FIVE REASONS ENTREPRENUERS SHOULD STARTUP AS AN ENTERPRISE
While starting up a business for the first time, entrepreneurs are encouraged to register their businesses. it is advisable to carry out businesses in a registered business name, different from the individual, this will ensure in accounting the separate entity concept. The separate entity concept is the basic accounting concept that says we should always separately record the transactions of a business and its owners. In Nigeria the Corporate Affairs Commission is the sole body empowered to handle all business registration matters by the Companies and Allied Matters Act (CAMA). The CAC has three major categories of business registration.
- Part A: Registration of Business Names
- Part B: Limited Liability Companies
- Part C: Registered Trustees.
Research has revealed that most start up entrepreneurs prefer to register their startup businesses as a limited liability companies in order for clients to see then as a mega businesses. In as long as there are alot of advantages to register companies as limited liability companies over the business name registration (Enterprise) it is advisable for startup business to start with business name registration and probably move on to limited liability companies as the business grows. The Pioneer Business Angels Club wishes to point out five (5) reason and advantages to start businesses as an enterprise over limited liability companies.
- It saves cost.
It is cheaper to incorporate business names as against limited liability companies. One of the major challenges of startup business is raising capital, since they are small most financial organizations do not lend to startups. They most times raise their initially capital from the entrepreneur’s personal savings or from family members and friends and at extreme cases Angel investors. While it cost less than N30, 000.00 (Thirty Thousand Naira) including consultancy fees to register a business name, the limited liability companies registration ranges between N150,000.00 to N5,000,000 depending on the initial share capital.
- Compliance Issues.
It is easier to run an enterprise as against running a limited liability companies, the legal demands of complying with the both legal and statutory demands of running a limited liability companies are demanding. The law demands that a limited liability companies should have a minimum of three (3) Directors, it stipulates the modalities of Directors meetings, filling of annual accounts, Annual General meetings(AGM), voting in the AGMS and a lot hosts of other demands that the company may not be run without professionals like company secretaries, chartered accountants etc.
- Taxation.
The enterprises businesses is less exposed to taxes than a limited liability company. While the LTDs companies are exposed to various taxes like the company income tax, withholding tax, Value added Tax (VAT), Education tax, Pay As You Earn (PAYE) etc. The Enterprises business tax may double as the proprietors personal income tax, Education tax is only applicable to Ltds, majority of the withholding tax rates is 5%, the enterprises tax liabilities lies with the state governments of the state the business is located which make it easier to administer.
- The interpersonal relationship with customers.
Since the business is new, the proprietors do not need to be detached from the business, the proprietor needs to have interpersonal relationship with the clients in order to understand their needs and improve on them when needed. Most LTDS managing Directors do not have this fundamental privilege as the Managing Director’s opinion may be subjected to further debate by other share holders. Enterprise businesses are small and as good as a sole proprietor. Managing Enterprises is more flexible than LTDS.
- Allowing More Room for Growth.
Entrepreneur’s joy and satisfaction lies mostly on seeing his/her business metamorphose and he can see the growth path, e.g. moving from enterprise to LTD and Public limited company. A company that starts from public limited company may be stunted with growth as there may not be any other growth path.
