How To Close a Business in the Philippines: An Ultimate Guide - FilipiKnow

Step 1: Deter mine which classification you belong to

b. Corporations and Partnerships
Juridical persons, including joint ventures, cooperatives, and other organizations required to
register with the Security and Exchange Commission (SEC), are also required to apply for the
cancellation of their business with the SEC.

According to SEC Memorandum Circular No. 5, Series of 20225, corporations may apply for
voluntary dissolution through the SEC Company Registration and Monitoring Department
(CRMD) or SEC’s Extension Offices.

Note that SEC allows the dissolution of corporations provided that no creditors will be affected.

Step 2: Complete the requirements for the cessation of

business

Before applying for business closure, you must call the appropriate government agency and your
local government unit to clarify which documents are needed.

NOTE: Every document applies to all classifications of taxpayers except when it specifically
mentions that it only applies to a certain type.

1. Local Government Unit – Barangay Hall

a. Valid ID

 Sole Proprietorship/Freelancers/Self-employed Professionals – Valid ID of the owner;

 Partnerships – Valid ID of all Partners;
 Corporation – Valid ID of the President.

b. Barangay Clearance
This is the most basic legal document you need to have to transact with other government
agencies or departments. You can request this at the barangay where your business is located.

c. Letter of Request for Retirement/Closure of Business

This letter shall signify your intention to cancel your business registration with your barangay.
The letter must indicate the following:
  Date of application;
 Contact details of the addressee (the Barangay Hall);
 Name of the applicant;
 Registered business name;
 Date of registration with the government, in this case, the barangay;
 Business permit number;
 Reason/s for the closure of business;
 Proposed date of closure; and
 A declaration that the business has no outstanding obligation or liability with the barangay.
2. Local Government Unit – City Hall

a. Valid ID

 Sole Proprietorship/Freelancers/Self-employed Professionals – Valid ID of the owner;

 Partnerships – Valid ID of all Partners;
 Corporation – Valid ID of the President.
b. Barangay Clearance

c. Barangay Certificate of Closure Indicating Date of Closure

This shall prove that you have already settled all existing liabilities and successfully closed your
business at the barangay level.

d. Latest Business Permit

You must submit the original copy of the latest business permit available.

e. Affidavit of Closure, Board Resolution, or Notice of Dissolution Indicating the Exact

Date of Closure
NOTE: Affidavits are required to be notarized.

Corporation

Original Board Resolution or Corporate Secretary Certificate on the closure of business

indicating the exact date of closure.

f. BIR Form 2303 or Certificate of Registration

The original copy must be presented, while a photocopy must be submitted. This shall be proof
that you registered with the BIR during the course of your business.

g. Latest ITR and Financial Statements

The latest income tax returns and financial statements (e.g., Balance Sheets, Income Statement,
Statement of Cashflows, etc.) for the three (3) preceding years of the retirement date must be
photocopied and submitted to the City Hall where your business is located.

h. Latest VAT and OPT Returns

The latest business taxes filed from the last payment of the business permits up to the closure
date must be photocopied and submitted to the City Hall where your business is located.

i. Books of Accounts

The City Hall where your business is located may request that you present your books of
accounts to be examined by their staff.

j. If with branches, proof of business tax payment from the LGUs governing the branches

This shall be proof of your compliance with other LGUs.

3. Bureau of Internal Revenue (BIR)

As per Revenue Memorandum Circular No. 57-20206, the list of requirements for closing
business in BIR has been streamlined. Here’s the list of requirements you must prepare:

1. Notice of closure or cessation of business

4. Department of Trade and Industry (DTI)

a. Letter of Request for Cancellation of Business Name

This letter shall signify your intention to cancel your business name. The letter must indicate the
following:

 Date of application;
 Contact details of the addressee (DTI Head Office);
 Name of the owner/partner/president, whichever is applicable;
 Registered business name;
 Date of registration of the business name;
 Certificate of Registration Number;
  Reason/s for the closure of business; and
 Proposed Date of Closure.
b. Affidavit of the Cancellation of the Registered Business Name

