How to Buy a Business in the Philippines

 

Guide to buying a business

Acquiring a developed business instead of starting a new business can be a better than an average decision for some potential business visionaries. Developed associations go with a present customer base and zones of now trading. Regardless, you may moreover gain any issues that the business has. You need to know definitely what you’re consenting to acknowledge and be clear about your ability to keep up a business.

But at the same time, it’s a confounded procedure with numerous potential traps. From picking the correct arrangement structure, running due industriousness to arranging guarantees, there’s a great deal in question and slip-ups can be expensive.

You should check business records, plans, and tasks, and acquaint yourself with your rivals and the business. You will likewise need to watch that the business has the fitting licenses, grants, and registrations and discover which ones can be exchanged to you.

Listed below are the following you must comply when registering with various government agencies:

  1. Verify the availability of the company name with the Securities and Exchange Commission (SEC)
  2. Obtain bank certificate of deposit of the paid-in capital from the Authorized Agent Bank (AAB) and in most cases a certificate of inward remittance
  3. Register the company with the SEC and receive pre-registered taxpayer’s identification number (TIN)
  4. Obtain the community tax certificate (CTC) from the City Treasurer’s Office (CTO)
  5. Obtain Barangay (neighborhood) clearance
  6. Obtain the business permit to operate at the local Business Promotion and Development Office (BPDO)
  7. Receive inspection from the BPDO
  8. Buy special books of account at a local bookstore
  9. Register with the Bureau of Internal Revenue (BIR)
  10. Pay the documentary stamp taxes (DST) on the issuance of authorized capital stock/span>
  11. Obtain the authority to print receipts and invoices from the BIR
  12. Print receipts and invoices
  13. Have receipts, invoices, and books of accounts stamped by the BIR
  14. Register with the Social Security System (SSS) as an employer
  15. Register with the Philippines Health Insurance Company (PhilHealth)

Available business registration services:

Department of Trade and Industry (DTI)

Business Name Registration
Assessment of Application
Forms, Requirements & Information Assistance
Issuance of Business Name Certificate
Securities and Exchange Commission (SEC)
Information Assistance
Corporation
Name Reservation
Pre-processing of Application
Forms & Requirements
Liaising with Application Processing

Pag-ibig Fund

Information Assistance
Assessment of Application
Forms & Requirements
Online Registration
Facilitation in the Issuance of Business Clearance

Philippine Health Insurance Corporation (PhilHealth)

Information Assistance
Assessment of Requirements for Employee/Employer Registration
Facilitation in the Issuance of Philhealth Employment Number

Social Security System (SSS)

Information Assistance
Assessment of Forms
R3 File Assistance for Employee Contributions

 


Be clear about the business procedure to limit your hazard and ensure your speculation. Listed below you need to do to protect yourself when buying a business.

What to do before you sign the contract?

  • Read and check the documentation

 Manage the risk of buying the business by:

  1. Guaranteeing the seller gives you the agreement of offer, duplicate of the lease, and Section 52 Statement External Association (opens in the same window) (otherwise called the Vendor’s Statement

  2. Checking if an execution condition can be implanted inside the understanding that decides the base takings of the business over an appropriate period making ready for settlement.

  3. Demanding the privilege to deal with the business before going into a coupling contract, or if nothing else preceding settlement – this encourages you to survey the veracity of the seller’s claims.

  4. Check financial records carefully.  

    When checking your finances, consider: 

    • the purchase price of the business
    • transfer (stamp) duty, usually payable by the purchaser
    • the working capital requirements for your business (your cash flow projections will show that figure)
    • professional fees and charges related to the purchase
    • any loan repayments and servicing costs, if applicable
  5. Making the exchange of important existing contracts to be a state of offer

  6. Organizing the installment of the deal in stages – some piece of the price tag could be held for a specific period and if fundamental set in trust with a specialist or domain operator.

  7. Guaranteeing any portrayals made by the seller – whether composed or something else – are ensured by the dealer as right and that this certification is consolidated as a condition in the agreement.

  8. Embeddings a restriction of trade explanation in the understanding – this will limit the past proprietor from working a tantamount business inside a particular partition for different years.

  9. Checking if there are long administration leave liabilities for existing representatives.

  • Prepare for transfer

Prior to the transfer, you should:

  1. Prepare the proposed assignment of the lease.
  2. Use business name register, an organization and different registers to look through the name of the current business to guarantee the seller has without a worry in the world responsibility for business and has full rights to exchange the business to you.
  3. Know whether the seller claims the business premises and is trading the title to you.
  4. Ensure that present contracts are traded to you as an element of the understanding terms.

When you sign the contract

Upon signing you should:

  1. Ensure the seller gives the marked contract.
  2. Return a signed copy of the contract to the seller.
  3. Pay the preparatory or full deposit and dealer to supply the receipt for deposit.

Immediately after settlement

Once the agreement has been marked, you should:

  1. Hold up applications for the exchange of registration of the business name.
  2. Transfer every single important permit, licenses, registration, and certificates – this will enable you to comprehend which licenses you have to exchange.

10 Things to Look Out for When Buying a Business

1. Make sure you’re buying the assets, not the business.

In case the dealer is an organization or LLC, in no circumstances,  should you buy stock in his business. Or maybe, offer to buy the benefits of the business, and edge an alternate association to go about as the purchaser. Why? Two reasons. To begin with, you hint at change evaluate treatment, since your “obligation preface” in the advantages will be the aggregate you paid for them, instead of the total your seller paid for them long, long back. Second, if he owes money to people or is being sued by some person, you won’t acknowledge any of those liabilities if you buy the advantages.

