6 Advantages of Registering a Business

6 Advantages of Registering a Business

A file image of traders at Gikomba market. File

Starting a business and running it successfully is always the dream of every member of the society. The financial and personal freedom that comes with it is unmatched.

However, most people prefer to run their businesses without ever registering them, either out of ignorance or as a way of evading payment of taxes.

The consequences of failing to register a business are always dire in most cases. Bernard Ngugi, a financial consultant, opines that the benefits derived from a registered business are always something to go for. Kenyans.co.ke has compiled six benefits business owners enjoy by registering their ventures. FileCommonwealth Equity financing

Equity financing involves selling company shares to potential shareholders. The money raised through equity financing does not have to be repaid. For business owners with good business model s, having a registered venture is necessary when raising money for expansion. Investors insist on knowing key details of the company before putting in their money.

“Once a business owner sells a stake of their venture, they should be prepared to handle some pressure from the shareholders," noted Ngugi.

"Shareholders require that a business is consistent in paying dividends and keeps updated books. Others may want to cash out their shareholding if the business is not performing."

Debt financing

When dealing with financial institution, they are very strict when offering loans to businesses. They expect businesses to show their registrations details before they can be given the loans.

Debt financing offers the same benefit as equity financing and in most cases helps in the expansion of the business.

Organized succession It is common for unregistered businesses to be highly disorganized when finding the rightful successor. Registered businesses can utilize legal entities to offer third parties a decision-making role in choosing the most qualified successor.“There are third party contracts that will offer individuals such as the directors, shareholders, and employees the oversight role to make the best decision for the business. This will ensure the business’s lifespan and legacy lives on even after shareholders or directors leave," stated Ngugi. Legal protection When a business entity is registered, the name of the venture is protected and the owner can utilize intellectual property rights to protect it from being used by another business entity.“A registered business is protected from unauthorized use hence protecting the corporate image. Registered businesses can also have a separate legal entity where […]

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