“Starting a business is like jumping out of an airplane without a parachute. In midair, the entrepreneur begins building a parachute and hopes it opens before hitting the ground.” Rich Dad Coaching
Starting a business often seems overwhelming and complicated. There are so many things to consider before commencing trade, from coming up with and an excellent and unique idea to registering a company and all the way up to planning and fundraising. Business registration has a lot of advantages to start-up businesses as it is the process of obtaining legal authorization to conduct business within your chosen jurisdiction. It is a legal obligation that ensures that a business is operating under the lawful obligations of its control. Below are advantages of registering a company before starting business operations:
1. For recognition, reputation and distinction
Developing a business idea is usually the first challenge that every entrepreneur faces when starting a business from scratch. It requires innovation and the ability to see what others are not able to see. Where others see problems, an entrepreneur should always see opportunities. As a result, the unique business idea has to be protected before it goes into the market and it should be lawfully registered to an individual or a legal entity so that the business idea or company name won’t be plagiarized or stolen by competitors.
Your business name means a lot. It identifies your brand and signifies your reputation and plays a pivotal role in helping your loyal customers to identify you from competitors. Registering a company before starting a business protects and secures your chosen business name and the ideas accompanying it. When you register a company, the company name that you choose is reserved for you only because business names are intellectual property assets. You may not have plans to start operating immediately after the registration process but registering your business name ensures that it is only available to you even when you are finally ready to launch your business in the market.
Once your company name has been incorporated and registered, you can further restrict its usage by registering it as a trade name or a trademark. This process guarantees that no one else can legally use your company name in any given circumstance. This is an advantage because registration processes reveal whether any other business has a confusingly similar name. Therefore, it is always wise to conduct a name search using governmental sources because distinctive company names are valuable business assets.
2. To secure funds easily
After developing your business idea, the next challenge you are likely to face is raising capital. As an entrepreneur, you are only one who knows your business idea to the core. You are the only one who knows the story of your future. Trying to convince investors about something that doesn’t exist is definitely a challenge and trying to make them understand that you are trustworthy and equal to the task is complex. Investors want to invest in an established business with minimal risk and they want to be sure that they get returns for the risk they took and registering your business is a step forward.
Raising money is essential for the development and expansion of your business and it is easier for financiers to invest in a registered company than a non-registered one. Lenders and investors will ask to see your business registration along with other application requirements before approving you a loan. As a registered company, your ability to attract customers and raise money for your business will be easier. Registering your company also gives you the ability to borrow and incur debt but more importantly, sell shares and raise equity capital.
A registered business also makes you eligible to receive low-interest loans that you wouldn’t normally receive as an unregistered operation. Suppliers commonly reserve wholesale rates for business owners who can show official paperwork from the state. Also, if you try to get government contracts for your company, a business registration is one of the first requirements.
3. For Legitimacy
Registering your company plays a pivotal role in enhancing the perception of your business because it is easier for people to deal with registered entities for the purpose of business than individuals. One of the major problems faced by entrepreneurs is the issue of gaining the trust from potential customers and the desire to shape the perceptions and perspectives of people about their business in general or their products and services to be delivered in the market.
Usually, people who are interested in dealing with a particular corporate entity have the opportunity to conduct due diligence from the regulatory authorities as to the nature of the entity they want to deal with. Creditors, customers, suppliers and financiers are some of the categories of people for whom registration of a business would provide some form of security. Furthermore, when a business is registered, the registration protects the name of such business so that no other business is allowed to use the same name as far as the jurisdiction of registration is concerned.
Registering a company helps you earn trust and integrity amongst your competitors which results in a good reputation. Firms with strong positive reputations attract better people because they are perceived as providing more value. Customers and clients, especially people you’ve never worked with before, need assurance that you are a legitimate business or they might suspect your business of being a fake operation if its not properly registered. When a business is on file with the state, it could put your clients at ease when making a decision on whether to spend money with your company.
4. To limit your personal liability
A liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of personal assets. It is of tantamount importance to note that a business must be registered before a corporate bank account can be opened for that business. The advantage of having a corporate bank account is the separation of business funds from personal funds which is fundamental for any business owner that seeks to make progress with the business venture.
