Closure of Business

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Published — May 16, 2020 

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

Read also: COVID – 19 AND ITS IMPACT ON THE MANAGEMENT PREROGATIVE OF EMPLOYERS

The COVID-19 pandemic has been affecting the health of the public and the economy. In an attempt to contain the COVID-19 infection, Philippine government suspended various business operations and implemented strict community quarantine procedures. Due to the substantial reduction of economic activity, many business operations have been affected. For some, it resulted to great business losses. And to stop the bleeding, many business owners opt to permanently close their businesses. 

Businesses choosing to close permanently must cancel their registration with (1) their Local Government Office; (2) Department of Labor and Employment (3) Bureau of Internal Revenue (4) Department of Trade and Industry (for sole proprietorship) or the Securities and Exchange Commission (for corporations and partnerships).  Notices must also be given to social welfare agencies, such as Philippine Health Insurance Corporation (Philhealth), Home Development Mutual Fund (Pag-IBIG Fund), and Social Security System (SSS).

1. Local Government Unit (LGU)

Procedures on closing a business may vary between LGUs. For Quezon City, the requirements are as follows:

Requirements in Getting a Business Retirement:

1. Duly accomplished retirement application form with Location Map (3 pages/set; originally signed by the Owner/President or Vice President)
2. Tax Bill & Official Receipts (3 years) (original)
3. Latest Business Permit (original)
1. If single proprietorship, original Affidavit of closure with exact date of closure
2. If partnership, original partnership dissolution with exact effectivity date of closure signed by all partners
3. If corporation, Original Secretary’s certificate or Board Resolution on closure or transfer of business with exact date of closure
4. Valid ID
1. If single proprietorship, ID of the owner
2. If partnership, all IDs of partners are required
3. If corporation, ID of President (original must be presented & photocopy to be submitted) and authorization letter from the owner and valid ID of the authorized representative
5. Barangay Certificate with Exact Effectivity Date of Closure
6. BIR Certificate of Registration (original must be presented & photocopy to be submitted)
7. Certified Breakdown of Sales, if there are two or more line of business/branches & if AFS is consolidated (original)
8. Proof of business tax payment/tax bill/permit issued by the other LGU where other operations are situated (original must be presented & photocopy to be submitted)
9. Latest ITR with AFS on or before closure from the last payment of business operation for years 20___ to 20___ (original must be presented & photocopy to be submitted)
10. VAT Returns or Percentage Tax Returns 201___ (original must be presented & photocopy to be submitted)
11. Book of Accounts (to be presented upon evaluation/actual inspection and examination)

Process in Securing Business Retirement

1. Business owners are required to apply at the City Treasury Department – Examination Division to declare closure of business. They need to submit and duly fill-up the application forms and all the required documents. A claim stub will then be given once all the requirements have been submitted.
2. After 5-7 days, they can claim the Assessment forms at the Treasurer’s Office.
3. They need to pay the final billing and certification at the Treasurer’s Office cashier.
4. Then, they can claim their Business Retirement Certification.

2. Department of Labor and Employment

Notice of closure and termination must be given to the employee and the Department of Labor and Employment (DOLE) at least thirty (30) days before the intended date of termination.  Furthermore, separation pay which equivalent to at least one month pay or at least 1/2 month pay for every year of service, whichever is higher, must be paid to employees  except when closure is due to serious business losses.

3. Bureau of Internal Revenue

Venue: RDO where TIN is registered.

BIR Form:

BIR FORM 1905 – Application for Registration Information Update for Updating / Cancellation of Registration / Cancellation of TIN / New Copy of TIN Card / New Copy of Certificate of Registration

Documentary Requirements:

1. Notice of closure or cessation of business;
2. List of ending inventory of goods, supplies, including capital goods;
3. Inventory of unused sales invoices/official receipts (SI/OR);
4. Unused sales invoices/official receipts and all other unutilized accounting forms (e.g., vouchers, debit/credit memos, delivery receipts, purchase orders, etc.) shall be physically submitted to the RDO where the Head Office is registered or where the Authority to Print (ATP) was secured;
5. All business notices and permits as well as the Certificate of Registration (COR) shall be surrendered for cancellation;
6. Other documents necessary to support the changes applied for.

4. Securities and  Exchange Commission (SEC) / Department of Trade and Industry (DTI)

For the closure of a corporation, the following must be submitted to SEC:

1. Director’s Certificate
2. Articles of Incorporation
3. Amended Articles of Incorporation (if any)
4. Audited Financial Statements (AFS)
5. Certification by President and Treasurer
6. BIR Tax Clearance Certificate
7. Publisher’s Affidavit of Publication
8. Endorsement / Clearance from Other Departments / Government Agencies (if applicable)
9. Notarized Secretary’s Certificate

For the closure of a partnership, the following must be submitted to SEC:

1. Articles of Partnership
2. Affidavit of Dissolution
3. BIR Tax Clearance     

For sole proprietorship, the following must be submitted to DTI:

1. Letter Request stating reason for termination
2. Affidavit of cancellation of the registered business name, stating the reason/s for the cancellation and that the registered owner has no outstanding financial obligation at the time of closure of establishment
3. Original copy of the business name certificate and the duplicate copy of the application form (affidavit of loss if either the business name certificate and/or the duplicate copy of the application form was lost)

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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