Why Convert business name to Limited Company: In this post, we look at why it is a good idea to convert your simple business name to a limited company.
By the way that is what ambitious and smart business people do…
Let me take you through:
Why Convert business name to Limited Company
Legal Protection for You and Your Assets
Converting your business name to registered limited company (e.g., from “Oduor Magima” to “ODMA Ltd.”) is great for legal protection.
Let me explain: You and your Business name are the same thing, in the eyes of law. So any issue that arises when you’re doing business, you will be personally liable. Not your business.
But with a company name, it’s opposite..you and your business are independent entities. So if your business (company) errs, it is itself that will be prosecuted. Because it is a legal person. Very independent from you.
It has limited liability- that is what we technically call this situation. To mean anything you own as a person (homes, cars, cash savings, etc.) are actually safe even if your company goes bankrupt/is suit. The only thing you lose is what you had invested in form of shares.
You Guarantee Business Succession (Your Business will outlive you)
I know you know that many businesses die when the owner die…..those that are simple soleproprietorships. It is the nature of it because you and your business has the same lifespan!
You fall sick, it gets sick. You go, it goes! Legally and circumstantially at least.
So if you want to build a legacy business, go the company way…because companies have perpetual succession.
That is the way it is…you write a will, transfer your shares to someone- maybe your child or partner- legally that is and the business goes on.
Meaning they will continue benefiting from your sweat long after you are gone.
Isn’t that amazing?
It’s easier to get investors on board
You see those big investors you see out there on TV (e.g. Shark Tank) and other places?
They won’t invest in your business innovation/idea- no matter how brilliant it is- if it’s not a company!
Period.
So if you’re dreaming big- and you have a cool business- then go the limited company way!
You are Eligible for Big Business (Tenders/Contracts)
BziNex is a private limited company..and we could have chosen to go the simple business name way…after all, it is way cheaper to register a straightforward business name.
But one of our goals is to work with NGOs, Government agencies, and International Brands…so we knew we had to register it as a limited company.
Who knows? We could bag the next multi-million shillings contract from the government. Or some big corporate.
So if you want to play in that league- and that is where serious money is- then you gotta do a company limited.
In any case, it makes you look more credible. In the eyes of the big shots.
No shortcut.
Possible Tax Benefits
When you make it a limited company, it will change how your income gets treated by KRA for taxation purposes.
In fact, as a soleproprietor trading with a simple business name, all your business profits will usually be combined with your other personal income and then taxed under various PAYE tax bands.
The issue is these can sometime climb to as high as 32.5%- 35% depending on your income levels.
On the other hand, your limited company gets more allowables, the tax exposure is at 30% (corporate tax) after all the expense deductions (which we said are more than for individuals) not to mention that some companies even get tax holidays/exemptions etc.
So with a good tax consultant- like the one’s we have here at BziNex- its possible to plan your company taxes better and reduce what you eventually pay.
That’s fantastic….don’t you think so?
Please go to our YouTube Channel if you’d like to learn how to Register a Company Limited or Convert business name to Limited Company…you can also WhatsApp us on 0797 532 345 if you’d like more clarification or you want someone to do it for you.
ALSO SEE: KRA PIN Registration & Updates