6 Mistakes To Avoid When Starting A Business

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Every business aims to achieve a desirable income. But before you can have a successful business, it always begins with a single step. There will be a lot of thinking and careful planning when you start a business. And whether you like or not, it is in the start-ups where every business can experience a rocky road along the way. Of course, it will always be up to you on how you handle your business.

When it gets down to business, it is a must for you to know by heart what your business is all about, who are your target customers, and how and what way you can promote your business. Even if these are just simple questions, it gives a great impact when you have the knowledge about your business. With that point, you will expect a growing and successful business.

Sad to say, there are a lot of businesses, especially to those who are still starting up, usually commit mistakes. Perhaps, they were not equipped with enough knowledge on what and what not to do when it comes to putting up a business. Well, if you are one of that business minded person who plans to have your own business, then below are some and most common mistakes you need to avoid.

1. Unregistered business

First and foremost, you cannot put up a business legally when you are not registered by Philippine Economic Zone Authority (PEZA). If your business belongs to a PEZA Zone, the government agency will give assistance by providing and tax holidays, and grant incentives to facilitate your business. Moreover, PEZA can also help you with investors, which is beneficial to your business.

2. Not doing enough market research

Putting up a business is not just about for the sake of having a business. Again, when it gets down to business, there should be a lot of thinking and careful planning to achieve the desired business growth. Yes, the first step can sometimes make us feel daunting and frustrating. That is why, it is also a must for you to have knowledge of what your business is all about. If there is anything that you do not know and understand, then it is your responsibility to make sure that you know every single detail of your business, to avoid loopholes when trouble comes.


3. Not focusing on your business

Whether you realize it or not, there are factors that contribute to the things that keep you from focusing solely on your business. Your job, for example, since there are a lot of deadlines that you need to catch up, thinking about your business may not be your priority as of the moment. Of course, you also have the need to attend all the other matters on your work.

4. Not choosing the right investor

Unless you can finance your business on your own, choosing the wrong investor is dangerous to your business. Finding yourself wondering where your money went when in fact, there are a lot of other investors transacts business with you, later did you discover that your cash reserves dwindle. When you plan on having a partner or investor, you have to make sure that you know every transaction that you have, especially when it gets down to money matters. You have to hand on with that matter if you don't want to waste your income.

5. Hiring too quickly

Yes, we understand that you need people to man your business. But it doesn't mean that you are going to hire people who are not capable and don't have any skills in doing the things that are related to your work. You also have to be keen when hiring a person for you not to regret your decisions later on. Moreover, it is also your duty to make sure that the people you want to hire meets the standard of your company. If not, then you have to make them understand your policies to avoid misunderstandings.

6. Not listening to customers

It is one of your downfalls if you are not going to listen to your customers. Of course, your business exists since there are still customers who avail your products. Just imagine your business without any customers, what will it look like? It is not a good way to achieve your desired income, right? That is why, whatever queries your customers have, you also have to take their suggestions. However, there's a caveat, though; it is also your duty to make sure that the suggestions from your customers are beneficial to your business.

Four Features of Economic Zones under PEZA Philippines

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Take a look around your local area. Have you noticed towering buildings and business establishments taking root recently? If you have, then know that you are not alone in noticing these. 

Currently, there has been a vast abundance of these companies in the Philippines that the business sphere in the Philippines is massively different to how it is today than it was years ago.  Foreign business conglomerates have recently been cropping up in the country, and if the business owner possesses the right industrial and economic acumen, he or she would have enough foresight to utilize the many benefits proffered by being registered under a PEZA zone in the Philippines. In the year 1995, the Philippine Economic Zone Authority under Republic Act No. 7915 otherwise known as “The Special Economic Zone Act of 1995” was created. The inception of this law enables multinational and other foreign investors to relocate and establish a business presence in the Philippines. Similarly, the local government may utilize them as their foreign investment mechanism as it allows for the creation of local jobs and labor for the labor capital in the country. Additionally, it improves the country’s foreign relations through various business and economic ventures and endeavors. Lastly, it generates revenue from the operations of these ecozones within the defined economic zones in the country.  

Considering that the Philippines is a customs territory, sales going outside of the country are considered as exportations while merchandise purchased abroad are considered as importations. If an entity is registered under an economic zone (ecozone for brevity), they are viewed as a separate customs territory despite being located in the same country. As a result, the sales of these registered entities from outside of it are exportation to a non-ecozone within the Philippines and purchases are an importation. In order to set a distinction of these items from the normal import and export transactions, they are considered as “technical exportations” and “Technical importations”. To know about the features of ecozones under PEZA, read on below. 

NOT ALL BUSINESS ENTITIES ARE REGISTRABLE 

The Philippine government still has the final discerning power of whether or not a particular business entity is eligible for registration. It would choose a select number of business operations or undertaking it would consider best for registration under the Philippine Economic Zone Authority (PEZA) as an ecozone. Activities eligible for PEZA registration are export manufacturing (Economic Zone Export Manufacturing Enterprise), Information Technology Service Export (Economic Zone IT enterprise or IT Parks and Buildings), Tourism (Tourism Economic Zone Developers or Operators and Locators), Economic zone development and operation, utilities (economic zone utilities enterprise), agro-industrial bio-fuel manufacturing (Agro-Industrial Economic Zone Developers or Operators and Locators) and facilities providers. 

