Why Most People Start Operating Businesses Without Permit and Licenses?

It is a common practice here in the Philippines.  Budding businessmen and entrepreneurs start their business activity without first acquiring the required permits and licenses.  Try to ask someone who has just started a business if he/she has business permit and licenses, majority of them, if not all, would say, none yet.

The '6-months Grace Period'

I really don't know where this '6-months grace period' for business start-ups to operate without business permit came to start.  Business owners purportedly given ample time to decide whether to pursue the business venture or not.  The period also would give enough time to assess whether the business is profitable or not.  It is a common answer everywhere I go.  This is not true, and nobody can tell where.  The reasons maybe valid but it has no legal support and it does not make your business legal.

Trial and Error Business Venture

Similar to the ‘6-months grace period’ and the lack of business plan, businessmen and women skip acquiring getting business permit and licenses on purpose.  Getting business permit and licenses here in the Philippines is a tedious process and moreover, costly.  If the business venture will not succeed, the cost of obtaining business permit and licenses is a deduction to would be losses.

Business Start-Ups Toward The End of The Year

When you apply for a business permit and licenses, you will have to pay a series of fees – from taxes to a growing list of regulatory fees, and incidental expenses incurred in going through the long and tedious business application process.  When you apply toward the end of the year, not all of those fees are computed equitably based on the remaining operating days of the current year.  Many of those fees are computed annually no matter which month of the year you apply.

Government’s Business Tax Mapping Activities

Most government agencies do not conduct tax mapping activities to verify information on businesses provided during application are true and to check whether there are businesses operating without the required permits.  Also, when government agencies conduct tax mapping activities, only on the first or second quarter of the year.  Business start-ups on the third and fourth quarter are spared from government monitoring activities.

Local Government Units Are Very Lenient on Business Permits

A good number of local government unit officials in the Philippines are not very strict on requiring business owners to obtain business permit and licenses for political reasons – votes.