How to Start a Small Business: Complete Guide for Filipino Entrepreneurs

The Philippines is full of ambitious entrepreneurs, but the initial process of setting up a small business can feel overwhelming when you're facing government forms and wondering how you'll fund it all.

This guide breaks down everything you need to know about starting a small business in the Philippines, from validating your idea to opening your doors (physically or virtually). We'll walk through the bureaucracy, funding options, and practical steps - plus show you how tools like Wise Business can save you money on cross-border payments.

Table of contents
Nailing your business idea and conducting market research Navigating Philippine business registration Capital and financing Smart financial management for Filipino small businesses Understanding your tax obligations Frequently asked questions

Nailing your business idea and conducting market research

Before diving into registration paperwork, validate that your business idea has genuine market potential. 34% of startups fail because they build products nobody wants¹.

The most effective validation method is making actual sales - money is the only true validator.

But there are ways to test the waters first.

Chat with 10-15 people from your target customer profile using open-ended questions, and then create a minimum viable product using no-code tools like Figma or landing pages to gauge interest.

Identifying your target market in the Philippines

In the Philippines, there are regional differences. Metro Manila customers have different needs and spending power than families in Mindanao or the Visayas. Research your market's demographics, income levels, and shopping habits. Although digital adoption has negated some of these differences, cultural factors still matter enormously.

Consider online and offline opportunities. Digital payments are growing, but cash remains king in many areas. What's accessible in Makati might be out of reach in rural Bataan.

Study local competitors' successes and failures, using industry data and customer feedback. Analyze market saturation: a crowded field could signal demand or oversupply. Look for gaps where competitors fall short. Specifically, examine their pricing, marketing, and customer reviews; recurring complaints are potential entry opportunities.

Define your Unique Selling Proposition (USP)—what makes you distinct (e.g., faster, cheaper, more convenient) and why customers should choose you. Your USP must be valuable to your target market. Test it with real customers and ensure you can articulate your difference simply.

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Navigating Philippine business registration

Let's tackle the business of paperwork. Your business will suit a particular type of structure, so picking the right one depends on your situation, risk tolerance, and growth plans.

Choosing your business structure

Sole proprietorship is where most Filipino entrepreneurs start. It's straightforward, inexpensive, and gives you complete control. The downside? You're personally liable for everything. It's the go-to choice for Filipino businesses and only requires DTI registration. No minimum capital needed, so you can literally start with what you have in your pocket.

Partnership brings in other people and creates a separate legal entity. General partnerships mean everyone shares unlimited liability, whilst limited partnerships protect some partners from personal responsibility. You'll need SEC registration if your capital exceeds PHP 3,000².

Corporation offers the strongest protection with limited liability. For foreign-owned businesses (less than 60% Filipino²), you'll need minimum capital of USD 200,000³. It's more complex and expensive to set up, but gives you the best foundation for serious growth. All corporations register with the SEC.

The registration process (step-by-step)

For sole proprietorships, start with DTI's online portal⁴. You'll input your personal details and describe what your business does. Choose your business name and decide whether you want local, regional, or national reach.

Fees are pretty reasonable: PHP 200 for barangay-level operations, PHP 500 for municipal, PHP 1,000 for regional, and PHP 2,000 if you want national scope. Add PHP 30 for documentary stamp tax⁵.

After DTI registration, you'll need several more permits. Barangay clearance is mandatory for everyone, including home-based online sellers. Yes, even if you're just selling on Facebook Marketplace from your living room. Get this from your local barangay - they can't waive the fees, even for BMBE-certified businesses.

The Mayor's permit requires your DTI certificate, barangay clearance, cedula, proof of your business location, fire safety certificate, sanitary permit, and occupancy certificate⁶ - most are straightforward to obtain.

BIR registration is the final step. File BIR Form 1901 and pay PHP 500 annually⁷. Corporations and partnerships use Form 1903 and pay additional documentary stamp taxes based on your capital and lease amounts⁷.

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Capital and financing

Most Philippine startups require between PHP 30,000 and PHP 50,000 to launch, though this amount is variable based on the business type.

Initial costs include one-time expenses such as government fees, permits, workspace setup (or virtual costs), and initial inventory/equipment. Monthly expenses involve employee salaries (allow at least PHP 25,000 per person), rent (PHP 15,000 to PHP 100,000+), and taxes (roughly 30% of revenue).

The Philippine government provides several programs to help with business loans. Check out programs such as the Small Business Corporation (SB Corp), and the Business Expansion Financing Loan. Traditional banks are another source but often demand extensive documentation and collateral, making them less accessible for new startups.

🧐 Did you know?

