Why formalising a business is an advantage.

Formalising a business is one of the key decisions that must be undertaken for a business to grow and succeed. It is usually done through the process of company registration and other regulatory compliance procedures. Registering a business is one of the certain way an organisation can gain traction in the corporate world enabling it to expand. There are countless advantages when a business is registered, these include legitimising the business, limited personal liability, tax benefit, funding for business, credibility and transferability. Company registration unlocks many potential benefits, this article will give an insight on the advantages of formalising a business.

Legitimising a business is a crucial factor in allowing the business to be acceptable and lawful. As a matter of principle suppliers, employees and customers trust to deal with a legitimate business, it gives a sense of security. A registered business increases the trust factor in the eyes of the customer.  If a business is not registered, people suspect business operations. On the other hand, when a company is legally registered, clients and other people will feel safe investing their money in the business.

When a company is registered as a Private Limited Company, it comes with an aspect of limited personal liability. What it means is that if the company is in debt or facing other liabilities, the obligation to settle them is solely on the business as it is considered as a legal entity. It is worth considering the issue of liability because when operating as a sole trader, the business owner is liable for anything that happens to the business, whereas registering as a company will limit liability to shareholding or the value of equity in the business.

It is important to note that business tax on profit is much less than that of the equivalent personal tax rate. The profits are taxed separately at a business rate therefore registering a company could significantly reduce a tax bill rendering it tax efficient. When the tax bill is reduced it helps the business to maximise profits thereby saving funds to invest in the expansion projects of the business.

Funding is of paramount importance for any business to grow and boost its revenues. It is not easy for partnership or sole proprietorship businesses to get equity funding, as they are unregistered. Most banks and lending partners would provide funds only for the registered companies, as it gives a sense of security to those institutions.

A registered business is much more appealing to investors than unregistered business, making it easier to raise capital. Furthermore, there is perceived permanency and reputability on the part of clients or customers when a business is formalised. A good brand reputation enables can improve revenues through building loyalty, trust and credibility with the customers.

Formalising a business will help position the business for growth and success. We can help you with company registration, re-registration and other compliance processes.

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