It has been perceived in Nigeria that many start ups and Business Owners pay little awareness to having their business(es) registered but experts and other experienced big enterprise say they may have a lot to lose than gain for this inaction.
Everyone in this neighborhood knows me and calls me Pyru,. Some even call me for home services. So, why do I need to go and register my business name with CAC?, Pyru(A popular shoemaker in ikorodu for the past 2years), said.
Pyru like many Start Ups think alike but experts say they have so much to lose by this action.
The first thing that qualifies you to be an entrepreneur is to own a business that legally exists.
If you are starting a new venture or looking to grow your business, you may be considering whether it is the right time to register a company. Setting up a company can be a relatively easy and stress-free experience that offers greater legal protection. By registering your company, your business can begin to operate effectively, and comply with Nigerian law.
Here are some benefits for registering your business/ideas/company
You can limit your personal liability
As a sole trader or partnership you are legally responsible for all aspects of your business, including any debts and losses. If you sell a defective product, make an error or suffer an injury during the course of your business, you will be personally liable. This can result in the loss of all your personal assets such as your car and home. A company is a separate legal entity and it is an easy way to protect your personal assets from your business actions.
Minimize your tax liability
The current tax rate for companies and small business is lower than the highest tax rate for an individual. As a sole trader you are taxed at the same rate as an individual. If you are in a higher tax rate, registering your company may significantly reduce your tax burden. Companies and small business are also entitled to a range of tax deductions for advertising, education and training, and repairs and maintenance, that are not claimable by individuals.
Avoid conflict with your founders
Registering a company helps immensely when conflict arises between founders. When you register a company, the company owners are limited to the number of shares purchased. The owners will have a clear understanding that their investment in the company is determined by the number of shares they own and not by any pre-registration verbal or written promises.
Enhance your brand image and improve the relationships with your customers and suppliers
Think of brands like; Dangote, Gtbank, Nairaland, Globacom, Zarah Cosmetics, Linda Ikeji. All of which are established Nigerian brands. Registering your company enhances the reputation and perception of your business. Accountability is also established through the structure of your company, as well as the regulations by CAC.
Becoming a registered company is also important for any future dealings with third parties, as many businesses will only hire or engage with registered companies. With the parties entering into an agreement with the company instead of the owners.
Raise significant capital for your business
As a company, your ability to attract investors and raise money for your business will be easier. Registering your company gives you the ability to borrow and incur debt but more importantly, sell shares and raise equity capital. If you had any other business structure, then you would need to pay taxes on your personal income tax statement even if that money is staying in the business.
It allows your business qualifies for soft loans from financial entities including the Small and Medium Scale Enterprises Development Agency of Nigeria (SMEDAN), Bank of Industries and the Likes
Raising money could be essential for the development and expansion of your business. It is also preferable for investors to invest in a registered company rather than a sole trader or partnership, mainly because they know that there is a formal structure in place to accept their investment.