THE NATURE OF SMALL BUSINESS WHAT IS

THE NATURE OF SMALL BUSINESS

WHAT IS A SMALL BUSINESS Business – An organized effort of individuals to produce and sell goods and services in order to satisfy the needs of the society. - The primary objective of business is to acquire profit. Small Business – Owned by the principal worker, and employs one or more assistants. (micro business) - Owner mainly directs the work of the employees.

SMALL AND MEDIUM ENTERPRISE Small and Medium Enterprise (SME) – are defined as any business activity or enterprise engaged in industry, commerce, agribusiness and/or services, whether single proprietorship, partnership, cooperative or corporation, whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated must have value falling under the following categories:

IN TERMS OF CAPITALIZATION SMALL AND MEDIUM ENTERPRISE CATEGORY AMOUNT OF CAPITALIZATION Micro Enterprise Less than Php 3 Million Small Enterprise From Php 3 M to Php 15 M Medium Enterprise From Php 15 M to 100 M Large Enterprise Php 100 Million and above (redefined the categories) Republic Act No. 9170 otherwise known as the Barangay Micro Business Enterprise (BMBE) Act of 2002

IN TERMS OF EMPLOYMENT SIZE SMALL AND MEDIUM ENTERPRISE CATEGORY EMPLOYMENT SIZE Micro Enterprise Less than 10 employees Small Enterprise From 10 to 99 employees Medium Enterprise From 100 to 499 employees Large Enterprise 500 employees and above

TYPES OF SMALL BUSINESS Small Manufacturing Business Small Service Business Wholesaling Retailing General Construction Firms

TYPES OF SMALL BUSINESS Small Manufacturing Business A manufacturing business is involved in the conversion of raw materials into products needed by society.

TYPES OF SMALL BUSINESS Small Service Business services – provide service to other business. Examples: janitorial/security services, collection agencies Personal services – provide service to a person. Examples: tutoring, massage parlors, voice lessons

TYPES OF SMALL BUSINESS Small Service Business Repair Services – provide repairs to owners of various machinery and appliances. Examples: auto repair shop, watch repair, plumbing Entertainment and recreation – includes movie houses, resorts, billiard pool centers, bowling centers.

TYPES OF SMALL BUSINESS Small Service Business Hotels, motels, and inns Education services – include Montessori school for children, high school, correspondence schools.

TYPES OF SMALL BUSINESS Wholesaling refers to the activities of persons or establishments which sell to retailers and other merchants, and/or to industrial, institutional, and commercial users, but who do not sell in large amounts to final customers. Examples: soft drinks wholesalers, dealers of supplies and office equipment

TYPES OF SMALL BUSINESS Retailing cover all activities involved in the sale of goods and/or services to the final consumers. Examples: retail drug stores, fast-food shops, appliances stores etc.

TYPES OF SMALL BUSINESS General Construction Firms Engaged in construction of buildings whether for private individual firms, or for the government. Many of them perform subcontracting jobs for bigger contractors such as installing electrical facilities and sewerage.

CHARACTERISTICS OF SMALL BUSINESS A small business is low in capital but high in labor intensity. A small business is efficient in specialized skill or service. A small business succeeds in small, isolated or overlooked markets. A small business often operates in unstable markets. A small business is closer to the market place.

CHARACTERISTICS OF SMALL BUSINESS Generally, the owner of the small business are also the managers. Capital comes from the owner or small group The area of operation is small. The size of the enterprise is small in relation to the industry.

ECONOMIC IMPORTANCE OF SMALL BUSINESS Small businesses play an important role in the development of our economy. They assume the following function: 1. Provides economic opportunities for entrepreneurs – People who do not feel comfortable as employee have the option of engaging in small business operation.

ECONOMIC IMPORTANCE OF SMALL BUSINESS Small businesses play an important role in the development of our economy. They assume the following function: 2. Provides of product and services to consumers – the production of many products and services is oftentimes feasible with big and medium business operation. These limited opportunities are naturally fitted for a small business.

ECONOMIC IMPORTANCE OF SMALL BUSINESS Small businesses play an important role in the development of our economy. They assume the following function: 3. Suppliers of products and services to other businesses – some businesses require raw materials, semi-finished parts, finished components, or even labor, which they cannot economically produce. The small business perform this for them.

