Why Company Registration is Crucial For SMBs?

Ashish M. Shaji

21 Oct, 2020

Registration of any business brings transparency to the business. It makes the business more trustworthy for the stakeholders. Willingness to register a business shows that the company is genuine and it is doing its business with all fairness and there is no malpractice involved in the business. After Online Company Registration, you have ensured the proper compliance of legal provisions required to be compiled by the company’s act.

In this post, we will discuss why Company Registration for SMB (Small or Medium-sized Businesses) is crucial?

Significance of Company Registration for SMBs

If someone wishes to expand its business globally, it is mandatory to register the business. Registration helps in branding and creating your own marketplace and market value. It hardly matters whether the business is small or big. To exploit all the benefits available for any business, you must register your business.

Small or medium-sized businesses mostly deal with large entities. If your business is not registered, large entities will hesitate to do business with you. Registered entities are more likely to attract investors in compression to unregistered entities. It is easy and tension free to work as a registered entity, as liabilities is reduced. If you are working as a Private Limited Company, any liability that arises in the course of business is the liability of the company or the LLP. You don’t need to meet the liabilities personally; it protects your personal assets.

Registration of a business comes with many benefits. As a growing business, you will need people to work with and investors to invest in your business; registration makes this process easy. If you have to avail of a loan facility from any bank it is difficult to get the loan approved by the bank for an unregistered entity. But if the business is registered, the bank will easily grant loans.

The government offers various incentives to small and medium-sized businesses like tax reduction and much more. A business can only avail of these options if it is registered. Registration makes the SMBs eligible to avail incentives announced by the government. It makes the product services provided by your entity authentic and trustworthy.

Advantages of Company Registration for SMBs

Registration of Companies for SMBs can be helpful in many ways. A few advantages of company registration for SMB are given below:

• It helps in the growth of the business

Registering a business can help it to grow. It provides opportunities to expand the business globally. If you go to banks for a loan, a bank will like to see your earnings, your turnover, taxes paid, etc. If your business is registered and you are complying with all the provisions, it will be easy to get the loan approved by the bank.

• It removes shipment barriers

You can’t export goods overseas if your business entity is not registered. There can be a problem at inter-state borders as well if the entity is not registered. Registering a small and medium-sized business removes shipment barriers for the business.

• It makes a transaction of cash easy and convenient

If you are running an online business, you need to get a Payment Gateway for the smooth transaction of cash. But if your SMB is unregistered, no service provider of a Payment Gateway^[1] will entertain your SMB.

• It limits the risk attached to the business and protects your personal Assets

Registering an SMB as a Private Limited Company or as an LLP reduces the risks attached to the business. It protects you from any personal liability. Any liability that arises in the course of business is limited to the company or the Limited Liability Company only. Shareholders and directors need not meet the liabilities of their personal assets.

• It attracts talent

Registered SMBs are more likely to be trusted, if any person wants to work with an SMB, he will prefer a registered SMB over an unregistered one. And attracting and holding the talent to the business reduces employee turnover.

The Process of Company Registration for SMB

For registering an SMB, first of all, you will need to decide the structure of your business. Once the structure of a business is decided, you can proceed with the formalities of registration.

1. If you have decided to proceed with your SMB as a company you need to decide the type of company, i.e. i) Private Limited Company ii) Public Limited Company iii) OPC, etc., then you can proceed with the registration process through SPICe+. And register your SMB at the Portal of Ministry of Corporate Affairs.
2. If you decide to register your SMB as an LLP you will need to go through the LLP incorporation process and complete the registration under LLP Act, 2008. Completing the procedure, you can register your SMB at the Portal of Ministry of Corporate Affairs.

Conclusion

Registering an SMB is very crucial. It provides various benefits to SMBs. The government also grants incentives to the registered SMBs. Registration of SMBs opens opportunities for the global market. It removes shipment barriers. It helps in getting loans easily.

Read our article:Form Spice+ and Agile-Pro: An Initiative by MCA for Ease of Doing Business