Why You Should Register A Company For Your Business?

A company is a ‘human being’ (legal person) that you can create by law, to undertake a business or render a service to the general public for profits. So in simple terms, when you register a company, you have given birth to a ‘human being’.

A company, just like a human being, can operate in any business by entering into contracts, opening investment and bank accounts, granting and taking loans from banks or financial institutions, selling and buying all kinds of properties, and doing many other things in the business world, just as can be done by human beings.

The difference, between human beings and companies, is that companies do not breath nor eat, but companies do grow in terms of the growth in its business, and dies when it is finally liquidated (its name is taken or struck out from the register of companies).

After registering your company, the company becomes your robot. You tell the company what to and what not to do. Whatever you instruct the company to do is the companies own doing especially when there is a liability or loss. However, when there are profits or benefits you reap them.

That is why you need to set up a company; firstly to undertake all your businesses for the profits, and secondly to transfer all your personal losses and liabilities to the company. This is what a rich business person does, and the normal or poor business person does not. Most business people does not even know about this.

In fact, you can transfer all your expenses, including rent, bill, fuel, car purchase, car maintenance, clothing, and so on, to the company such that you don’t have to pay for them with your own money, but with your company’s. Your expenses now become your company’s expenses, which by law have to be deducted from the company’s total earnings before determining the company’s profits for tax purposes.

In law, there is a very strong shield between a company and its owner, which separates the personality or identity of the owner from the company. This is termed as the ‘veil of incorporation‘ or the ‘corporate veil‘.

For example, if ‘Mr. Gardson‘ owns a company called ‘Gardson Shipping Ltd‘, then any liability or loan or debt incurred by the company from any bank or individual is the sole liability of the company and not Mr. Gardson. What this means is that when the bank or creditor begins to chase the company for the debt, the bank or creditor can only go into the bank account of the company, but not that of Mr. Gardson.

Thus, where the company’s bank account does not contain enough money to cover its debt, that ends the chase. Mr. Garson cannot be chased or forced to pay the company’s debts.

For the reason that companies cannot talk or write or walk, the actions of a company are undertaken on its behalf by its owner (known in law as the shareholder), its directors (the direct managers of the operations of the company who are employed by the shareholder) and its officers (including its lawyer, secretary, auditor, accountant, cleaner, and so on, who are employed by the directors with the knowledge or consent of the shareholder).

In effect, after registering a company as a shareholder, will not be held responsible for any of your actions or inactions for and on behalf of the company, which actions or inactions are neither fraudulent nor unlawful.

Unlike a company, a sole proprietorship or partnership is not a human being upon registration in the eyes of the law; and that is the more reason why you should choose a company over a sole proprietorship or partnership.