As the year draws to a close, many see this season as a time for fresh beginnings, new ventures, bold ideas, and renewed energy. Yet for others, it is also a moment of reflection, a chance to let go of businesses that have run their course. Just as opening a business marks a hopeful start, closing one at year‑end can be a strategic decision, clearing space for future opportunities and ensuring that past commitments are properly settled.
Casual shutdowns, stopping operations without formal dissolution, and contract terminations—can leave owners vulnerable to future assessments, ongoing fees, and claims from employees or creditors. MSMEs should approach business closure as a form of risk management: an intentional, documented process that preserves value and limits liability for business owners.
Define the Scope and Record the Decision
Start by determining whether you are closing down a branch, stopping a line of business, or dissolving the entire entity. For corporations and partnerships, conduct the necessary board or shareholder meetings and record the board resolutions; sole proprietors should document the decision in writing. Proper corporate minutes and resolutions serve as key evidence that the closure was authorized and intentional.
No closure without communication
Before proceeding with closure, employers are legally required to inform their employees of the decision at least 30 days prior to the intended closure date. If the shutdown is not due to bankruptcy or insolvency, affected employees must also receive severance pay.
Explaining the process
The procedure for closing a business is not one‑size‑fits‑all. It varies depending on the type of enterprise. Sole proprietorships, for example, follow a relatively straightforward process, while entities registered with the SEC must comply with more formal requirements, including board resolutions and notices of dissolution. Each business structure carries its own set of documentary obligations, and understanding these distinctions ensures that closure is handled legally, efficiently, and with minimal risk to the owner.
- SEC or DTI (Business Registration) - Cancel your business registration.
For corporations and partnerships (SEC):
SEC Memorandum Circular No. 5, Series of 2022 provides for the revised guidelines on corporate dissolution. The specific process and documentary requirements differ depending on the chosen mode of dissolution. In general, if the dissolution is not prejudicial to any creditor having a claim against it, the process can be summarized by filing a Verified Request for Dissolution, with an attached Verification and Certification Against Forum Shopping with the SEC, along with the following documents:
- A notarized copy of the Board Resolution or directors’/trustees’ certificate authorizing the dissolution and designating an authorized representative to file the verified request for dissolution, signed by a majority of the board of directors or trustees and countersigned by the secretary of the corporation;
- Publisher’s Affidavit of Publication of the Notice of Meeting;
- Latest General Information Sheet (GIS);
- Audited Final Statements (AFS) as of the last fiscal year;
Affidavit executed by the President and Treasurer that the dissolution shall not be prejudicial to the interest of the creditors and that no opposition is made by any creditor from the time of publication of the notice of dissolution up to the filing of dissolution with the SEC; - BIR Tax Clearance Certificate;
- Notarized Secretary’s Certificate of no pending case involving intra-corporate dispute; and
- Clearance or Favorable recommendation from other Departments of the SEC or other regulatory agencies, if the corporation to be dissolved is a bank, quasi-bank institution, insurance or trust company, pawnshops, non-stock savings and loan association (NSSLA), or any other financial intermediary
After fifteen (15) days from receipt of the Verified Request for Dissolution, and if there was no withdrawal filed within the said period, the SEC shall approve the request and issue the Certificate of Dissolution.
For sole proprietors (DTI):
For the closure of a sole proprietorship, an application for cancellation and closure of business should be filed before the DTI, either in person or online (through their BNRS portal) with the following documentary requirements:
- Original Business Name Certificate
- Affidavit of Cancellation of Business Name stating the reason for the business closure
- A declaration under oath affirming that the cancellation is not intended to defraud creditors and that there are no outstanding financial obligations related to the business
- DTI Cancellation Form
If done online, the process shall be done through the BNRS portal’s cancellation page. Enter your reference code, select your business, and follow the on-screen instructions to finalize the cancellation. The BNRS portal may also require you to upload certain supporting documents.