 2. Ask about sales taxes and payroll taxes.

In numerous states, regardless of whether you purchase a business’ assets, the state imposes expert can come after you in the event that they discover the merchant owed deals, utilize, finance and different business charges. On the off chance that the merchant has representatives (other than himself), inquire as to whether he was utilizing a finance administration, and ensure he’s as of now on his work charge installments. At that point ask the state impose expert to issue a “clearance letter” saying the dealer is present in his deals and utilize charges on the end date. This may take a while, however, it’ll spare you huge amounts of sorrow not far off.

3. Determine who will deal with the accounts receivable.

Chances are, a portion of the business’ clients will owe the merchant cash on the end date. Will’s identity in charge of gathering these late obligations? There are just two approaches to deal with this: Either you buy the records receivable at shutting (for a rebate, to mirror the way that a portion of these people won’t pay up), or you let the merchant gather them at his relaxation. My vote is for you to purchase the records receivable at shutting – that way, if the reprobate client needs extra work done after the end, you’re in a more grounded bartering position.

4. Find out if you can assume the seller’s lease.

Is the dealer renting the premises where he leads his business? Provided that this is true, you should discover (1) how much time stays on the rent term and (2) regardless of whether the proprietor will give you a chance to expect the merchant’s rent “as seems to be,” without an expansion in the lease. On the off chance that the rent has under two years to run, you should need to spend the cash currently to arrange another rent with a five to 10-year term. Additionally, see whether the proprietor is holding a security store (generally two months’ lease, yet once in a while more). Your merchant will most likely need you to buy his security store over the settled upon price tag for the business resources. In the event that the dealer is incorporating the security store in the price tag, ensure that is illuminated in composing someplace.

5. Are there prepaid expenses?

Take Yellow Pages promoting, for instance. When you purchase a Yellow Pages advertisement, you ordinarily pay for an entire year ahead of time. Chances are your end will occur at some point amid the year, and the dealer will need to be repaid for the part of the year when you’re maintaining the business and profiting from the Yellow Pages promotion. Prepaid costs – like the vender’s security store – for the most part are excluded in the settled upon price tag yet are attached at the end. Approach the seller now for a rundown of “shutting alterations”- – sums the dealer has prepaid that should be “expert appraised”- – so you can spending plan for them likewise and there’ll be no frightful shocks at the end.

6. Negotiate a “letter of intent.”

Likewise called a “term sheet,” a letter of intent (or LOI) is a short, a few page agreement between the purchaser and seller of a business that spells out all the vital terms and states of the deal. For instance, it will incorporate the price tag, how and when the price tag will be paid, the advantages that will be sold to the purchaser (and those the seller will keep for his own particular utilize), the terms of the dealer’s noncompete understanding, et cetera.

7. Watch out for bulk sales laws.

Most states have disposed of these, yet various states still require the buyer of a business to exhort the merchant’s credit supervisors that the trade is going on. Powerlessness to get a once-over of the trader’s banks and send “notice of sale” to them may give the merchant’s moneylenders a shot at settling (or “revoking”) the trade remembering the true objective to prevent the seller’s points of interest from being sold out from under them. Notwithstanding whether the merchant has no creditors by any extent of the creative energy, which is an exceptional occasion, the state charge master all around needs a copy of the “bulk sales notice” so it can choose whether the seller owes any business, use or diverse business charges. In case the merchant does, he’ll have to pay them before the end happens.

8. Get an indemnity from the seller.

Regardless of whether you and your consultants have torn separated the seller’s books and records, once in a while things get neglected and you wind up getting sued in view of something the seller did (or failed to do) before you assumed control over the business. Get a repayment from the seller, promising to shield the claim and pay all judgments and expenses if that ought to happen. Similarly, you ought to be set up to give the merchant a reimbursement on the off chance that he gets sued as a result of something you do or neglect to do after the end happens.

9. Make sure the seller sticks around for a while.

In numerous retail and administration organizations, the clients have an individual and also business association with the proprietor. Make certain the seller keeps on showing up at the business for fourteen days after the end to acquaint you with clients, enable you to make sense of the books and “guarantee a smooth and methodical change of the business.” Consider paying the merchant for his chance so he has a motivator to remain off the fairway – in any event until you’re agreeable you recognize what you’re doing.

10. Get to know the employees.

Before you purchase a business, ensure the “key representatives” will stick around, since they’re regularly the ones who see the clients every day, work all the dubious apparatus and know “where the bodies are covered.” Many merchants will be hesitant to tell their representatives the business is available to be purchased, for fear they’ll stop as a group. All things considered, put an arrangement in the business get that peruses as takes after: “Dealer and Buyer will declare the proposed deal to all representatives of the Business inside forty-eight hours previously the Closing, and Buyer will be given a sensible chance to meet with every worker independently before the end date to decide, to Buyer’s sensible fulfillment, the representative’s readiness to keep working for the Business.” Then add an arrangement enabling you to stroll from the arrangement in case you’re not completely fulfilled that the key representatives will remain on board at any rate sufficiently long for you to realize what they definitely know.

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