Running a business means you wear multiple hats every day. And if that isn’t enough, the legalities of running a business makes it even harder. That’s why I compiled this list of common business terms that you cannot afford to mix up.
Having properly defined terminology helps prevent misunderstandings which often leads to wasted time, effort, and in some cases, money. Here are the most basic info you need to know.
A business is an entity that is engaged in the process of buying or selling products and/or services. It’s a generic term that’s used to describe what you do.
Example: Jollibee Foods Corp, MNLGrowkits Corporation, Juan Dela Cruz
A company is a legal or business structure. It’s often used interchangeably with a business, but the key difference is that a company is only a subset of businesses.
What that means is not all businesses are companies; while all companies are businesses.
One other qualification of a company is it’s ability to scale and hire employees.
Individual as a Business
An individual can be a business, e.g. freelancer or online seller or a professional. The difference between an individual business from a company is the number of people involved.
A company can hire employees, but an individual business can’t, at least from a legal perspective. An individual can partner and/or outsource to other businesses though.
Example: Graphic design freelancer, lawyer, accountant
A professional is someone who is licensed under the Philippine Regulation Commission (PRC). If there is a PRC license for it, you are considered a professional.
Example: doctors, lawyers, dentists, accountants
A type of company that is registered with the Department of Trade and Industry (DTI). Also known as single proprietor.
It is one of the business structures that has the highest legal risk because the owner and the business is treated as one.
A sole prop is different from an individual registered as a business.
A corporation is the most common type of company structure. There are different types of corporation as well, like a stock- or non-stock corporation. A new type of corporation, the one person corp (OPC) is another one.
A brand, from a legal perspective, is a short name for your brand name. Think of it as an alternative name that you use when doing business.
A brand, from a marketing perspective, is different. You can use any brand name you like in your collaterals, but your receipts and official documents need to mention your complete company name.
The only time the marketing and legal perspective aligns is when you have completed an IPO filing that allows you (the company) to do business as your brand name.
- Jollibee is the brand name, while Jollibee Foods Corp. is the complete company or business name
The vast majority of businesses use their brand name for their websites and drop the legal suffix. For example, Meralco is short for Manila Electric Company and its website is meralco.com.ph. It’s unique to them. Of course, that is entirely up to you.
If you’re in the process of starting a business, I strongly suggest that you check the domain availability of your chosen name so that you can use it later on. If you skip this step and finished your registration without checking, you might regret it since someone else might have registered the domain already.
Also note that Googling the name is not the same as doing a domain search. You might come up with zero results when you search on Google, but end up with a domain that’s already registered. There is a thing called domain parking where other people buy domains that are widely used then wait for others to buy it from them at a huge profit. Typically, domains range from $10 or PhP 500 per year. But I’ve seen domains being sold 10x or more.
Unless you want to be in this situation, make sure that you do a domain search first. Then once you finish the name registration, even if you haven’t completed the entire business registration process, buy and register the domain right away to prevent others from using it.
Paying Taxes vs Filing Tax Returns
You pay taxes and file tax returns. You don’t file taxes. Remember that.
You only pay taxes if there is a tax due; but you have to file tax returns every single time. Yes, even if there are no sales or no operations. It’s a requirement. Failure to do so will result to an open case with the BIR, which means penalties and headaches.
The amount and deadline is different for each type of tax. Generally speaking, below are the most common tax types, frequency, and its deadline.
|Income Tax||N/A||On or before the following dates of the current year|
For Q1, deadline is May 15
For Q2, deadline is August 15
For Q3, deadline is November 15
|Due every April 15 for the previous year|
|Value-Added Tax (VAT)||On or before the 20th day of the following month|
If filing for the month of August, you need to pay the taxes due (if any) and file the tax returns on or before September 20.
|Within 25 days following the close of a quarter|
If filing for Q3 (September), you need to comply by October 25.
These dates are subject to change depending on certain circumstances.
For example, if the deadline falls on a weekend or a holiday, it’s moved to the next business day. Another instance where this may change is when the coronavirus pandemic hit. All deadlines were moved. Depending on your registration with the BIR, the due dates will also be different.