for debt is unlimited
Planning and problem- Property invested becomes
solving are participatory joint property of all
THE PROS AND CONS OF EACH LEGAL FORM
CORPORATION
ADVANTAGES DISADVANTAGES

Capital is easily raised Major decision cannot be done

by the owners without approval
of the board directors
Corporate and individual profits,
in the form of dividends, are
taxed separately(double taxation)
More expenses are involved
More rules and regulations to
comply with
THE PROS AND CONS OF EACH LEGAL FORM
COOPERATIVE
ADVANTAGES DISADVANTAGES

Capital is easily raised Control of the business is

Liability is limited shared
More people benefit from Ideas and decision made by
profits earned board have to be accepted by
Owners(members) may the general membership
employ managers with
relevant qualifications
May be tax-exempted
THE OPTION NOT TO REGISTER
With all these discussions about the various legal forms of business, the author is
assuming that you want to register your business. But actually, do you? This
question implies that you have an option to register or not to register your
business.

UNDERGROUND ECONOMY
The underground economy is composed of business, which are “Informal” or
unregistered. Some informal business stay informal, others eventually “surface”
and become formal.

There are advantages to staying “underground”. An unregistered business

does not pay taxes. It can also pay salaries that are less than those prescribed by
law. An informal business is not required to grant sic and vacation leaves and
other fringe benefits, nor it is required to remit SSS contributions.
HOW TO REGISTER YOUR BUSINESS
Where to register your business depends on the legal form you have chosen for
your business.
FOR SOLE PROPRIETORSHIPS FOR PARTNERSHIP OR CORPORATIONS FOR COOPERATIVES

1. Register your business name: Bureau of 1. Register with Securities 1. Register with
Domestic Trade and Department of and Exchange Cooperative
Trade and Industry (BDT-DTI). Commission (SEC). Development Authority
(CDA).
2. Obtain business clearance: Barangay 2. Follow the steps for sole
Captain. proprietorship 2. Register your
3. Get a business permit: Local cooperative name with
government (city or municipal). Department of Trade
and Industry (DTI).
4. Get a Tax Identification Number (TIN):
Bureau of Internal Revenue.
5. Register with Social Security System
(SSS): For social benefits.
6. Register with Department of Labor and
Employment (DOLE): If you have 5 or
more employees.
REGISTERING WITH THE DTI
To register your business name with the DTI:
Visit the DTI Office in your city or province.
Fill out an application form (five copies).
Pay the registration fee.
Have three alternative business names ready, as some may already be taken.
FOR SOLE PROPRIETORSHIPS FOR PARTNERSHIP OR CORPORATIONS FOR COOPERATIVES

1. Be 18 years old or older. 1. Submit certified true copies of 1. Submit certified true
articles of incorporation or copies of articles of
2. Provide two recent passport- partnership, by-laws, and SEC cooperation, by-laws, and
sized photos. registration certificate. CDA registration
3. Show proof of Filipino 2. If foreigners own 40% or more certificate.
citizenship (birth certificate, of the capital, the SEC 2. Provide a CDA certificate
Voter's ID, etc.). certificate must comply with for any capitalization
the Foreign Investment Act of increase.
1991.
3. Provide an SEC certificate for
any capital increase.
REGISTERING WITH THE MAYOR’S OFFICE
(LOCAL GOVERNMENT UNIT)

WHERE TO GO:
City or Municipal Mayor's Office, Business Licensing Section.

BEFORE YOU GO:

Get a Barangay Clearance (P50 fee, 1997 rates).

FEES:
Mayor's permit fee

Other fees: sanitary, garbage, inspections (building, electrical, plumbing,

mechanical, fire), working permit.
Total fees: Around P1,000 (1997 rates)
REGISTERING WITH THE MAYOR’S OFFICE (LOCAL GOVERNMENT UNIT)
REQUIRED DOCUMENTS:
FOR SOLE PROPRIETORSHIPS PARTNERSHIP OR CORPORATION FOR COOPERATIVES
DTI registration certificate Location map of business Location map of business
Location map of business establishment establishment
establishment Barangay clearance Barangay clearance
Barangay clearance SEC registration certificate CDA registration certificate
Community Tax Certificate Articles of Plus, depending on your
partnership/incorporation business: building occupancy
Certificate of proprietor
Current Class "C" certificate permit, mechanical/electrical
Plus, depending on your
Community Tax Certificate of inspections, pollution
business: building occupancy
partners clearance, location clearance,
permit, mechanical/electrical
Plus, depending on your sanitary/health certificate.
inspections, pollution
business: building occupancy
clearance, location clearance,
permit, mechanical/electrical
sanitary/health certificate,
inspections, pollution
police clearance.
clearance, location clearance,
sanitary/health certificate.

