A lot of startups don’t think about their business addresses and how it can affect the way they operate later on.
I’ve seen this happen over and over again to clients. And it’s frustrating that we can’t reach ALL business owners so they can avoid this problem.
Imagine this scenario:
A first-time business owner registers her corporation with the SEC. She reserves the name online, prepares the articles of incorporation, by-laws, and treasures affidavit. All the incorporates sign the paperwork. They have it notarized then submit it to the SEC.
After a couple of days, they get back their Certificate of Incorporation and other documents from the SEC. They then proceed to get a Barangay clearance for their business.
Then they hit a roadblock. The address they used is a residential address – a condo unit of one of the incorporators – not a commercial address.
The Barangay requires them to submit an endorsement letter from the homeowners association. The letter should state that they are allowing the use of the residential address for commercial purposes.
However, this entails complications for the homeowners association. So, they don’t give this letter to the business owner. Therefore, the Barangay won’t process their clearance.
The business owner is now at a dilemma. She thought everything would go smoothly. Now, she has to transfer her business address or abandon the incorporation altogether.
This scenario happens frequently and in different variations too.
Sometimes, as what happened to one client, the homeowners association allowed them to use the address for commercial purposes when they initially registered, but come next year, they withheld this clearance from them. That client of ours now can’t renew their permits. They are now in the process of transferring their business address to another city.
There are also cases where, in the city hall level, you are required to submit an occupancy permit, and your lessor doesn’t have this. You again have no choice but to transfer your business address if you want to register properly.
So, now, you really are left with no choice but to transfer your address. But this isn’t as easy as it sounds.
How to Transfer Your Business Address
Conceptually, the process is simple.
Please take note that this example is for transferring your business address to a different city. There are other variations for transferring of address like the same city, different RDO; or same city, same RDO.
The only way to transfer your business address to another one is to retire your business in the current address, then apply a new business in the new address.
Sounds easy, right?
But here’s the catch: long list of requirements and a long time to finish.
Here’s the step-by-step process if the company is registered as a stock corporation with the SEC:
- Amend articles of incorporation
- Retire business at Barangay level
- Retire business at city hall level
- Apply for new Barangay clearance
- Apply for new business permit
- Transfer records from old RDO to new RDO
Step 1: Amend Articles of Incorporation
I won’t go into detail here as we have already written another article about amending your articles of incorporation before. Basically, you submit the amended articles (document with the new changes), board resolution, and secretary’s certificate to the SEC.
The output of this is the Amended Articles of Incorporation.
Step 2: Retire Business at Barangay Level
Unfortunately, the barangays and cities in the Philippines don’t have a single database or record of businesses. That is why this process of retirement – application is necessary.
Here, there are two requirements for this:
- Barangay Clearance, latest
- Letter of Request for Retirement
You submit this to the barangay and you get a certification from them stating the business is closed/retired.
Step 3: Retire Business at City Hall Level
At this level, you have to submit more documents. Here’s a list to begin with:
- Letter of Request for Retirement
- Audited Financial Statements (AFS) & ITR for the three (3) preceding years of the retirement date
- Original Mayor’s Permit. Computerize Assessments & Official Receipt/s of the current calendar year.
- Monthly and/or Quarterly BIR VAT Returns / ITR for the current year.
- Certification of Gross Sales for the current year duly certified by an accountant.
- Cedula / CTC for three (3) years of the retirement date.
- Certification from Barangay stating actual closure of business.
So, just submit all these requirements at the barangay and wait for clearance from them stating your business has been retired.
And I’d like to highlight that the list is just something to begin with. Some cities ask more documents while some, this list would suffice.
Here’s a reminder for everyone: even if you had no operations (e.g. registered November 2016), you are still required to have an audited financial statement for that year.
Step 4 – 5: Apply for New Barangay Clearance and Business Permit
Same as amendment section, we’ve written articles regarding this topic already. Just submit the requirements and you’re all set to go.
Step 6: Transfer Records from Old RDO to New RDO
The Bureau of Internal Revenue (BIR) has a better way of storing your business’ records, or more specifically, the amount you paid or not paid.
That is why at this step, you “transfer” your records from your original Regional District Office (RDO) to your new RDO.
The process goes like this:
- Request for transfer at old RDO
- Old RDO comes out with the report of open cases (these are documents/tax returns that their system showed up as missing).
- Comply with open cases
- Wait for transfer
- Get new Certificate of Registration (COR)
- Apply for new receipts/appeal to use old receipts at the new address
What becomes a headache for most companies is the list of open cases. Most of the time, these are tax returns you have submitted already but didn’t show up in their system.
So, it is up to you as a business owner to show proof of these filings. Once you’ve complied with these, everything goes smoothly.
But as a disclaimer, smoothly can mean as short as a week or as long as 2 months. While you don’t have to do or submit anything else, you really have to literally just wait for the BIR to finish this process.
No matter how much you followup, it won’t change that timeline.
There you have it. From our experience, this whole transfer of business address takes around 2 months to finish. So, avoid this hassle by making sure your business address is for commercial purposes. Ask your lessor or the building if they can provide you with the list of requirements we listed here; otherwise, you risk using that address and going through this painstaking process afterwards.