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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Registering your business name is both a legal requirement and a protective measure for the public and the business owner. It ensures transparency, avoids confusion, and helps establish the owner’s accountability. For sole proprietorships, complying with Republic Act No. 3883 provides a lawful foundation for conducting business in the Philippines and upholds the integrity of commercial transactions.
Registering your business is more than just a formality, it is a legal obligation for anyone who conducts business under a name other than their true personal name. In the Philippines, this requirement applies specifically to sole proprietorships and is governed by Republic Act No. 3883, also known as the Business Name Law, as amended by Act No. 4147
What the Law Says
Section 1 of the Business Name Law makes it unlawful for any person to use or sign, on any written or printed receipt, including receipt for tax on business, or on any written or printed contract not verified by a notary public, or on any written or printed evidence of any agreement or business transactions, any name used in connection with his business other than his true name, or keep conspicuously exhibited in plain view in or at the place where his business is conducted, if he is engaged in a business, any sign announcing a firm name or business name or style, without first registering such other name, or such firm name, or business name, or style, in the Bureau of Commerce together with his true name and that of any other person having a joint or common interest with him in such contract, agreement, business transaction, or business.
In simple terms, if you are running a business using a trade name or brand name, anything that is not your legal personal name, you must register that name with the Department of Trade and Industries (DTI).
Why the Law Exists
The Supreme Court, in Villanueva v. Coca-Cola Bottlers Phils., Inc., G.R. No. 264746, 07 August 2024, explained the purpose behind this requirement. According to the Court, Act No. 3883 was enacted for the protection of the members of the general public who deal with businesses being operated under a name other than the true name of the owner. It seeks the prevention of tremendous confusion in the field of trade, wherein businesses would be operated under fictitious names, with the true owner being obscured from the public.
The Court emphasized that pursuant to Act No. 3883, members of the public who transact with businesses being operated under a name different from the true name of the owner has a right to assume that the registered owner is the actual or lawful owner thereof. Further, for the policy of the law to be enforced, the registered owner cannot be allowed to prove the contrary and evade liability to prejudiced third persons, but he or she may seek indemnity or reimbursement from the actual operator of the business at the time the injury was caused to a third party.
This ruling reinforces the idea that proper registration is necessary not only for legality and transparency but also for accountability in business dealings.
Rights and Limitations Upon Registering a Business Name
Under Section 3 of Rule VIII of Department Administrative Order No. 18-07, or the Revised Rules and Regulations Implementing Act No. 3883, as amended, states that the Certificate of Business Name Registration shall be valid for five (5) years from the date of issuance thereof.
Section 5 of Rule VIII of the Revised Rules and Regulations outlines the use of the Certificate of Business Name Registration. It specifies that the Certificate of Business Name Registration shall be exclusively used by the owner for the registered purpose/business and within its territorial scope. The use of the Certificate of Business Name Registration by any person other than the registered owner for whatever purpose is prohibited.
Rule V of the Revised Rules and Regulations provides for the Territorial Scope of Business Name. Section 1 states that a Business Name applicant shall choose the territorial scope for the BN he/she is applying for. The territorial scope for the registered Business Name is where he/she may locate his/her business and use the registered Business Name during its validity period.
This protection allows you to build brand recognition and trust among your customers, since clients and business partners can confidently associate the registered name with your enterprise. It also provides a legal basis to address potential disputes with other businesses attempting to use a similar name within your territory.
It must also be emphasized that the Business Name Law applies only to sole proprietors. Corporations and partnerships must register their names through the Securities and Exchange Commission (SEC), not the DTI. Additionally, to lawfully operate your business, you must still secure a business permit, Bureau of Internal Revenue registration, and any other required documents; registering the business name alone does not authorize actual business operation. In essence, registration of your trade name is the first step in establishing your business legally and protecting your brand, but it should be complemented by compliance with other regulatory requirements to ensure smooth and lawful operations.
Effect of Failure to Register Business Name
Failure to register your business name carries legal consequences. Under Section 4 of the Business Name Law, any person violating the provisions of section one of this Act shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be fined not less than fifty pesos (PhP50.00) and not more than two hundred pesos (PhP200.00), or imprisoned not less than twenty (20) days and not more than three (3) months, or both, in the discretion of the court.
Although these penalties may seem minimal today, the violation still constitutes a criminal offense and can lead to complications in licensing, enforcement of contracts, and business legitimacy.
To help business owners compy and avoid penalties, the DTI provides a Registration Guide, which can be accessed at https://bnrs.dti.gov.ph/resources/registration-guide.
Conclusion
In essence, registering your business name is both a legal requirement and a protective measure for the public and the business owner. It ensures transparency, avoids confusion, and helps establish the owner’s accountability. For sole proprietorships, complying with Republic Act No. 3883 provides a lawful foundation for conducting business in the Philippines and upholds the integrity of commercial transactions.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 09175772207/ 09778050020.
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