2. BIR Tax Compliance - Finalize financial statements and tax obligations.
Prepare final financial statements and file final tax returns, including payroll, VAT/GST, and withholding obligations. Annex 11 of Revenue Memorandum Circular No. 57-2020 provides the updated policies and the revised checklist of documentary requirements for business closure and Taxpayer Identification Number (TIN) cancellation with the BIR. In many jurisdictions, tax authorities require specific documentary steps for closure and TIN cancellation—following these procedures reduces the risk of later assessments or penalties. Retain accounting records for the statutory retention period to defend against audits.
BIR closure is often the most critical and time-consuming part of the process.
Key requirements include:
- Filing all final tax returns (Income Tax, VAT or Percentage Tax, Withholding Taxes)
- Payment of all outstanding taxes, penalties, and surcharges
- Updating taxpayer registration status to “Closed”
- Surrender of:
- Certificate of Registration (BIR Form 2303)
- Unused official receipts / Authority to Print (ATP)
Books of accounts - Securing a BIR Tax Clearance
Until the business is officially closed with the BIR, tax obligations may continue to accrue.
3. SSS, PhilHealth, Pag-IBIG, and DOLE (Labor and Employment Agencies) - Comply with employment and benefits rules.
Address statutory notice, severance, final pay, and social security or pension contributions. Provide written notices and obtain signed acknowledgments whenever appropriate. Document settlements and communications to reduce illegal termination or benefits disputes.
If the business has employees, compliance with labor, social security, and health insurance agencies is required.
What to accomplish:
- Submit a Notice of Business Closure or employer status update
- Update employer accounts to inactive or closed
- Settle all employee contributions and remittances
- Submit final employee reports and separation documentation
- File termination or closure reports with DOLE, if applicable
Proper settlement ensures that there are no future claims or compliance issues involving employees.
The closure of business must also be reported to the DOLE and to the employees at least one (1) month before the intended date of cessation of operations. Additionally, except if the closure is due to business losses or financial reverses, or unless otherwise provided by a Collective Bargaining Agreement, separation pay must also be paid to the employees, which shall be equivalent to one (1) month pay or at least one -half (1/2) month pay for every year of service, whichever is higher.
4. Local Government Unit (LGU) - Cancel licenses and registrations.
Deregister business names, cancel permits, and close tax and local government registrations.
Sole proprietorships must submit an Affidavit of Closure/Dissolution stating the exact date of cessation of operations, while corporations are required to issue a Board Resolution on Dissolution, while Partnerships must file a Notice of Dissolution. Closure at the local level is also essential to stop local tax assessments.
Requirements for closure of business usually include:
- Application Form or Letter of Intent to Close Business
- Cancellation of the Mayor’s Permit / Business Permit
- Barangay Closure Certificate
- Payment and clearance of local business taxes and fees
- Settlement of real property tax, if applicable
- Issuance of a Business Closure or Retirement Clearance
An LGU clearance is often required before other agencies will issue their final approvals.
5. Data Protection: Protect Data, IP, and Corporate Records
Secure customer and employee data in compliance with privacy laws, decide whether to transfer or maintain intellectual property, and archive corporate records—minutes, tax returns, contracts, and payroll—for the legally required period. Appoint a records custodian and provide clear access instructions for future inquiries.
6. Practical Legal Solutions
For retained clients, a law firm can draft resolutions, prepare statutory filings, coordinate tax clearances, negotiate lease and contract exits, and prepare employment settlement documents—sequencing actions to align with deadlines and preserve negotiation leverage.
For business owners acting independently, follow a checklist: define scope, document approvals, file final taxes, settle employees, notify creditors, cancel registrations, and archive records. When complexity arises—multi‑jurisdictional issues, creditors, or insolvency risk—seek counsel before informal shutdowns.
Closing a business legally is an investment in peace of mind. Act now at year‑end while records are current and stakeholders expect clarity; a deliberate, documented closure prevents future headaches and protects owners and directors.
For more information, we welcome inquiries. Initial consultations for MSMEs are complimentary to help you better understand your year-end legal compliance and business closure obligations.
We’re always glad to assist! Message us on Facebook or call (+63) 936 979 2296 or (+63) 908 867 6601.
Disclaimer: This article is for general informational purposes only and does not constitute legal advice and requirements may change; always confirm with the concerned agency