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Why Is It Important To Register A Business

Ian McGrat

January 02, 2014

There are two types of entrepreneurs I know - One is the kind of people who are kicked about the concept of entrepreneurship and so go ahead and register a business even before they find their first customer or make their first dollar. Second is the kind who are so much into the concept of running a business that they do not register the business even long after they have started making money and the reason they do not do so is because they are still not ready to hire employees.

I am not comfortable with either of these kinds. Registering a business is important and when you register it is even more important. People who register the business even before validating their idea (unless they are serial entrepreneurs who know what they are doing) are doing it wrong because registering a business costs money and you do not want to do it until it is essential. However, the other kind of people are not too right either. If you are running  a business, then you ought to have a registration. Here are some reasons why:

Professionalism:

Having a registered business name makes a difference when you approach clients and partners. To be more particular, it tells your customers that you are not a fly-by-night operator and are here for the long term. Consequently, what this does is that it helps you convert customers more easily and efficiently than you can when running the business as an individual.

Separating Professional Account From Private:

Part of being a professional is to have your customers pay your company for the services and not make the payment to your personal bank account. This is regardless of whether you are a one man army or a corporate with a thousand employees. Now to have a bank account in your company name, you will require your business to be registered as an entity. Doing so helps you keep your professional life separate from your personal life. Also, in the event that your business fails, you do not have to lose any of your personal savings to repay the investors.

Hiring Employees:

Anyone starting a business dreams of being successful enough to hire at least a few dozen people. Unless you are looking for freelancers, it is not possible to legally hire employees without being a registered business entity. One mistake that entrepreneurs often do is leave the registration of business till the end. But as successful businessmen often say, you do not realize the need for your first employee until you desperately need one. Leaving the business registration process to the end makes it difficult to hire which ends up in a lot of bureaucratic hassles at a time when you desperately need an additional pair of hands. It is hence always recommended to register your business as soon as you are ready for operations and are open to customers.

Getting Loans or finding investors

This is the most important reason why you should have a registered business name. If you are requesting a loan citing business requirements, you need to prove to the bank that you actually own a business. That is only possible if you have already registered the business. Like it is with hiring employees, getting funded is extremely critical for your business and if you do not get the money at the moment you need it, you are under great risk of shutting down or at least losing your edge to competition. Leaving the business registration process till the last minute makes you liable for these risks.

Have you registered your business? How easy or difficult was the process? Tell us in the comments.

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