Since she is working as a regular freelancer (e.g., Web designer, writer, event manager) not as a licensed professional (e.g. doctor, accountant), she needs to register as a sole proprietor, even if she has no employees and practically no office.
If she has investors, she could also register as a corporation.
But I would like to address a more basic question: Should she register in the first place?
Let me just tell you about my experience when I decided to register my business, and you decide.
Before you can register as a freelancer with the BIR, you need to register with
- The DTI, to get your trade name and DTI certificate;
- The barangay, for your barangay permit, which is a requirement for getting the mayor's permit; and
- The mayor, to get your mayor's permit
The DTI certificate and mayor's permit are requirements for getting your BIR certificate of registration.
I've written about getting my own DTI certificate. Read the details here. You can apply for your DTI certificate online and pay with Gcash.
For your barangay permit, you need to personally go to your barangay hall, bring with you your DTI certificate, and pay for registration. I've written about that too. Details here.
Now comes the municipal permit, which I think is the most difficult part of all. To get your municipal permit, you also need to go personally to your municipal hall, fill up the application form, and pay the fee.
The amount of the application fee depends on your municipality type. Since I live in a "first-class municipality," I paid around P1,500. It probably costs more if you live in, say, Makati, and less if you live in a second- or third-class municipality.
The municipal permit is much more complicated to get than the DTI or barangay permit because it also entails inspection from the sanitation and fire departments of your municipality. You have to pay extra fees for those inspections as well.
To get the sanitary permit, you and all your registered employees need to undergo health certification (X-ray, stool and urine labs, blood test) even if you never meet your employees or clients and all your work is done online.
To get the fire safety certification, your office (a.k.a. house) needs to have at least two exits and, in our municipality's case, a fire extinguisher.
Incidentally, not all municipalities require a fire extinguisher. Antipolo doesn't. Makati does.
There is no specific fire extinguisher size requirement stated in the building code, but we were advised to get a 10lb carbon dioxide type rather than the dry chemical type because the former does less damage and leaves no mess as it is just gas.
The BIR registration
Web citizen that I am, I got the requirements for BIR registration from the BIR Web site. Well, there were a few things it did not include:
- If you have your office address at a place that is not your own and you are using the place for free, you need to have a letter signed by the house owner certifying that he/she allows you to conduct your business in that place free of charge.
- You also need to draw a map of your place on a clean sheet of bond paper.
Once my requirements were complete, I had to pay the P500 registration fee and attend the seminar.
I must say, that seminar was pretty useful, and I advice all business owners to attend it themselves rather than send in some liaison officer who is not even an accountant. For a preview, you can read the BIR seminar's contents in this post, but at the actual seminar, you can ask questions and maybe even get some answers.
Oh, by the way, you may be thinking now, "Gee, it's not so expensive to register after all. Five hundred pesos is not so bad."
True, but I've so far neglected to mention one important thing: The moment you are registered with the BIR, you will need to issue receipts.
It doesn't matter if all the work you do is online. If your client is in the Philippines and they declare you as one one of their expenses—which means they pay taxes for you, which they probably deduct from your service charge, in which case they should be issuing you a Certificate of Taxes Withheld—then you need to issue them a receipt.
(This does not apply if you are not registered with the BIR as a self-employed individual.)
It doesn't matter if that receipt never reaches their hands; you just have to issue it and record it in your books of accounts.
There are printers that are accredited by the BIR to print out receipts. You can find them at Sulit.com.ph or even in the BIR office itself. Just ask the guard, and he should be able to tell you which employee has that sideline.
The minimum number of booklets for printing is usually 30, and the cost can be P40 per booklet if you get the smallest size.
After the registration, I encountered a few more glitches (amendments in tax activities, correction in business type, other stuff too tedious to detail here) that eventually prompted me to give up trying to do things myself and get an accountant to do my taxes for me.
The advantages of getting a good accountant are (1) you never have to step out of the house to do all your filing yourself, (2) you can be sure your taxes and all other government fees such as SSS, Pag-ibig, and Philhealth are paid on time, and most importantly, (3) you have an expert to help you avoid falling into all those little legal pitfalls—tiny little laws that you could end up breaking simply because you did not know they even existed.
I am not about to stick my neck out by listing here the tiny little laws I had almost broken from sheer ignorance, but take my word for it: a good accountant is a great help—and an incompetent one may have a smaller retainer fee but will cost you more in the tax penalties you'll end up paying.
But between you and me, if I were working solely with foreign companies who don't declare my earnings to the Philippine government, and if I didn't need an ITR as proof of income for stuff such as loan applications, I would never register my business activities—not anymore, after all the hassle I'd been through just to write some articles for some magazines on a single computer in a tiny bedroom at home.
As much as I want to do my part in being a good citizen by paying taxes, the government just makes doing the right thing too hard and too expensive in this country.