Why you need virtual offices when you start doing business in the Philippines

When I start reading in the news that my government is streamlining the steps required in doing business, I can’t help but let out a sarcastic laugh. Starting a business in the Philippines is challenging, and I don’t just mean making profits. I mean getting your documentation in order.

 

In the past three weeks, I have been assisting a client to incorporate and get a business permit for a client in Makati City. The client’s first mistake was to immediately sign a multiple-year lease contract over office space. While any company worth its salt should have enough resources to secure its office location, the next danger that you don’t know about (and no one will tell you) is that you should not renovate. Bringing in partitions, dividers, furniture, re-painting, re-modeling, and what not calls for an animal called the “occupancy permit” which usually starts at Php 100,000.00. I have yet to meet someone in City Hall or among the building “facilitators” who can explain properly what is the purpose and why it costs that much without receipts. While that is pending, it is best that you do not occupy your leased office space for fear of incurring penalty.

 

So, client signs a multiple-year lease contract and pays the first four months’ worth of security deposits and advance rentals. You see, the client’s other more urgent requirement is to get a landline, and that does not happen until after you have incorporated. Incorporation with the Securities and Exchange Commission takes about 10-14 days, so long as your papers are complete. If the inspector finds missing entries or scrutinises the place of notarisation, then you have to re-do everything and come back and line up for another whole day. And another. And another.

 

Then the complaints start pouring in. Why can you sign a lease contract for a yet-to-be incorporated entity and yet, not get a landline? Meantime, you can’t use the office space because the building administration already told you to produce your occupancy permit. So, you practically don’t have an office, a phone, a legal basis for existence, and most importantly, you don’t have business walking in through that door. And still, the meter for the monthly rentals will not stop running. If you think your landlord in Makati City will offer you some rent relief or a reduction in rent, you are dreaming. Landlords can be inflexible, and most of the time, they are.

 

Enter virtual offices. Of course, you still rent, but the terms can be more flexible. While you are undergoing the process of incorporation, you are provided with office space, telephone and fax services, conference rooms, and an address. It can be short term, and usually, that’s what it is. You use the virtual office while getting your government documentation in order without being tied down to monthly overhead expense that you have no way of earning yet. Looking at my clients who have fallen into the trap of inflexible (even fraudulently escalating) leases while they await their SEC, DTI, BIR, SSS, Philhealth, Pag-ibig and city hall permits, they have already received the short end of the stick. We should actually teach government registrations in school, and credit it as internship. More in my next column.