What I need to understand
The registration of your business is the first step in the process of formalizing it and acts as a kind of gateway to the other steps.
1. What does it mean to register your business?
The registration of a business is generally the first step towards formalization. The other administrative steps (e.g.,
registration with chambers of commerce, tax and social security offices) only take place when your business is a legally
recognized entity. The requirements for registration may depend on the industry in which your business operates.
There are several ways of completing the registration of your business. The classic method is to register in person at a
business registration office in your city or the nearest municipality. You are usually asked to fill out a business registration
form that includes your personal information and details about your business. You are often required to pay a registration
fee depending on the nature of the business you are registering.
To facilitate the administrative process for businesses and the trade registry, many countries are offering the option of
online business registration
Why is it important to register a business?
There are many reasons why you should register your business in accordance with national registration requirements:
Registering your business facilitates your access to financial services offered by commercial banks and
other official providers.
Most financial products and services for entrepreneurs are only available to formal entities that have a registration
number. In addition, once you have registered your business, you can access a number of government programs and
business development services (performance-enhancing training).
By registering your business, you gain the ability to make formal financial transactions.
When you register a legal entity, you are given an identification number and are listed in the national (and sometimes
local) business registry. This enhances the credibility of your organization and allows you to pursue more business
opportunities with other formal businesses. You can also conduct formal financial transactions. For example, you can
write invoices (which contain your registration number, tax identification number and contact information) when you
sell products and services.
Registering your business gives you easier access to public procurement.
Public procurement can offer businesses considerable business opportunities. Eligibility criteria are often very strict.
Since bidding processes require business owners to provide a service or product on equitable terms (e.g., comparing
costs, experiences, and expected quality of supply from each competing business), most government procurement
tenders require compliance with minimum specifications. Being a formal business is usually a requirement.
By registering your business, you can join business networks and representative organizations that can
advocate for you and provide services.
You can access business networks and representative organizations – including women entrepreneurs’ organizations
if you are a woman – more easily when your business is formal. These networks can provide you with valuable contacts
since many business dealings are conducted within tight networks. In addition, you can benefit from capacity-building
and sector-specific expert knowledge made available to business organization members. In most cases, you have to
pay a fee to become a member of these networks.
3. What legal form of business should I choose when registering?
National legislations specify various legal forms for business registration. There are generally two forms of legal entities:
X You can register your business as a separate legal entity. This means that the law differentiates between you as the
owner of the business and the business itself. This would be the case, for example, when you register a limited liability
company (LLC) or Limited partnership.
X You can register your business without a separate legal entity. This means that the law makes no distinction
between you, as the owner of the business, and the business itself. This is the case, for example, when you register a
sole proprietorship or a partnership.
The type of entity you choose for your business has implications in a number of areas:
X Liability: this is about whether and how you are liable with your private assets for debts caused by your business.
X Registration procedures: this is about the efforts, costs and documents needed to register the business and comply
with the law.
X Capital requirements: this involves figuring out whether you have to pay a holding capital and the minimum capital
level.
X Taxes: this relates to the tax regime you must follow and whether you can benefit from tax breaks and/or exemptions;
in addition, you must identify the accounting requirements you are to follow.
X Ownership: this refers to your business’s ownership structure and how you should cooperate with other people who
own shares in your business.
What you need to know to choose the right legal form
It is important to choose a legal form that fits your personal situation, abilities and preferences. The following table provides
some information on the various legal forms that may be of interest to you. Analyze them and choose the best one. You
can discuss them with other entrepreneurs and learn from their experiences. And remember that you can always change
your legal form as your business evolves in future
