Every day, many businesses spring up, some genuinely trying to solve an existing problem, and while others ride on the waves of already proffered solutions. Regardless of the idea or motive an entrepreneur decides to build a business on, he/she needs a legal backing for the business to survive and its life to be prolonged in the long run.
However, it is not enough to create, own and establish a business. It is more advisable to proceed further and register the business for better opportunities. This is because running a business in Nigeria does not only revolve around choosing a name or a place of business. Whether you are running your business in the form of a sole proprietorship, limited liability or a partnership, there is a need to have your business registered.
There are also legal and marketing advantages to registering a business name. The importance of registering a business can never be over-emphasized. For one, when it comes to doing serious business, many agencies will never take you seriously if your company is not registered. This is why, as a business owner, registering your business should not be trivialised. Here are ten reasons why you should register your business:
10 Why SMEs Should Register their Business in Nigeria
Registration of any legal business in Nigeria must go through the Corporate Affairs Commission (CAC). Formation of a company has to do with registering the company as a limited liability company which makes it a distinct and separate entity. Then the company becomes an independent person in the eyes of the law separate from its owners in terms of finances, property ownership, liabilities, and contract agreements
The CAC is a federal government agency that is responsible for the registration of all companies that have their offices spread across the nation. The primary reason for setting up a company is making profit
Monopoly to Your Business Name
One of the advantages of registering your business name is to give you a certain uniqueness, and also a monopoly. Apart from that, when you register your business with CAC it provides you with legal and exclusive rights to your business name. That means you have to register your business with a name that no one has, and will ever use; as a certificate of incorporation will be issued to you, which will serve as a legal document that will enable you to operate with your business name.
Gives you Credibility with Your Customers
There is a lack of trust for most businesses by many Nigerians, because of the high rate of fraud. But when you register your business name, it gives you credibility with your potential customers as well as with the existing ones. Suppose you are willing to register your company name. In that case, it is usually perceived as strong signs of responsibility and trustworthiness as your prospective clients know that they can sue or take up matters arising with the law.
Also, registering your company enhances your business’s image, credibility and overall perception of your business. This can play a part in improving your future business dealings with third parties, as many businesses will only hire or engage with registered companies rather than with individuals.
It is a great way to build your business’s reputation, being on the Government’s records confirms your legal existence, which may make your client more comfortable transacting with your business.
Gaining Access to Loans
Registering your business gives you credibility with banks and financial institutions because when you apply for business loans, you’re going to have to prove that you’re a business. And documentation needed from these banks and investors before you are granted access to a loan will include seeing your business registration certificate along with other application requirements.
Your business registration with the Corporate Affairs Commission would serve as a condition precedent for extending credit to your business.
Attract Investors to Your Business
As a business owner, you would like to expand your business reach, and your ability to attract investors and raise money for your business will revolve around how legal your business is.
Investors are likely to invest in a registered company that is recognised with the government rather than an unregistered business that has no formal structure in place. If your business is registered, you can raise money by equity financing, which involves selling shares in your business to prospective shareholders, angel investors or venture capitalists.
Ensures Business Continuity
When your business has its own legal identity, it affords its perpetual succession and enables continuity of such business. This is because a registered business will continue to be in existence especially when the business has a well laid out structure; even when the owner is dead or may not be able to run the business anymore. This means your business has an unlimited life span; the business’s existence will only cease if it is formally wound up by order of the court.
Run a Customized Bank Account
A business with a CAC Registration can run a customised bank account portal with any bank of your choice. Anyone who wishes to transact any business with you will be certain of your genuineness. Operating a business bank account can also be a way you can separate personal activities from business activities. And, it is more professional to give your clients a corporate bank name for payment instead of your personal name.
Can Hire Employees Legally
When your business is registered, affords you the ability to employ staff legally. You gain access to hire and recruit quality and skilled employees easily from job recruitment agencies and other online platforms. You can even request for NYSC members to work at your company when registered.
Tax Benefits
As a registered business won’t have to pay companies tax, instead you will be accustomed to paying Personal Income Tax. The implication of this in a Federal State like Nigeria is that if you have a Director of a company, you pay your company income tax to the Federal Inland Revenue Service (FIRS), and you pay your personal income tax to the relevant State Inland Revenue Service (in Lagos this is the LIRS).
Most benefits and expenses are taxable, but in a registered company in Nigeria, you could legally offset certain costs that would have been taxable as benefits in kind under personal income tax.
Limited Liability Protection
A business that is incorporated is deemed a separate entity. You are protected, and you are not personally held for certain liabilities.
Gain Benefits Deemed Fit for SMEs
When you register your business name, your business gets the opportunity of expansion. These come through the various business incentives made only available to registered Micro, Small and Medium Enterprises (MSMEs) by the Federal Government.
The importance of registering your business can’t be overemphasized. Not only does it grant your business legitimacy, but the law also protects you. You can also enjoy the maximum operational business benefits and gain access to funding.