Tip: Bring cash to pay the fees.

REGISTERING WITH THE BIR
Why Register?
Get a Tax Identification Number (TIN) for tax purposes.
Obtain official receipts and invoices.
Get your book of accounts stamped.

Fees:
Tip: Use a BIR-accredited printing press
VAT-covered businesses: P1,000 (1997 rates)
to get your official receipts and invoices
VAT-exempted businesses: No fee
printed and stamped.
Requirements:

FOR SOLE PROPRIETORSHIPS FOR PARTNERSHIP OR CORPORATIONS FOR COOPERATIVES

1. DTI registration and Mayor's 1. SEC registration and Mayor's 1. CDA registration or
permit (photocopies). permit (photocopies). business permit
(photocopies).
For Cooperatives who want to apply for tax exemption, fill
out BIR Form 1702A-1.
REGISTERING WITH THE SSS
You are required to get additional registration with the Social Security System(SSS),
especially if you have employees. If you have none, you may still register as a self-
employed individual. The SSS provides sickness, retirement, loan, and other social
services to employees of private businesses. The funds for such benefit come from
contribution from the government(SSS) and from you, the employer.

Here are the requirements for registering with the SSS:

FOR SOLE PROPRIETORSHIPS FOR PARTNERSHIP AND CORPORATIONS FOR COOPERATIVES

Photocopy of mayor’s Photocopy of articles of (Cooperatives, as a rule, do

permit partnership or incorporation not have to register with
Employer’s date record Employer’s data record the SSS, but their
Initial or subsequent list of Initial or subsequent list of employees do.)
employees employees(The last two
requirements should be signed
by the managing partner of a
partnership or the highest
ranking officer a corporation).
REGISTERING WITH THE SEC (ONLY FOR COPORATIONS AND
PARTNERSHIPS)
When your business grows and you want to organize a corporation or partnership, or
partnership in place of the single proprietorship you originally set up, you need to go to
the Securities and Exchange Commission (SEC).

The requirements for SEC registration are:

Verification of proposed name of your firm. If it has been registered by any other name,
you have to change your proposed name and repeat the process.
Six copies of the following(For stock coporations):
- Articles of incorporation
- By-Laws
- Undertaking to change corporate name
- Treasurer’s affidavit
- Bank certificate of deposit
- Authority to verify bank accounts
- Registration data sheet/ subscribes information sheet
- Statement of assets and liabilities, if subscription is paid in property
OTHER REGISTERING AGENCIES
These agencies generally exercise regulatory and control functions over industry sectors
under their jurisdiction. Some of these agencies extend incentives and assistance to the
firms.
Here is a partial list of these specialized agencies:

Food and Drug Administration, for firms manufacturing drugs, cosmetics, and food
products
Fiber Development Authority, for businesses engaged in processing and trading of fiber
and fiber products
National Food Authority, for traders and processors of rice, corn, and flour
Land Transport Franchise and Regulatory Board, for land transport services(jeepney lines,
taxicab, and bus operation)
Maritime Industry Authority, for sea transport services
Philippines Overseas Employment Administration, for firms engaged in recruitment of
workers for employment abroad
Department of Education, Culture, and Sport, for owners of schools, universities, and other
educational institutions
Department of Tourism, for hotels and other lodging facilities for tourists
Philippine Contractors Accreditation Board, for construction contractors
OTHER REGISTERING AGENCIES

Bangko Sentral ng Pilipinas, for exporters in general

Bureau of Food and Drugs, for exporter of drugs, cosmetics, and food products
Philippine Coconut Authority, for exporters of coconut and coconut by-products
Garments Trade Export Board, for exporters of garments and textile
Bureau of Fisheries and Aquatic Resources, for exporters of fish and fish products
Bureau of Animal Industry, for exporters of animals and animal product and by-
products
Bureau of Plant Industry, for exporters of plants and plant products
Bureau of Forest Development, for exporters of forest product
THANK
YOU