What are the Advantages of Registering Your Business?
If you are beginning a new business or wanting to expand your current one, you may want to consider forming a corporation. Although forming a corporation may appear to be a major undertaking, there are numerous advantages to doing business through a business structure. So this article will go through the five advantages of why you should register a business and how it can help your business grow.
Your Liability Will Be Reduced
As a lone trader or partnership, you are legally accountable for all parts of your firm, including debts and losses. Furthermore, you will be solely accountable if you sell a faulty product or make the wrong decision. Running a business in this manner can be risky since it puts your assets at risk. On the other hand, a company is a distinct legal entity that allows you to safeguard your assets from your commercial activities easily. As such, debts that attach to the firm will not tie to you, allowing you to focus on growing your business.
You May Reduce Your Tax Liability
Based on how much money your organization generates, you will probably pay less in taxes under a business structure. Meanwhile, in Australia, the corporate and small business tax rate is lower than the maximum personal tax rate. And as a sole proprietor, you’re taxed as an individual, and the profits from your business are included in your income. Furthermore, your business will be eligible for various tax breaks for marketing, training and education, and maintenance and repairs.
You Can Avoid Disputes With Your Co-Founders
In case you disagree with your co-founder, registering a corporation can be beneficial. When you register a business, the amount of power owners have is limited by the number of stocks they possess. As such, the owners will realize that their involvement in the business is not contingent on any pre-registration written or verbal assurances. And in a disagreement, share distribution will also establish who has more decision-making authority.
Similarly, businesses might allow you to split ownership and administration of the company. You may, for example, have numerous shareholders yet pick managers who don’t own the business. This enables the company to be run by experts solely concerned with making a profit for the shareholders.
Credibility and Brand Recognition
Consider the most powerful brands worldwide today; they are all legal entities. As such, a corporate structure is required for a company to be as effective and vast as possible. And registering your business improves its reputation and perception. A firm is an organization that acts independently of you, while you will be held accountable to ASIC and use an Australian Company Number. It is also necessary to become a registered company for any future negotiations with third-party companies, as many companies will only engage with or hire registered companies. This means that your company’s name will appear on your business contracts rather than your own.
You Can Raise a Lot of Money
You will find it easier to find investors and raise funds for your venture as a firm. Meanwhile, registering a company not only allows you to incur debt and borrow, but more importantly, it allows you to raise equity money and sell shares. And even if you have another type of business structure, you will have to pay the tax on your individual income tax account while the money stays in business. Besides, raising funds may be vital for the success and development of your business. And investors want to invest in registered businesses over a lone trader or partnership because they know there is a formal framework to take their investment.
Creating a company is one of the finest strategies to build your business and secure its success. This way, not only will you be clear of liability, but lower taxes will allow you to focus on growing your firm into the profitable endeavor you desire. So if you’re not sure which company structure is best for you, a corporate lawyer can assist you in figuring it out.