Closing a business in the Philippines is often described as more arduous than starting one. Because the state has an interest in ensuring that all tax liabilities are settled and employee rights are protected, the process involves a multi-agency "exit" procedure.

Failure to properly close a business can lead to the continuous accumulation of penalties, "open cases" with the Bureau of Internal Revenue (BIR), and potential legal action from stakeholders.

Phase 1: Internal Dissolution and Employee Separation

Before approaching government agencies, the entity must formally decide to cease operations.

Board/Partner Resolution: For corporations, a majority vote of the Board of Directors and a resolution by stockholders representing at least two-thirds of the outstanding capital stock is required. For partnerships, a simplified resolution to dissolve is needed.
Notice of Termination: Under the Labor Code of the Philippines, employers must serve a written notice to employees and the Department of Labor and Employment (DOLE) at least one month before the intended date of closure.
Settlement of Benefits: If the closure is not due to serious business losses, employees are entitled to separation pay (usually 1/2 month pay for every year of service). All final wages and pro-rated 13th-month pay must be released within 30 days of the cessation of operations.

Phase 2: Local Government Unit (LGU) Clearance

The first external stop is usually the Barangay and the City/Municipality where the business is located.

Barangay Clearance: Obtain a certification that the business has ceased operations within the jurisdiction.
Mayor’s Permit Cancellation: You must surrender your original Business Permit and Plate to the Business Permits and Licensing Office (BPLO).
Assessment of Local Taxes: The LGU will assess if there are outstanding local business taxes or fees. You must pay these before they issue a Certificate of No Business Liability or a similar retirement clearance.

Phase 3: The Bureau of Internal Revenue (BIR)

This is the most critical and time-consuming step. The goal is to obtain a Tax Clearance.

Form 1905: File the Application for Registration Information Update for the closure of business at the Revenue District Office (RDO) where the business is registered.
Surrender of Documents: You must surrender the original Certificate of Registration (COR), unused Receipts/Invoices (which will be destroyed), and the "Ask for Receipt" signage.
Audit and Verification: The BIR will verify if the entity has "open cases" (unfiled returns) or unpaid taxes. They will conduct a terminal audit of the books of accounts.
Payment of Terminal Taxes: All taxes due up to the date of closure must be settled. Once cleared, the BIR issues the Tax Clearance.

Phase 4: Statutory Labor Agencies (SSS, PhilHealth, Pag-IBIG)

You must inform the "social agencies" to stop the accrual of monthly employer contributions.

Social Security System (SSS): File Form R-8 (Employer Data Change Request) indicating the "Cessation of Operations."
PhilHealth & Pag-IBIG: Similar forms must be filed along with proof of closure (e.g., LGU retirement or BIR Form 1905) to ensure the employer's account is deactivated.

Phase 5: Securities and Exchange Commission (SEC) or DTI

The final step is to dissolve the legal personality of the business itself.

For Sole Proprietorships:

Department of Trade and Industry (DTI): File an affidavit of cancellation of the Business Name (BN) registration. This is relatively straightforward compared to corporations.

For Corporations (SEC):

Articles of Dissolution: File the Articles of Dissolution with the SEC.
Requirements: This requires the BIR Tax Clearance, a Certificate of No Pending Case from the SEC, and proof of publication of the dissolution in a newspaper of general circulation for three consecutive weeks.
Certificate of Dissolution: The SEC will issue the formal Certificate of Dissolution, at which point the corporation’s legal existence ceases (except for the three-year winding-up period for litigation/liquidation).

Summary Table of Requirements

Agency	Primary Document Needed	Outcome
LGU / BPLO	Original Permit, Financial Statements	Certificate of Retirement
BIR	Form 1905, Unused Receipts, Books	Tax Clearance
SSS/PH/HDMF	Form R-8 / Membership Update	Deactivation of Employer ID
SEC / DTI	Articles of Dissolution / Affidavit	Certificate of Dissolution / Cancellation

Legal Consequences of Non-Compliance

Abandoning a business ("ghosting" the government) does not stop the legal clock. The BIR will continue to expect tax filings, resulting in Compromise Penalties that can reach hundreds of thousands of pesos over time. Furthermore, directors and officers of a corporation may face personal liability or be "blacklisted" from registering future businesses if the previous entity was not closed according to the proper legal framework.