For many freelancers and small business owners, a sole proprietorship is the easiest way to register a business. But what happens when you need to close your business—and worse, when your receipts are lost or destroyed?
This situation can feel overwhelming, especially when dealing with the Bureau of Internal Revenue (BIR). Whether your receipts were burned, misplaced, or damaged, it’s important to know the right process to close your sole proprietorship legally and avoid penalties.
Let’s discuss how you can close your business properly, what to do if your receipts are gone, and whether you can handle the process online.
What Does Closing a Sole Proprietorship Mean?
Closing a sole proprietorship means officially deactivating your business registration with the BIR, Department of Trade and Industry (DTI), and your local government unit (LGU).
This process ensures that:
You are no longer liable for filing tax returns or paying business taxes.
Your Taxpayer Identification Number (TIN) remains valid for personal use but not for business.
You are compliant with government regulations, avoiding potential fines or penalties.
Simply stopping operations or ignoring your tax filings does not count as closure. You must formally apply for business closure through the BIR.
Can You Close a Sole Proprietorship Online?
Currently, the BIR does not allow full online closure of a sole proprietorship. The process requires in-person filing at your Revenue District Office (RDO) where your business is registered.
However, some steps can be done digitally to make the process easier, such as:
Downloading and filling out BIR Form 1905 (Application for Registration Information Update).
Booking an online appointment or queue number for your RDO.
Communicating through the BIR chatbot Revie or the BIR eAppointment system to ask for requirements.
But the submission of documents and verification will still take place at the BIR office.
What To Do If All Receipts Are Lost or Burned
If your receipts were destroyed, lost, or damaged (due to fire, flood, or any accident), the BIR requires you to file an Affidavit of Loss.
This affidavit must be notarized and should include the following:
Date and reason for the loss or destruction.
Details of the receipts (e.g., series number, printer name, date of issuance).
Declaration that the receipts are no longer usable.
You will submit this affidavit together with your closure documents to your RDO. The BIR will then record the loss and exempt you from surrendering the physical receipts that were destroyed.
Why Proper Closure Matters
Even if your business has stopped operations or lost its records, it remains legally active until you close it with the BIR.
Failing to do so can lead to:
Accumulated penalties for non-filing of tax returns.
Open cases or audit notices for non-compliance.
Difficulty registering a new business under your name in the future.
By closing properly, you protect your TIN and maintain clean tax records—important if you plan to freelance, reopen a business, or work with large clients again.
Step-by-Step Guide to Close a Sole Proprietorship
1. Prepare All Required Documents
You will need the following:
BIR Form 1905 (Application for Closure)
Certificate of Registration (BIR Form 2303)
Books of Accounts (manual or loose-leaf)
Unused receipts (if available)
Notarized Affidavit of Loss (if receipts were lost or destroyed)
Final income tax return and financial statements
2. Visit Your RDO
Submit your documents to your RDO and request business closure. The officer will check if your tax obligations are updated.
3. Settle Any Pending Liabilities
Before approval, the BIR will verify if you have unpaid taxes or open cases. You must settle all obligations to proceed.
4. Wait for Clearance and Certificate of Closure
Once verified, the BIR will issue a Certificate of Business Closure, officially confirming that your registration is inactive.
When Should You File for Closure?
File for business closure as soon as your operations permanently stop. The BIR recommends filing within 30 days of ceasing activity. Delaying your closure can cause unnecessary penalties or complications during verification.
Practical Tips for Freelancers and Business Owners
Act quickly after an incident. File an affidavit immediately if your receipts were destroyed.
Keep digital copies. Scan receipts and registration papers for backup.
Consult a tax professional. They can help you organize requirements and prevent missed details.
Avoid using old receipts. Once declared lost or destroyed, you must not issue them again.
Check your RDO’s specific requirements. Some offices may request additional documents.
Closing a sole proprietorship with lost or burned receipts may seem complicated, but it’s manageable when handled properly. While you can’t do the entire process online, you can prepare your forms and affidavit ahead to save time.
By filing your closure properly and reporting the lost receipts through an affidavit, you can protect your tax record, avoid penalties, and start fresh when you decide to register again.
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