Operating a business in the Philippines using only a Department of Trade and Industry (DTI) business name registration while lacking a local government unit (LGU) business permit (commonly called the Mayor’s Permit) is a serious regulatory violation that exposes the owner to a cascading series of administrative, financial, civil, and potentially criminal liabilities. This practice is widespread among small entrepreneurs who mistakenly believe that a DTI certificate is sufficient to legitimize operations, but Philippine law treats the LGU business permit as the actual license to operate within a specific territory.

Legal Framework Governing Business Permits

The Local Government Code of 1991 (Republic Act No. 7160) is the primary law that mandates every person or entity engaged in trade, business, or occupation within an LGU to secure a Mayor’s Permit before commencing operations.

Section 152(c) expressly prohibits any person from engaging in business without first obtaining the required permit.
Sections 444 and 445 (for municipalities) and Sections 455 and 456 (for cities) empower the municipal or city mayor to issue or deny business permits.
Section 447(a)(5)(i) and Section 458(a)(3)(v) authorize the Sangguniang Bayan and Sangguniang Panlungsod to prescribe penalties for violations, including fines up to ₱5,000, imprisonment up to one year, or both, and business closure.

The DTI registration under Republic Act No. 3883 (Business Name Law), as amended, serves only to protect the business name and does not confer any right to operate. The Supreme Court has repeatedly held that DTI registration is merely proprietary and does not substitute for the LGU license to operate (G.R. No. 175763, Lim v. City of Manila, 2009; G.R. No. 166944, Acebedo Optical v. City of Muntinlupa, 2010).

Administrative Consequences

Immediate Closure and Padlocking
LGUs routinely conduct business inspections. Upon discovery of operation without a valid Mayor’s Permit, the mayor or his authorized representative may issue a Cease and Desist Order and padlock the establishment on the spot. This is authorized under Section 444(b)(3)(iv) and Section 455(b)(3)(iv) of the LGC and is standard practice nationwide.
Confiscation of Goods and Equipment
In many cities (Quezon City, Manila, Makati, Cebu City, Davao City, etc.), ordinances authorize the seizure of merchandise displayed or sold without a permit. Goods may be held until fines are paid or auctioned off if the owner fails to settle obligations.
Blacklisting and Perpetual Disqualification
Repeated or deliberate violators may be blacklisted by the LGU’s Business Permits and Licensing Office (BPLO), preventing future permit applications in that locality. Some LGUs share blacklists regionally.

Financial Penalties

Accumulated Business Taxes and Fees with Surcharges
Even without a permit, the LGU assesses local business tax from the date operations began. The owner becomes liable for:
- 25% surcharge on unpaid taxes
- 2% monthly interest (compounded)
- Compromise penalties
  These can easily reach 100–200% of the original tax due within a few years.
Administrative Fines
Fines vary per LGU ordinance but typically range from ₱5,000 to ₱50,000 per violation. Examples (2024–2025 rates):
- Quezon City: ₱5,000 + closure
- Manila: ₱5,000 first offense, ₱10,000 second, closure on third
- Makati City: ₱10,000–₱25,000 depending on gross sales
- Cebu City: ₱5,000–₱20,000 + daily fine until compliance
- Davao City: ₱5,000 per day of violation
Payment of Back Regulatory Fees
The owner must retroactively pay all fees (sanitary permit, fire safety inspection certificate, zoning clearance, environmental clearance, etc.) from the date operations started.

Criminal Liability

Operating without a Mayor’s Permit is punishable as a criminal offense under local ordinances. The penalty is usually fine or imprisonment or both at the discretion of the court.

In cities where the ordinance classifies the violation as a misdemeanor, the owner may be arrested without warrant during business hours if caught in flagrante delicto (Quezon City Revenue Code, Manila Revenue Code).
Persistent refusal to close after a CDO may be prosecuted as resistance and disobedience to an agent of a person in authority under Article 151 of the Revised Penal Code (imprisonment up to 6 months).

The Supreme Court upheld the criminal nature of such violations in People v. Cruz (G.R. No. 140692, 2004) and City of Manila v. Laguio (G.R. No. 118127, 2005).

Tax Implications with the Bureau of Internal Revenue (BIR)

While the primary issue is the LGU permit, the BIR treats operation without registration/permit as evidence of willful attempt to evade taxes.

Revenue Regulations No. 7-2012 and Revenue Memorandum Order No. 26-2017 authorize the BIR to conduct surveillance and closure operations jointly with LGUs against businesses without proper registration.
The owner may be assessed deficiency taxes (income, VAT/percentage tax) plus 25%/50% surcharge for willful neglect/fraud, 20% interest per annum, and compromise penalties.
Criminal prosecution for tax evasion under Sections 254–257 of the Tax Code is possible if gross sales exceed the VAT threshold or there is clear intent to defraud.

Civil Law Consequences

Unenforceability of Contracts
Courts have ruled that contracts entered into by an unlicensed business may be unenforceable when the licensing requirement is imposed for public protection (Art. 1409, Civil Code; Paculdo v. Regalado, G.R. No. 123654, 2000). Creditors may refuse payment, or the owner may be unable to sue delinquent customers.
Personal Liability of the Owner
In sole proprietorships, the owner is personally liable. Claims for damages arising from defective products or services can pierce through the unregistered business and attach to personal assets without limit.
Labor Law Violations
Employers operating without permits frequently fail to register with SSS, PhilHealth, and Pag-IBIG. Employees may file complaints for non-remittance, leading to joint and several liability and possible criminal cases under RA 11199 (Social Security Act) and RA 11223 (Universal Health Care Act).

Impact on Banking and Credit

Banks and financial institutions routinely require a valid Mayor’s Permit before opening business accounts, granting loans, or issuing credit lines. Operation with only DTI registration will prevent access to formal financing and may trigger reports to the Anti-Money Laundering Council (AMLC) for suspicious structuring.

Special Cases and Aggravating Circumstances

Food establishments without sanitary permits risk additional prosecution under the Food Safety Act (RA 10611) and the Consumer Act (RA 7394).
Construction-related businesses without permits may face charges under the National Building Code (PD 1096).
Online sellers with physical inventory or pick-up points in a city are still required by most LGUs to secure a business permit (Quezon City, Makati, Taguig, Pasig, and Mandaluyong explicitly require it even for home-based online sellers with annual sales above certain thresholds).

Prescription Period

Administrative fines and taxes generally prescribe in 5 years (LGC Section 194), while criminal cases prescribe in 1–3 years depending on the penalty. However, continuing violations reset the period.

Practical Reality and Enforcement Trends (2023–2025)

Post-pandemic enforcement has intensified. Major cities now deploy joint task forces (BPLO + barangay + PNP) conducting nightly raids on sari-sari stores, carinderias, online sellers with warehouses, and even home-based food businesses. In 2024–2025, Quezon City alone closed over 8,000 establishments and collected hundreds of millions in back taxes and fines from unregistered operators.

Conclusion

A DTI certificate is nothing more than a name reservation—it does not grant any authority to transact business. Operating without a Mayor’s Permit is equivalent to running an illegal enterprise under Philippine law, exposing the owner to immediate closure, crushing financial penalties, criminal prosecution, and permanent damage to personal and business reputation. The only lawful course of action upon discovery of non-compliance is to cease operations immediately, settle all back taxes and fines, and apply for the proper permits before resuming business. There is no shortcut, and the consequences of ignoring this requirement have ruined countless entrepreneurs who believed “DTI lang muna” was acceptable.