Stating the reason/s for closure and, at the time of the closure, that the business has no
outstanding financial obligation in connection with the operation.

c. Original copies of the business name certificate of registration

d. Affidavit of Loss of BN Certificate or Certificate of Registration, if applicable

e. Certified photocopy of the SEC certificate of dissolution of the corporation/partnership

5. Securities and Exchange Commission (SEC)

a. Request for Voluntary Dissolution

The request7 must be signed by the corporation’s authorized representative and should include
the following:

 The corporate name, SEC registration number, corporation’s principal office, and email
address
 Name, position, and mailing address of the authorized representative
 Reason for dissolution
 Copy of notice to shareholders and members for a meeting for the purpose of the corporation’s
dissolution

b. Notarized copy of Board Resolution that indicates the dissolution of the corporation and
the designation of the authorized representative

c. Latest due General Information Sheet (GIS)

d. Audited Financial Statement (AFS) as of last fiscal year

e. BIR Tax Clearance

f. Affidavit from the president and treasurer indicating that the dissolution is not
prejudicial to the interest of the creditors and there’s no opposition from them

g. Notarized Secretary’s Certificate of No Pending Case of Intra-Corporate Dispute

h. Clearance/Favorable recommendation from other SEC departments or from an

appropriate regulatory agency, when necessary
Step 3: Officially announce the closure of business to
your stakeholders
Announcing that your business will be closing soon may seem unnecessary. Not only will it help
you smoothly transition into your next plan, but it is also legally required by different
government departments.

Your stakeholders are all the people and businesses interested in your business. These are your:

a. Employees
DOLE requires employers to notify their employees that the business is closing at least 30
days from the intended closure date. Also, separation pay must be given to the employees if
the closure is not due to bankruptcy or insolvency.

To properly announce the termination of employees due to the closure of business, the company
must:

 Send individual termination letters to the employees and DOLE Regional office where the
employee is located stating: (1) The reason for termination (e.g., due to closure of business);
(2) That the notice was given within 30 days from the day of closure; and (3) That a separation
pay will be given to the employee. The Notice of Termination is valuable as it’s one of the
requirements that the employees need should they decide to avail of the SSS unemployment
insurance, a cash benefit they can use to stay afloat while looking for a new job.
 Conduct a company-wide meeting explaining what will happen to them, what they will
receive etc. This is also the time to answer employees’ queries and address their concerns
regarding their job status. It is essential to be as transparent as possible. This is optional but as
significant as losing one’s job, it is polite to address their worries properly.
Failure to follow the above requirement is grounds for an illegal dismissal lawsuit.

b. Suppliers and Creditors

Simply calling or emailing your suppliers and creditors, notifying them about your intention to
close your business, is enough. However, you must still follow the contracts made with your
supplier and creditors in the event of the closure of business to make sure that you do not violate
any provision or term in the contract.

Failure to observe this process is grounds for a lawsuit from your supplier or creditor.

c. Regulatory Agencies
You need to notify the relevant government agencies that regulate your business to get
government clearances that would signify that you are compliant with the laws. For more
information, please see Step 4.

d. Shareholders and Business Partners

Closing a juridical entity like a corporation or a partnership must undergo a series of meetings
and decision-making by its owners.
For a partnership, the partners shall notify the other partners that a meeting with the agenda to
dissolve the partnership will commence. This is done preferably via email.

For a corporation, at least twenty (20) days before the meeting, notice shall be given to each
shareholder by any means authorized under its bylaws, stating that the corporation shall be
dissolved. Then at the meeting, the shareholders and the directors shall vote on whether or not
the corporation shall be dissolved.

e. Customers
To notify your customers, you could post a written notice within the vicinity of the business
stating that the business will close on the proposed date. You also have the option to call key
customers and inform them that you will no longer be doing business with them.