Filipino businesses lost about PHP 8.37 billion in 2023 to hidden exchange rate markups. The hidden exchange rate markup is an undisclosed fee that many banks and payment processors add to the exchange rate used in a currency conversion. They rarely give you the mid-market rate (the true, real-time rate you see on Google). Instead, they use a slightly worse rate and keep the difference—this is their profit margin, often called a spread. Since this markup is baked into the conversion rate, it's not listed as a transparent fee, making it easy to overlook and causing you to receive less money than expected. Consider Wise Business for sending and receiving payments - Wise always uses the mid-market rate and offers 10+ local account details for major currencies, making it simpler and cheaper for overseas clients to pay you directly as if you were a local.

Smart financial management for Filipino small businesses

Money management can make or break your business. Cash flow planning and monitoring show positive relationships with business performance, but cash flow control has the strongest impact.

Instead of using your personal bank account for business purposes, consider opening a dedicated business bank account. There are several advantages of doing this, but if you're still on the fence,

➡️Check out our explainer on the pros and cons here

You should also invest in proper point-of-sale and inventory systems. Keep accurate books - the BIR will thank you, and so will your accountant. Use accounting software like QuickBooks or Xero to automate what you can.

Stay on top of invoicing and payments. Create realistic payroll budgets that include overtime and benefits. Consider partnering with a CPA for tax planning - they often pay for themselves. Build up cash reserves for the inevitable rainy day.

For businesses handling multiple currencies or international transactions, Wise Business serves as a central hub for managing multi-currency finances. Rather than juggling different bank accounts and paying hefty fees for international transfers, you can hold 40+ currencies in one account, send money to 140+ countries at fair rates, and avoid the costly pitfalls of traditional banking. This streamlined approach helps you focus on growing your business instead of wrestling with financial admin.

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Understanding your tax obligations

Philippine tax law covers several areas. Income tax applies to sole proprietorships as personal income and corporations at 25% (20% for smaller entities)¹¹. VAT kicks in at 12% when annual sales exceed PHP 3 million, filed quarterly¹¹. Below that threshold, you might use percentage tax instead.

Monthly tasks include VAT remittance and withholding taxes. Quarterly filings cover income tax and VAT returns. Annual submissions include tax returns and financial statements. It's manageable with good record-keeping, but consider professional help as you grow.

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Frequently asked questions

Do I need to register my home-based business?

Absolutely. It doesn't matter if you're selling online from your spare bedroom - the BIR wants to know about all income-earning activities. You'll need barangay clearance for your home address, DTI registration if you're a sole proprietor, and a mayor's permit.

What's the easiest way to get paid by international clients?

Wise Business solves this neatly. You get local account details for major currencies (one-time 1,400 PHP setup fee applies), receive payments with no fees for domestic transfers, and get the real exchange rate with transparent pricing. It integrates with platforms like Stripe and your accounting software, with same-day or instant transfers in many countries.

💡 Take Axpara, a software company that expanded overseas to serve UK clients. When their first UK customer could easily pay in GBP via Wise, it built immediate trust and confidence. That professional payment experience led to more referrals, and Axpara now serves clients across multiple countries - all because accepting international payments became simple and seamless. ➡️Read the full Axpara case study to learn how they scaled globally, whilst saving on costs.

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Conclusion

99.6% of Philippine businesses are MSMEs - you're joining a massive community of entrepreneurs who've figured it out. Most started exactly where you are now: with an idea, some determination, and the same trepidation about the journey ahead.

The key is taking it one step at a time. Validate your idea, understand the registration requirements, sort out your funding, and build efficient operations from day one. Don't try to do everything perfectly - just start, learn, and improve as you go.

💡Are bank accounts limited to USD, EUR, or GBP options holding back your business? With a Wise Business multi-currency account, you can access over 10 local account numbers — far more currency options than the handful most banks offer. Plus, Wise makes it easy to hold, send, receive, and exchange 40+ currencies from a single account. With the freedom to send and receive payments in more currencies globally, you can focus on what matters most: growing a local business that knows no borders.

• Obtain account details to receive payments in USD, EUR, GBP, SGD, HKD and more for a one-time fee of 1,400 PHP.
• Zero fees when you get paid via ACH, FAST, InstaPay/PESONet, & other local transfers.
• Send money to pay invoices, suppliers & contractors fast, with less fees
• Always get the mid-market rate with transparent conversion fees starting from 0.57%.
• Pay your bills and ad-hoc overseas expenses using the Wise Business card without hefty foreign transaction fees.
• Seamless integrations with popular accounting software.

➡️Get started with Wise Business today

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Sources:

1 - Failory - Startup Mistakes and Statistics

2 - Incorporation PH - Incorporation Options

3 - Incorporation PH - Paid-Up Capital

4 - Business Name Registration

5 - Business Name Registration FAQs

6 - Philippines Business Registration - Mayor's Permit

7 - BIR - BIR Forms

8 - SB Corp - MSME Financing Programs

9 - PhilHealth

10 - Sprout Solutions - Pag IBIG Contributions

11 - Asean Briefing - Philippines Taxation Guide

Sources checked on 17th September 2025