One of the most common ways to try and save money among self-employed people, entrepreneurs, and people who generally make money outside of formal corporate structures is choosing not to officially register their operation as a formal business entity. The cost-saving implications of not officially registering your business are in many instances understandable because in addition to making sure your registered business remains legally compliant, the process of registering the business in itself costs a bit of money. How much it actually costs to officially register differs according to which country your business will be registered in, but there are always some costs involved.
Forgoing formal registration of your business also means certain national or state regulations specifically aimed at formal businesses don’t apply to you, like perhaps otherwise having to contribute to your state’s equivalent of the Job Seekers Assistance Fund, through contributions worked into your business’ tax bill. Formal workplace health and safety regulations can also be quite costly to have to adhere to; something which is likely a non-entity if you’re not formally registered.
Why Register a Formal Business then?
For all the cost-saving benefits you can inherently take advantage of by simply choosing not to formally register your business operation, in the long run, it makes for better practice to register your business.
Meeting Regulations For Hiring
Registering a formal business entity is a crucial step for various reasons, and one of them is meeting government regulatory requirements, and ensuring that your business is in compliance with them. Meeting regulatory requirements can be particularly crucial when it comes to hiring and employee management. Businesses must adhere to labor and employment laws, including those related to hiring practices, wages, and workplace safety. To ensure that the workplace is safe, businesses can work with experts like Asset Test & Tag or similar firms that can conduct electrical inspections. They can also install fire alarms, have an emergency exit in place and get their emergency lighting and exit signs inspected regularly to ensure they work properly when need arises. Keep in mind, following the building codes, fire safety, and electrical safety is not only a legal requirement but also essential for the safety and well-being of your employees and customers.
Additionally, a formal business structure provides a legal framework to navigate these regulations effectively. For instance, if your business is subject to Department of Transportation (DOT) regulations, it’s essential to understand and comply with the return-to-duty process in DOT testing when hiring employees involved in safety-sensitive roles. The same goes for hiring in any business that is subject to the laws and regulations of that specific industry. Registering your business, hence, not only helps ensure that you follow these processes correctly but also instills trust and credibility with both employees and regulatory bodies, contributing to the long-term success and legitimacy of your enterprise.
Personal Legal Protection
Perhaps the biggest reason why you’d want to make the existence of your business official is the personal legal protection it offers. Your economic activities are otherwise directly tied to you as an individual, so heaven forbid, but if someone were to get injured as a result of your economic activities, you’d be personally liable if you haven’t officially registered a business. Registering a business separates you personally from the business and should your registered business run up debts or incur any other liabilities, your own personal assets cannot be tied to the business and subsequently seized in an attempt to pay off those debts and other liabilities. You’re obviously still responsible for all activities and consequences of your business operations, but only in your capacity as a director or business owner, and not in your personal capacity.
Having this legal protection also helps when it comes to maintaining your reputation and taking legal action as a registered entity against parties who try to damage your business. For instance, if someone posts a review of your business that contains legally questionable content such as defamation or the disclosure of confidential information, then using the services of onno plus and similar specialists, a court order can be enforced to delete it. Needless to say, there is more than one legal benefit of having a registered business.
Whichever field or industry you’re involved in to generate your income, your personal reputation and acclaim can only take you so far. Also, it can take one bad experience with just one of your customers or even a competitor to undo all the hard work you put into building up your reputation. This is where the legitimacy that comes with officially registering your business becomes apparent because a formally registered business’ credentials can be verified by vigilant prospective clients who are otherwise not too comfortable entrusting an individual with their money.
If you’re involved in the research and development of new products, services and solutions, the legitimacy that comes with registering your business also opens you up to benefits such as qualifying for R & D tax credits. As an individual, it would otherwise prove to be very difficult to demonstrate your compliance with the regulations surrounding the requirements for you to even qualify for Research & Development grants and perhaps some other sources of investment and funding.