As a sole trader or partnership, you will be legally responsible for all aspects of your business, including debts and loses. If you are to sell a defective product, make an error or suffer an injury during the course of your business, you will be personally liable. A company that is registered is a separate legal entity and it is an easy way to protect your personal assets from your business actions to be carried out. This means that a company has limited liability and it can sue and be sued in its own name.
5. To minimize your tax liability
Tax is a mandatory financial charge or some type of levy imposed upon an individual or a legal entity involved in business by the government in order to fund various public expenditures. Failure to pay, along with evasion of or resistance to taxation is punishable by law. It can also be defined as a compulsory monetary contribution to the state’s revenue, assessed and imposed by a government on the activities, enjoyment, expenditure, income, occupation, privileges or properties of individuals or organisations. In Zimbabwe, after commencing operations, businesses are required to keep records of their business operations and pay taxes on the stipulated dates given to them by the Zimbabwe Regulatory Authority (ZIMRA).
ln Zimbabwe, businesses receive tax deductions for business related expenses which includes the use of a car or a home office only to mention but a few. The current tax rate for companies and small businesses is lower than the highest tax rate for an individual. Companies and small businesses are also entitled to range of tax deductions for advertising, education and training, repairs and maintenance, which are not claimable by individuals.
It is common for traders to face an unethical conundrum whereby they either have to pay hefty bribes or risk having their business activity blocked by high-ranking public officials. This usually happens to unregistered companies or organizations and it has a consequence of deterring both the growth of the region and the spirit behind entrepreneurship in general. Registering a company will save your money as it done once whilst bribes have to be paid at regular intervals which is costly and frustrating at the same time. To save yourself from all the trouble and to safeguard your business, register it today.
6. For business continuity
Business continuity is the ability of an organization or a company to maintain essential functions during, as well after a disaster had occurred. It can also be defined as the planning and preparation of a company to make sure it overcomes serious incidents or disasters and resumes its normal operations within a reasonable period of time. When you do business as an individual, your business dies with you. Registering a business ensures the continuity of your business beyond just you as a person.
It is every entrepreneurship’s wish or dream to see his or her business growing massively and thriving the business industry. Every business has the potential and ability to survive as long as business owners deem necessary. Everyone wants to invest their time and resources in something that will thrive and bring profits in the long run. Registering your company before starting your business ensures long existence to your business even way before the business activities commence in the market.
As a result, registering your company would mean that your company can continue without you. An example is that of Apple Company which was started by Steve Jobs who is no longer alive but the company is still running and growing massively. Customers are interested in knowing if your business has future and if it does, it is easier for them to create a relationship with you and your business and it would also mean that they will be loyal to your business.
7. To hire the right people, outsourcing
Running a company comes with plenty of challenges and having trained employees or experts will make the work easier. However, qualified people are not likely to search for jobs at unregistered companies. Registering your company makes it authentic and legitimate and it shapes people’s perception towards your company. It shows that one is a professional in what he does and unregistered companies are likely to be deemed fake.
It is of paramount importance to acknowledge the fact that hiring the right people could lead to the success of any company but wrong employees could ruin the whole plan. Similarly, hiring and outsourcing can be synonymous in start-ups in that outsourcing a product or service can add or take away value from the end product or service. If you wish to increase your chances of hiring qualified employees, register your business and become an employer of choice.
8. To protect your employees and customers
In business, maintaining a safe workplace is essential for employee and customer satisfaction. Yet a safe workplace can be asset, it is one of the hardest to deliver and if you fail to protect your employees and customers they might be unhappy. Disgruntled employees and customers are a liability to a business.
A business license is a guarantee that your employees will be protected if they are injured as well as protecting your customers in the course of doing business activities. If you are in the business of selling food or products that touching the human body, for example if you own a nail salon or a food outlet, you will be required to have a specific license and you will be expected to pass an annual inspection. This act serves to protect you and your customers in case any incidents occur.
Building a reputation especially from customers and clients you’ve never done business with before is very difficult. However, registering your company is a step forward. Company registration enhances your brand image, improves your relationships with customers and suppliers as well as to help you raise significant capital for your business. Its a starting point for a successful business adventure.