PRIOR REGISTRATION IS ESSENTIAL TO AVAIL OF BENEFITS AND INCENTIVES 

Being in the above business operations does not immediately grant you incentives as prior registration is required. New businesses can file their application papers during the incorporation stage with the Securities and Exchange Commission (SEC) or after they get approved by the SEC. Documentary requirements are different depending on the particular type of activity that is to be registered. To qualify, PEZA locators should be located in an ecozone. An ecozone is an area specifically registered by the PEZA or a building accredited as an IT building. 

INCENTIVES FOR REGISTERED ACTIVITIES

Business activities engaged by various entities are registered. This means that if a corporation will engage in more than just one business activity, the registration of one business activity does not automatically register all activities. So, in essence, some non-registered activities are not qualified for tax and other incentives.  

THERE ARE FISCAL AND NON-FISCAL INCENTIVES 

There are various fiscal and non-fiscal incentives offered by being registered under PEZA.  Fiscal incentives include income tax holiday of a specific duration (4, 6 or 3 years) and is subject to extension under certain conditions. This means that a PEZA registered company will not be liable to pay 30 percent income tax. Additionally, there is a 5% special income tax upon expiration of the income tax holiday, tax and duty free importation, zero percent value added tax on purchases of goods and services ONLY for use in the registered activity, exemption from withholding taxes on payments of local buyers from customs territory and exemption from payment of any and all local government fees, taxes, imposes or licenses.  Non-fiscal incentives include a simplified import and export procedures, special non-immigrant VISA to certain officers and employees and the employment of non-resident foreign nationals in supervisory, technical or advisory positions. 

PEZA Zones - What You Need to Know About Them

PEZA, which stands for Philippine Economic Zone Authority, is the implementing agency established in helping promote investments in the manufacturing industry. The agency assists investors from the registration to facilitation of the business. It also provides tax incentives for businesses that will embrace the establishment of a presence here in the Philippines specifically on PEZA zones. We’ll dig deeper on what PEZA is, its features and benefits.

Overview

The basic philosophy behind import and export is import is inward and export is outward. The Philippines is a customs territory that imports and exports goods. In eco-zones, anything going outside of the zones are considered as exports and anything going inside are imports.

Nonetheless, the philosophy behind PEZA eco-zones is not just merely about encouraging foreign direct investments. Instead, the eco-zones are created to reflect sustainable development in the Philippines like that of Lakeside EvoZone in Laguna. Operating on PEZA zones are not only about reducing operating costs, it is also about improving occupant productivity, enhancing asset, boosting profits and optimizing economic performance lifecycle.

Aside from PEZA zones, there are also PEZA approved companies and PEZA approved buildings. The companies and buildings go through a rigorous process of accreditation before it can be declared as PEZA approved. The President is the one to proclaim if an area (or zone) is an eco-zone, but the agency will declare if the company or building is approved. As of June 30, 2013, there are 289 economic zones in the country:

• 2 medical tourism parks/centers
• 17 tourism economic zones
• 18 agroindustrial economic zones
• 65 manufacturing economic zones
• 187 IT parks/centers

Evidently, not all kinds of businesses are registrable. PEZA chooses which among the business operations may register as an eco-zone. If your business falls in any of these categories, then you should consider registering with PEZA and reap the benefits of doing such.

Prior registration

The establishment of the business operations is not automatic. There are two ways a business by which a business can register. First, it can file application papers during incorporation with SEC (Securities and Exchange Commission) and second, after SEC registration. Upon registration, various documents will be required depending on the nature of operation and approval. Aside from SEC documents, business plans and maps may be required. The business must establish its operation in a PEZA zone or PEZA building to qualify.

Upon registration, the business activities that an entity engages into are registered and not necessarily the entity. If a firm engages in more than one business activity, separate registrations for each activity are required. This means the firm will not qualify to the incentives for its non-registered business activities.

One-stop and non-stop shops

As a one-stop shop, PEZA issues:

1. Building and occupancy permit
2. Import and export permit
3. Non-immigrant visa
4. Environment clearance

PEZA also employs harmonized customs processes since it has a memorandum of agreement with the Bureau of Customs. It also has a memorandum of agreement with the Department of Environment and Natural Resources. Business permits are waived for companies operating in PEZA zones.
As a non-stop shop, PEZA provides 24/7 continuous service to companies. All officials are on-call 24/7.

Fiscal and non-fiscal incentives

A certificate of registration will be provided by PEZA for those business activities that are deemed compliant with the requirements. The terms and conditions including the incentives are detailed on the certificate. Fiscal incentives include:

• Income tax holiday

Tax holidays are provided in specific durations such as 3, 4 and 6 years. The tax holiday is also subject to extension under specific circumstances. PEZA registered companies are not liable to pay 30% income tax.

• Special income tax

Upon the tax holiday expiration, PEZA registered companies are liable to pay 5% special income tax. The percentage is based on the company’s defined gross income wherein only specific expenses (as enumerated) are deductible from gross sales.

• Value added tax

Purchases of goods and services required for the utility of the registered activities receive 0% VAT.

• Exemptions

PEZA registered companies are exempted from withholding taxes on payments of the local buyers from the otherwise customs territory. These are also exempted from paying government fees including permits and licenses.

• Duty free import

Further, the non-fiscal incentives include simplified import-export procedures, employment of foreign nationals and issuance of special non-immigrant visas to the employees. Apart from state-of-the-art building and facilities, the eco-zones are fully-secured and with adequate, un-interrupted power and water supplies.


Economic growth and development has a huge impact on the natural environment. The Earth’s ecosystem is now approaching a critical stage if it is not at it already. Our government, including all of us, must do its share. Urbanization is challenging, but we can always look for ways to conserve our resources. If it means operating businesses on eco-zones where consumption is strictly regulated, then so be it.