Decoding the Benefits of Registering a Business
It is a dream that becomes a reality when you start a business. You can already feel the incoming profits that you would make – already feel the heights that you would reach. However, the higher you grow, the weaker you can go. Therefore, incorporating or registering your business with the government is not a bad idea. It gives a strong foundation to your business aspirations so that you don’t come crashing down.
However, despite the above fact, many are still doubtful about business registration. “What is the point?” – They say – “why should we care?” – They ask. The answer to both of these questions is the same – there are benefits of registering your business. But even if they get the answer – they hardly can understand it. So through this blog, we shall try to make you understand the benefits associated with business registration.
Benefits of business Registration in India
Registering a business has its importance everywhere in the world, but it is India where it has more significance. The major benefits of registering a business in India are as follows:
It gives you structure
When you register a business, you give it a proper structure. Suppose, you want to start a one-man business – you can register yourself as a One Person Company or OPC. Similarly, if you have partners, you can register yourself as an LLP. As a group of directors, you can register yourself as a private limited company. Each one of these structures has a particular structure.
You do require structure in your business, don’t you?
Without structure, there is no order in business and therefore, there is hardly any profit. Without a structure, there is no proper chain of command. As a result, there can be no business conducted properly. Therefore, when we talk about business registration benefits, we always focus on how it gives a properly organized structure to your business idea.
One of the main points associated with the benefits of company registration is the inclusion of a separate entity. It is also the most confusing. So, let us make it simple for you. When you register a business as a company, it gains certificate of incorporation. Consider this certificate as a legal “Birth Certificate” of your business.
Once you get the certificate of incorporation, you apply for getting a PAN card in the name of the company. Consider it a “valid ID” of the company.
Now, these two – PAN card and Certificate of Incorporation – are similar to how you would give a person their legal identity. Therefore, a business, through registration, becomes a person. And a person is free, independent, and has rights.
So basically, with this analogy, a business becomes a separate entity.
We live in an era of Start-ups, everyone not only wants to make money – they want to establish a legacy. To be clear, they want to leave something behind. When a business is registered, it becomes a separate entity. Therefore, if and when the owner of the business dies, the business can continue to exist. Its ownership can be transferred to another director. If there is no other director, it can lie dormant.
Because of business registration, a company doesn’t die with its director – it becomes the director’s legacy.
Registered businesses are more trusted
Who would you trust more? A business that has been set up hidden in the backwoods or a business that operates in broad daylight, within the eyes of the law? We are not saying that unregistered companies are worthless, they are just more hidden, less advertised, less marketed and therefore, less trusted. However, once you have registered your business, you are free to reveal yourself and market yourself.
Both of them – revelation and marketing – help your business gain more trust from people.
Trust then leads to more funds
If you have more trust of the people – you have more trust from the financial institutions and investors. A business can’t survive on the personal assets of its owner, it needs outside funding for expansion, diversification. Being a registered business attracts more investors towards you – who see your business as a legitimate one. These investors are then more than happy in investing in your future – and by extension theirs.
Similarly, banks (financial institutions) have special loan provisions for registered businesses.
Therefore, it can be said when your business is registered, with little effort, you won’t be left wanting for funds.
Limited Liability is probably the most overused term when “benefits of business registration” is the topic. However, people are still fuzzy about its meaning. Limited Liability means this:
As a company is a separate entity – is its own person – only it has to bear its own losses.
The above statement basically means that if the company goes through any loss on finances, the personal finances or assets of the directors of this company are not affected.
To go back to the statement of limited liability – the liability of losses of a company is limited to the company – and the director is unaffected.
When it comes to business registration benefits, there are many – but what is lacking is the understanding of these benefits. We hope that through this blog we have enlightened you with the understanding of what the benefits actually mean. Stay tuned for more blogs such as these.