Having examined the intricacies of company and business name, we bring you reasons why should register your business as a company and not as a business name.
1. Legal Entity: A registered company is a legal entity that has its own rights and duties: the right to sue and be sued, the duty to pay its staff including you, and the duty to settle its debts and liabilities. But a business name is not different from its owners; so when there is a lawsuit, it is against you; when there is a debt, you have to pay; you are also responsible for the expenses required for the day-to-day running of the business.
2. Long Life: Yes! A company continues to live even after the death of its owners but a business name dies with its owner(s). Steve Jobs died in 2011, but his company, Apple, is still going strong.
3. Limited Liability: If a company is not unlimited, the liability to be incurred by its members with regards to the settlements of debts when the company is being wound-up is limited, either to the amount outstanding on the shares they hold or to the amount they have undertaken to pay. But the liability of a business name owner is unlimited.
4. Availability of Funds: A company can raise funds through its shares, and can even easily secure a loan in the bank; but the owner of a business name can only rely on the profit from his business, personal loans, and donations from good Samaritans.
5. Reduced Tax: Many hold the belief that paying taxes as a business name is much easier than as a company because you don’t pay separately for the business, you only pay personal income tax. But in the real sense, allowing the business to pay its own taxes as a company is much cheaper and less stressful because personal income tax is charged based on your personal income bracket which will be measured by all your means of income (not just the business).
6. Expansion: If you plan on growing and remaining in business for a long time, you may decide in the future to re-register your business as a company. This process will require you to start registering from afresh as a company. Why not put that in perspective now and do the registration only once?
Do you want to register your company? Seek legal advice!