ECONOMIC IMPORTANCE OF SMALL BUSINESS Small businesses play an important role in the development of our economy. They assume the following function: 4. Distributors of products and services of other businesses – some manufacturers do not have the ability to distribute their products and services.

ECONOMIC IMPORTANCE OF SMALL BUSINESS Small businesses play an important role in the development of our economy. They assume the following function: 5. Supporters of Government – small businesses support the government with the taxes they pay, as well as performing other functions.

ECONOMIC IMPORTANCE OF SMALL BUSINESS Small businesses play an important role in the development of our economy. They assume the following function: 6. Providers of employment – a large proportion of the labor force are employed by the businesses.

ECONOMIC IMPORTANCE OF SMALL BUSINESS EMPLOYMENT AND SMALL BUSINESS OPERATION COMPATED FACTOR SMALL BUSINESS OPERATION EMPLOYMENT INCOME Uncertain CAPITAL INVESTMENT Risk of losing None Required QUALITY OF LIFE Lower until business gets established Consistent at a certain level RESPONSIBILITY Complete/ all encompassing Restricted to one’s job Gain control over his own country Present Absent Reach his full potential Present Absent Reap unlimited profits Present Absent Make a contribution to society Present Limited

ADVANTAGES OF OPERATING A SMALL BUSINESS Personalized relationships with customers and employees Flexibility in management Government incentives Simple record keeping Independence

DISADVANTAGES OF OPERATING A SMALL BUSINESS Difficulty in raising capital Risk of failure Limited management skills Lack of opportunities for employees

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES Barangay Micro Enterprises Act The Anti-Dumping Act of 1999 Consumer Act of the Philippines Electronic Commerce Act of 2000 Price Act

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES Others Tobacco Regulation Act of 2003 (RA 9211) Export Development Act (RA 7844) Foreign Investment Act (RA 7042) Retail Trade Liberalization Act (RA 8762) Safeguards Measures Act Transaction Value Act

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES “Barangay Micro Business Enterprise” It is hereby declared to be the policy of the State to hasten country’s economic development by encouraging the formation and growth of BMBEs which effectively serve as seedbeds of Filipino entrepreneurial talents, and integrating those in the informal sector with the mainstream economy, through the rationalization of bureaucratic restrictions, the active intervention of the government specially in the local level, and the granting of incentives and benefits to generate muchneeded employment and alleviate poverty.

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES “Barangay Micro Business Enterprise” Engaged in the production, processing or manufacturing of products or commodities Whose total assets shall not be more than Three Million Pesos (Php 3, 000) Services – excludes exercise of profession duly licensed by the government Certificate of Authority Assets – all kinds of properties, real or personal owned and/or used by the BMBE for the conduct of its business Where to register: Office of the Treasurer of each city or municipality Fee: not to exceed One Thousand Pesos (P 1, 000) Effectively: 2 years renewable for a period of 2 years for every renewal

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES “Incentives and Benefits” Exemption from Taxes and Fees Exemption from the coverage of the Minimum wage law Credit Delivery Technology transfer, production and management training and marketing assistance Trade and investment promotion

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES The Anti-Dumping Act of 1999 Whenever any product, commodity or article of commerce imported into the Philippines at an export price less than its normal value in the ordinary course of trade for the like product, commodity or article destined for consumption in the exporting country is causing or threatening to cause material injury to a domestic injury, or materially retarding the establishment of a domestic industry producing the like product, the Secretary of Trade and Industry, in the case of nonagricultural product, commodity or article, after formal investigation and affirmative finding of the Tariff Commission, shall cause the impositions of an anti-dumping duty equal to the margin of dumping on such product, commodity or article and on like product, commodity or article thereafter imported in the Philippines under similar circumstances, in addition to ordinary duties, taxes and charges imposed by law on the imported product, commodity or article.

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES Consumer Act of the Philippines (Republic Act No. 7394) Products the interest of the consumer, promotes his general welfare and establishes standards of conduct for business and industry. a. Protection against hazards to health and safety; b. Protection against deceptive, unfair and conscionable sales acts and practices; c. Provision of information and education to facilitate sound choice and the proper exercise of rights by the consumer; d. Provision of adequate rights and means of redress; and e. Involvement of consumer representatives in the formulation of social and economic policies.

