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Why Company Registration is Important for Small Businesses in India?

So, you have got that eureka idea that has the potential to change the world? Well, acting on that idea and turning it into a viable business is far easier today than it was a decade back. Young entrepreneurs are changing industries with their innovative ideas and remarkable solutions to customer problems. In the process, startups are making millions of dollars and even raising a huge amount of capital from venture capitalists and investors.

However, one of the common oversights by young entrepreneurs is not doing the company registration. It is understandable given the longstanding belief that registering a business in India can be a troublesome and time-consuming process. Well, times have changed and company registration is now a seamless process that can be completed even without visiting any government offices. Registration of small businesses comes with its own set of benefits. Let us look at some of the top benefits of company registration for small businesses in India.

Limited Liability

One of the most important benefits of company registration in India is reducing your own individual liability. Running a business involves lots of risks and factors that are beyond your control. Registering a private limited company, limited liability partnership, or even a one-person company will limit your liability. It will ensure that the company is a separate entity and founders of the business will not be personally liable for the business. You can protect your personal assets by registering your business.

Easy Access to Funds

A registered business can easily get a business bank account which serves as valid proof of a registered business. Your potential business partners will also be more comfortable working with you knowing that you are a registered business with valid business accounts. It also makes your business eligible for bank loans and other facilities such as overdrafts. This easy access to funds can help your business grow and sustain in difficult times.

Additionally, venture capitalists and investors are more likely to invest in a registered business. It is not necessary to be a registered business to seek funding, but your chances will significantly go up if you are a registered business. A registered business makes it easy to legally invest in your company while safeguarding the interests of all the stakeholders.

Legal Entity

Company registration of your startup makes it a registered legal entity that has the power to enter into legal agreements and contracts. Your small business upon registration is established as a separate entity in a particular jurisdiction. While it may have immense benefits legally, your business as a separate legal entity will also help you in rapidly expanding your business. Established corporate companies prefer doing business with registered companies.

Perpetual Succession

A registered business will continue irrespective of the founders and co-founders. Registering a business will ensure that your business goes on even if an individual decides to leave the business. Also, in case of an untoward incident that the founder dies, a registered business can continue functioning which may not be the case for an unregistered business. Company registration ensures that the retirement, disability, or death of any individual will not impact the business.

Easy Transferability

It is easy to transfer a registered business as compared to an unregistered one. Once your business grows, so will the valuation of your company. There could come a time when you would want to completely sell the business, and registered business would be easier to sell. Even if you wish to raise funds by selling a part of your business, transferring shares of a registered business is feasible. Raising money from the public is also possible with registered businesses.

How to do company registration for small businesses?

The government of India also offers several benefits to start-ups including collateral-free loans, tax rebates, protection against payment delays, and more. You can either register your business as LLP, Private Limited Company, or a One-Person Company. The requirements in terms of documents, capital, and compliance are different for each of these registrations. If you prefer minimal compliances, you can even register as a sole proprietorship or partnership.

The basic requirement of registering any form of business is being above 18-years of age, a business address, and a PAN card. The cost of business registration will vary based on the type of business, but more or less should not be over 8-10k. The benefits of company registration should outweigh these costs and a bit of compliance required post-registration.

 Conclusion

Start-ups operate and function in a dynamic environment and business registration could be vital for growth and survival. It is essential that you discuss the registration process with professionals who can help you make the right choice. You can also analyze your competitors and understand their business models. However, what suits them may not suit your company. The type of business registration depends on your requirements and business goals. It is ideal to get in touch with a professional who would advise you and may help you in registration at nominal costs.



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