South Africa has a variety of business owners, who are successful and have been running their enterprises for years. Many of these are unregistered and are just informally trading. Entrepreneurs don’t always understand, appreciate or see the importance of registering their business. SAICA Enterprise Development’s Financial Excellence Offering Bookkeeper, Dhiraj Mathapersadh takes us through the advantages of a registered versus a non-registered business and how registering your business can actually work in your favor.
- Company Registration protects your business and gives it a unique identity. You can be proud of the fact that you’re a business owner because it’s no longer just an idea, hobby or running informally. It is now a formal legal entity with its own name and address. We all dream of having the title CEO or Managing Director and by starting your own business, you begin your journey as a CEO but that’s where the hard work begins. Registering your business gives you credibility and shows that you are taking this SMME journey seriously.
- Registering a business protects you from personal liability. This is the biggest reason why you should register your business. A Private Company (Pty) is preserved by law as a legal entity. A registered (Pty) becomes a formal entity which can trade separately from its owners. This means that Shareholders have limited liability. Investors’ and owners’ private assets are protected should something go wrong. If the business fails or you are sued, your personal property cannot be seized. If you’re trading informally, you stand the chance of losing your personal assets as there is no separation of assets. As a business owner you want to protect what you have built; you can purchase assets in the business name and use those assets to trade.
- Registering your business makes you look serious and attracts more customers – credibility. Most businesses are looking to get into the corporate environment where there are able to trade with corporates and generate revenue. Most customers, especially corporate customers, will do business with you only if your business is registered as invoices/ receipts with business details will be required. This speaks to compliance and governance. By not registering your business, you may appear as if you are trying to evade tax. This speaks to a lack of integrity.
- Financing for your business. To qualify for a business loan, the number one and non-negotiable requirement, is that you must have a formalized business registration. For investors, it’s the same thing, e.g. Dragon’s Den – they are only interested to invest in your business if you give them a share of your business. No investor will take you seriously if you’re asking for investment when your business is not registered.
- Company Registration is important for continuity sake. People have a lifespan but businesses have the ability to last forever as they are transferred from one generation to another or sold. You don’t start a business with the intention to close it within a year; ideally you would like to build an empire that you can sell or live off. A registered business is an asset (like a house, car and other properties) that can be passed down (as an inheritance) or sold by its owners to a new generation of people who can continue to own and run the business.
Getting your business registered can help you tap into investment opportunities effortlessly, also giving your company a credible reputation which plays a significant role in the growth of your business. And more than that, the collective power of small businesses can play a tremendous part in contributing to the economy, as well as create jobs.