I'm reluctant to write about commercial law because my grades in this subject are just passing (2.75 to 3.0) except for intellectual property law (2.25) and commercial law review (2.0). The commercial law subject that I am most confident about is intellectual property law. So if I cannot get work at the Office of the Solicitor General (OSG) or in the many law firms in Taguig and Makati, I am going to apply at the Intellectual Property Office (IPO), which is in Mckinley Hill near my home.
No matter how low my grades are, I still passed commercial law and probably know more about it than the regular layperson. So based on my little knowledge of commercial law, here's my advice on how to make money in business in the Philippines:
1. Know what people need and what you can offer. Every business starts because a person offers to sell goods or services for another person who needs it. Identify the needs and problems of people and figure out how you can solve them.
If people are willing to pay you, then you have a business idea. For example, if you like making websites and know people who need websites and are willing to pay for it, you have a possible business. Do your homework and conduct market research, but be willing to take risks and start your business soon.
2. Know how your business should be organized. A business can be organized under a sole proprietorship, a partnership, or a corporation. Most small and medium-sized enterprises are sole proprietorships and partnerships. Think of your neighborhood sari-sari store.
Some businesses must be organized as a corporation. This includes banks, insurance companies, mining companies, private schools, etc. Take note that some industries have minimum capital requirements and minimum Filipino representation.
3. Choose and hire only people that you trust. No matter how great your contracts are and how many penalties you have against fraud, give yourself peace of mind and work only with people you trust. If you trust them, you can trust their judgment and the people they will hire. If you do not trust them and you have sufficient justification, you can let them go from the business.
4. Keep your business capital separate. If you have a sole proprietorship or partnership, create a separate bank account and credit card for the business. If you form a corporation, it is required by law to maintain books of its shares of stock and accounts of its finances.
5. Make profits and keep cash flowing. Ideally, your business should be profitable from day one. If your overall revenue is less than the total cost, find ways to increase revenue (marketing and sales) and reduce costs.
But don't worry too much because it usually takes five years to break even in a business. Focus on adding value for your clients and being flexible in managing the business.
6. Embrace change. If your initial business plan did not work out well, find out why and how you can improve your business. Be willing to learn about your business and to change little things to make your enterprise profitable.
For example, you have a small store, but you're losing money to buyers who cannot pay. Maybe it's time to sell to other businesses online or to other buyers who can pay cash.
6. Protect your business. Sometimes bad things happen to good people and good businesses. But when these things occur, you should be prepared for them.
Understand the law and the protection that it could give your business. Create a corporation if your business is required or even ready for it. Read the contracts in your credit transactions. Write checks and promissory notes only when you're sure that you can pay them. Ask help from banks and financial institutions.
Insure your business and property. Transport your goods and passengers safely. Protect your business with trademarks, your inventions with patents, and your works by copyright. Know your rights and obligations as a business owner, and be prepared to stand by them.
7. Pay the right wages and taxes. While you want to keep costs down, you must still pay your employees the wages they deserve under the law. Know the minimum wage in your region and the benefits required by law. If you are contracting out labor, make sure that the subcontractor is complying with labor laws.
Pay the state the taxes that are due. Register for the proper taxes (corporate tax, value added tax, excise tax, etc.) If you have a corporation, make sure to pay income tax every quarter. Research or hire someone to figure out how to reduce your taxes legally. For example, you might want to export your goods or to include education to minimize taxes. Remember that income tax is different from the value added tax (VAT), local business tax, excise taxes, etc.
8. Seek advice and retain a lawyer. When your business grows, your problems will become more complex and this simple guide will no longer suffice. If this happens and you cannot make a sound decision by yourself, seek advice from mentors and lawyers. Focus on what you do best: growing your business.