This is the third in a series of guest articles authored by Archbold Musamadya
Many people are aspiring business people or they have already started doing some businesses but they are not legally registered. They just know they are trading and they are making a profit. It’s unfortunate that many of them do not even know the next step to take to have their businesses formally registered or licensed. This is my main cause for worry because many of such people are potential big company owners and they are perhaps the people Zimbabwe is waiting for to turn around its economic fortunes but the knowledge they lack will definitely deprive them of their destination of being founders of great companies. Some may argue that they will consider registering when they have grown a bit bigger or when things become fine. I always compare that school of thought to a mother who says I will just send my son to grade seven so for now I will wait till he is 12 years. This doesn’t work, lay your foundation from the very beginning and be straight forward and learn as you grow. Some things are not learnt at once, they need continuous practice and experience. By that time you as the founder will be old and still trying to learn how to talk business with a CEO of a fine company, how to write a business letter, how to calculate VAT,, you name it!! Practice this as you grow and it all start with doing things right. After all you can’t wait for anything to do the right thing.
In my last article on this site I had promised to explain the causes of failure of many small businesses in Zimbabwe but the responses I got from many people pointed on asking me to really begin from why they first need to have their businesses formally registered and what are the available types of businesses to register. Some were asking about tax issues and my first question was to ask them the business types they had registered but they said their businesses were not registered and they do not find any reason why they have to register them for they are currently trading well anyway. I further asked them whether they wish to have their businesses grow and have large companies and government bodies as their clients; the answer was a resounding “Yes why not?”!! Unfortunately my response to them was fairly arrogant as I told them that once they do not have their businesses formally registered they will never transact with big companies and even other small organisations which do business formally in the next one thousand years. The frequency of this problem with many small business operators in Zimbabwe which contacted me made me feel that there is a need to write an article informing on the need for the subject in question, Why you need to have your business formally registered and/licensed.
In this article, Part 1, I will only explain the advantages of registering and licensing businesses as compared to operating an “underground” organisation. In Part 2 of this series I will explain all the available business types in Zimbabwe. Please note that I am saying “Business” not “Company”. Many people refer to a business as a company e.g. I have a Company, when the business is actually not a company. A company is a type of business which can be registered so not all businesses are companies but all companies are businesses, (This is a slight pre-empting of Part 2 of this series)
Why should I have my Business legally registered?
Below is a list of advantages and reasons for registering your business. Please not that the list is not exhaustive and the listed are just a selected set.
- Registering or licensing your business is a requirement of the Law.
Generally it is not an option to register your business; it is actually a requirement at Law. It is illegal to operate an unregistered or unlicensed business. Please note that some businesses may not need to be registered but can only be licensed to trade. Many small businesses e.g. vending and other small operations and trades are required by various laws both from local governments and the state at large to be licensed even when not registered. So as I always emphasise, we need to observe the law. The law is not meant to be fair but it is meant to be followed. So let’s do what it calls us to do.
- A registered company has more credibility.
Who wants to deal and commit their money to a supplier who is not known by the government (unregistered)? That potential supplier is pretty not serious and there is a risk that they may be conman or those people who do not mind even when things go wrong because they do not have a name to shield from business disrepute. Having a business that’s not registered is a signal to potential customers and partners that you’re not serious. A registered company is an entry-level commitment and sign that you’re not just a fly by night operation or shadow business as so many in Zimbabwe have become.
- Big opportunities often require registration papers.
Almost all registered businesses and not-for profit organisations especially big ones and also government bodies have a formal policy stating that they do not deal with suppliers or partners who are not registered organisations. Some do not only request proof of registration, they also request that your business be compliant to other various laws especially tax laws. The case in point is that big government tenders and dealing with many big companies will often demand that you be able to produce your business’ papers in one form or another. You may be capable of doing the job perfectly and at the best price, but you could lose the opportunity if you’re not registered.
- It is impossible to get a corporate bank account without a registered business.
A business bank account is not just a place to keep your money but it is also another sign that your business has a life. After all, do you expect your client to pay you $12,000 in cash? For interest sake, do you also think a client can make a $5,000 (or even $100) upfront deposit to you without knowing if you are liquid yourself, is there not a risk on giving cash up front to someone who is actually broke? How do I know your liquidity/cash position, do we not need to see your banking history first? The case in point here is that some organisations and companies will not even consider you without looking at your banking history. Unfortunately you cannot get a corporate bank account without being a registered business. If you’ve been keeping your cash under the mattress, isn’t it time for the next level?
- If your dream is to have a life business that will make an unforgettable impact in Zimbabwe and beyond then you MUST be registered.
There are things you do to make quick returns here and there, then there are things you do for the long-term, like your dream business or a business you hope to sell for massive profit one day. If your business is not registered then this “dream” is truly a dream. Register that business.
- Registration proves you exist!
One day you will call for justice for your business and you will need the help of the courts of law. You will realise that you cannot go there and speak on behalf of your business when it is not registered. It doesn’t exist in this situation and you will definitely lose. Clearly you need it registered so that it makes sense when the business needs to stand on its own one day. In short, without being registered, that business does not exist even if it is making good profits.
- Registration helps to protect your brand.
If your trade name is not registered and by one reason it’s a catchy name and your business has since taken your local community by storm then you are likely to succeed in your business and you now have a “brand” name. You have created reputation. Sad enough is that someone can register a business in your current trade name, start doing exactly what you are doing and even better. You have no say on them at law because your business is not protected and no one is prohibited from using your name and business model. The case in point here is if you are not registered you are not protected from unfair trade practices because you “do not exist”.
With the few above facts, I hope you have realised the importance of having your business registered if you wish to be firmly established. However if you are just doing your business for a quick buck and you do not want it to grow and also you are reckless and do not need to observe the law then surely you do not need to register that business. Now let me apologise on the arrogant talk style I was using in this article. I however wanted this to get to your heart and I hope it did. In my next article I will give the various business types you may consider when you need to register your business in Zimbabwe.
Thank you for reading.
About the Author
Archbold Musamadya is a Trainee Chartered Accountant and he is currently serving Articles with a firm of Chartered Accountants in Zimbabwe. He holds a B. Comm. Accounting Honours degree with NUST (2013). He also holds a Post Graduate Diploma in Accounting Sciences with UNISA (2014). He is currently studying for a Post Graduate Diploma in Applied Accounting with UNISA and also a ZCTA accreditation with the Institute of Chartered Accountants of Zimbabwe (ICAZ).
The information in this article is provided for general guidance only and on the understanding that it does not represent, and is not intended to be, advice. Any views or opinions presented in this article are solely my own and do not necessarily represent those of my employer, the Registrar of Companies, StartupBiz Zimbabwe or any other person or organisation. Whilst care has been taken in its preparation, it should not be used as a substitute for consultation with professional accounting, tax, legal or other advisors. Before making any decision or taking any action, you should consult with an appropriate specialist or professional. No warranty is given to the correctness of the information contained in this article, or its suitability for use by you. To the fullest extent permitted by law, no liability is accepted by Archbold Musamadya for any statement or opinion, or for an error or omission or for any loss or damage suffered as a result of reliance on or use by any person of any material in the article.
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