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES Electronic Commerce Act of 2000 (Republic Act No. 8792) Provides for the legal recognition and admissibility of electronic data messages, documents and signatures. Mandates all government department and offices to accept electronic data messages and documents in their transactions within two years from its effectively. Provides for penalties on computer hacking, introduction of viruses and piracy of copyrighted works of at least P 100, 000 and maximum commensurate to the damage incurred, and imprisonment of six months to three years, among others; Promotes e-commerce in the country, particularly in business-to-business and business-to-consumer transactions.

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES Price Act (Republic Act No. 7581) Protects consumers by stabilizing the price and supply of basic necessities and prime commodities without denying legitimate business a fair return an investment and by prescribing measures against undue price increases especially during the emergency situations and similar occasions. Tobacco Regulation Act of 2003 (RA 9211) Enacted to protect the populace from hazardous products and promote the right to health and instill health consciousness among them. Safeguards the interests of the workers and other stakeholders in the tobacco industry.

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES Main thrust of RA 9211 Promote a healthful environment Inform the public of the health risks associated with cigarette smoking and tobacco use Regulate and subsequently ban all tobacco advertisements and sponsorship; Regulate the labeling of tobacco products; Protect the youth from being initiated with cigarette smoking and tobacco use by prohibiting sale of tobacco products to minors; Assist and encourage Filipino tobacco farmers to cultivate alternative agricultural crops to prevent economic dislocation; and Create a inter-agency committee on Tobacco (IAC-Tobacco) to oversee the implementation of the provisions of this Act.

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES Export Development Act (RA 7844) Aims to develop the country’s export sector and meet the country’s export goals. Puts into focus a national strategy for a sustainable agri-industrial development to push the Philippines’ image as a newly industrialized country. Enjoins the government and the private sector to consolidate efforts to promote exports and expand the country’s share in the international markets by promoting industries that are considered export winners.

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES Foreign Investments Act (RA 7042) Recognizes the role extent played by foreign investments in the economy, and sets into place the procedures for the registration and grant of incentives to foreign investors. Specifies the limits on the extent of allowable foreign ownership There are no restrictions on foreign ownership in export and domestic market enterprises, but a Foreign investment Negative List or Negative List defines the areas of economic activities where foreign ownership is limited.

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES Foreign Investments Act (RA 7042) Former natural-born Filipinos are granted the same investment rights of a Philippine citizen based on existing investment and related laws. However, former natural-born Filipinos are restricted in cone areas such as defense-related activities, exercise of profession, activities covered by the Retail Trade Act, Small Scale Mining Act, Rice and Corn industry Act and other laws. Foreign Investment List No foreign equity is allowed in mass media; services involving the practice of professions, such as engineering, medical and allied profession, accountancy, criminology, architecture, law, etc. ; retail trade; cooperatives; small-scale mining, utilization of marine resources; ownership and operation of cockpits; manufacture, repair of nuclear weapons and other biological, chemical weapons, etc. ; and other areas.

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES Foreign Investment List Up to 25 % foreign ownership is allowed for private requirement, whether for local or overseas employment; locally -funded public works, except for infrastructures/development projects and foreign-funded or assisted projects. Up to 30 % foreign equity is allowed in advertising Up to 40 % foreign equity for exploration, development and utilization of natural resources; ownership of private lands; operation and management of public utilities, educational institutions; rice and corn administration; contracts to supply materials, good and commodities to GOCCs; project proponent of a BOT project in public utilities; deep-sea commercial fishing vessels operation and condominiums. Up to 60 % ownership in financing companies regulated by the SEC and investment houses.

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES Safeguards Measure Act (RA 8800) Contains measures to protect local manufactures from trade practices tat are seen as unfair. It provides relief to domestic industries when a sudden increase in imports adversely affects local industries. The government can levy a higher tariff an imports of agricultural products once these breach a certain volume or price, protecting local farmers growing the same products. Also provides an adjustment period for the agricultural sector to become competitive, as well as adjustment plans for other affected sectors to help enhance competitiveness.

LAWS THAT GOVERN ENTREPRENEURSHIP IN THE PHILIPPINES Transaction Value Act (RA 8181) Changes the basis of dutiable value of imported articles subject to an ad valorem rate of duty from Home Consumption Value (HCV) to Transaction Value (TV). The price actually paid or payable for goods that are exported to the Philippines. The price that appears on the accompanying commercial or sales invoice issued in the country of origin or exporting country. The TV system enables local manufacturers or producers to price their export products more competitively and allows Philippines to align its valuation system not only with its ASEAN neighbors but also with the rest of the world.