This is Money
Reasons why you should register your business now (part 1)
by STEPHEN ONYEKWELU
October 5, 2017 | 5:02 pm| | | Start Conversation
Young entrepreneurs are often big on ideas but inexperience sometimes makes them fail to realise to do first things first, do their marginal cost/benefit analysis and reap benefits down the line, one of the costs young entrepreneurs like to postpone is the registration of their business.
Here are some benefits of registering your business from the outset.
It gives you a unique identity (and protects it too)
There is a certain pride that comes with the identity of your own business. It is no longer that big idea you have had in your head all these years. It is now a real thing that legally exists; with its own name and address.
Some people choose their business names on emotional grounds (like their father’s, mother’s, wife’s or child’s name or even their own name). Some other people prefer to choose names that inspire while some other will go with names they want to portray good qualities about the business.
Whatever name you choose, and for whatever reason, is totally up to you. Once you are ready to register your business, the first thing the Business Registration Office does is to check that no other business already exists with the same name. Under law, no two businesses should have the same name to avoid confusing the public.
This search could take a few minutes or several days, depending on your country. Once it is confirmed that the name you have chosen for your dream business is available (that is, nobody else is already using it), you will be allowed to go ahead with the rest of the business registration processes.
And unless your business goes bankrupt and is formally dissolved, no other person can use or register the same name ever. Once registered with the name you chose for it, you are legally free to go ahead and design a logo, create business cards and letterheads, and do anything you want with the name.
It protects you from personal liability
This is arguably the biggest reason why many people have to register their business.
Without the legal protection of limited liability, you could lose your business and personal property if something goes wrong (say somebody sues you to court for heavy damages).
Imagine you started a trucking and haulage business with two trucks that carry heavy goods for customers from the sea port to the inner cities. Unfortunately, one day, one of your trucks had a fatal accident that involved a collision and fire that killed five people.
Although your business has suffered a hit (as a result of the lost truck), that appears to be the least of your problems. Your biggest problem is the case brought against you in court by the relatives of the people killed in that accident. They are suing you for damages of up to N1, 000, 000. Even if you sold the other remaining truck, it would not still be enough to settle such a high sum.
How much money you lose in this scenario really depends on the nature of your business. If your business is registered as a limited liability entity, the worst that could happen is that only your business will be responsible for paying the damages because it is a separate entity from you.
However, if you were running an unregistered business, you may not be entirely safe. Why? Because your personal stuff (house, cars, money in the bank etcetera) maybe used to settle any outstanding debts the business cannot settle.
Don’t forget, not all company types can offer this protection. Only Limited Liability type companies can do this. Sole-proprietorships and partnerships (except Limited Liability Partnerships) cannot provide protection from personal liability.
It makes you look serious and attracts more customers
In today’s modern world, most customers, especially corporate customers, expect a serious and responsible business to be registered. In fact, most companies will not do business with an unregistered business. In certain cases, it is against the law for regulatory and tax reasons.
Think about it for a moment: If your business is not registered, how can you issue receipts to customers for products you sell or services delivered? You can’t!
And who exactly pays for something these days without demanding a receipt? Unless your plan for your business is to become and remain a petty trading business that sells stuff off street corners, you just have to register it to attract more discerning customers.
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