When you are venturing in a business you have a choice to register the business as a company or operate as unregistered or as a sole trader. However, a registered business has a lot of advantages. You can either register your business as a Private Limited Company or as a Private Business Corporation.
This guide will explore the advantages of registering a company in Zimbabwe.
1. Limited liability advantage
The biggest advantages of registering a company in Zimbabwe is that it offers limited liability to the owners of the business. Operating as a sole trader makes you liable for the debts and losses you incur. Running a business in such a way is risky, because it means that your personal assets are also on the line.
On the other hand, a company is a legal entity and your personal assets are separate from the company. This therefore means, in the case that the business incurs any debts or losses you will not have to pay using your personal assets.
2. Tax advantage
As a registered business, you have a tax advantage. A company pays less tax than sole traders. Depending on how much they earn, sole traders are liable for tax up to 45% of their income whereas companies only pay a flat tax return of 14.5% income tax.
3. Capital advantage
Its easier to raise capital as a registered company than as a sole trader. Registering a company gives you the ability to raise capital through debt capital or through the selling of company shares.
Raising capital is essential for the scaling up of the business operations, covering expenses etc. Also investors prefer to invest in a registered company rather than a sole trader or, mainly because they know that there is a formal structure in place to accept their investment in a registered company.
4. Perpetual succession advantage
If not wound up, a company can exist perpetually, irrespective of the resignation or death of its directors, shareholders/owners or any employee. With a sole trader or unregistered business, the business will die with the owner.
5. Control advantage
You can use a company structure to effectively separate the management and ownership aspects of the business. For example, the managers of the business can be appointed directors of the business. The owners of the business are its shareholders.
Becoming a registered company is also important for engaging other businesses. Many businesses will only hire or engage registered companies because they are legitimate.
Operating as a registered company is the best way you can expand your business and help ensure its continued success. Not only will you be free of liability, but lower tax rates will mean that you can focus on turning your business into the lucrative venture you want it to be. If you’re unsure which business structure is right for you can contact us for any enquiries.
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