This is optional, but it is not bad to still have a healthy relationship with your key customers
because they were the ones that helped you build your business.

f. Other ways to announce the closure of your business

 Via your website – a letter to your stakeholders announcing your business’s closure,
including the closure details.
 Via newsletters or social media groups/pages – You may issue a statement detailing the
facts of the closure and how it may affect local businesses in your area. This is recommended
for big enterprises that have a large impact on the local economy to enable other local
businesses to adjust to the changes brought by the cessation of your operations.

Step 4: Submit requirements to appropriate

gover nment agencies to obtain the required clearances

Before we proceed, please take note of the following:

 Before applying for the closure of your business, you need to settle all your pending cases
with the BIR, DOLE, DTI, and/or SEC.
 The government does not know when you stopped your business operations that’s why they
still expect you to comply with your obligations until you get the appropriate government
clearance (e.g., Filing Tax Returns; Mandatory Contributions for SSS, Philhealth, and Pag-
IBIG; Payment of local government fees and taxes like business permits).

b. Dissolution and Closure of a Corporation and a Partnership

i. Notice of Closure to DOLE, SSS, PhilHealth, and Pag-IBIG
Send a service of a written notice to the employees and the DOLE at least one (1) month before
the intended date of closure/cessation. This will lower the risk of getting illegal dismissal
lawsuits.

ii. Application for Closure at your LGU – Barangay

1. Create a Letter of Request for Retirement/Closure of Business.

2. Present the required documents (see Step 2 for the list of requirements) to the Barangay Hall
where your business is located.
3. Pay the necessary fees, including unpaid business permits or, depending on the LGU,
facilitation fees.
4. Claim Barangay Certificate of Closure which shall be used as a document to apply for
closure of business at the City Hall Level.
iii. Application for Closure at your LGU – City Hall

1. Provide Board Resolution in case of Corporations or Notice of Dissolution in case of

Partnerships.
2. Present the required documents (see Step 2 for the list of requirements) to the City Hall where
your business is located.
3. Depending on the LGU, there are application forms needed to be filled out. These application
forms need only basic information.
 4. Pay the necessary fees, including unpaid business permits or, depending on the LGU,
facilitation fees.
5. Claim City Hall Certificate of Closure which shall be used as a document to apply for
closure of business at the BIR.
iv. Application for Closure at BIR

1. Fill out BIR Form 1905.

2. Create a Notice of Dissolution/Board Resolution.
3. Present the required documents (see Step 2 for the list of requirements) to the RDO where
your head office is located.
4. If necessary, file for short-period tax returns when you decide to end your business in the
middle of a taxable year. This shall be done within 30 days from the adoption of the resolution
to dissolve or when it was notified by the SEC to dissolve.
5. Destroy all unused sales invoices/ official receipts, accounting forms, business notices, and the
Certificate of Registration in front of BIR Personnel and Officials.
6. Wait for the RDO to verify that you have no open or delinquent cases and, after a tax audit,
verify that you have no more outstanding liabilities with the Bureau.
7. Pay the necessary fees and other deficiency taxes
8. Claim Tax Clearance.
v. Application for Dissolution at SEC

1. Obtain Clearance from other regulatory agencies if your corporation has secondary licenses
(e.g., PEZA, BOI, BMBE, etc.).
2. Present the required documents (see Step 2 for the list of requirements) to the SEC.
3. Claim Certificate of Dissolution from SEC
vi. Application for Cancellation of Business Name at DTI

1. Create a Letter of Request for Cancellation of the Business Name.

2. Create an Affidavit of Cancellation of the Registered Business Name.
3. Create an Affidavit of Loss if you lost the Certificate of Registration of Business Name.
4. Present the required documents (see Step 2 for the list of requirements) to the DTI Head
Office.
5. Claim Certificate of Cancellation of Business Name.