DIFFERENCES BETWEEN A BUSINESS NAME AND A LIMITED LIABILITY COMPANY.
Starting a Business and knowing the right structure to register is very pivotal to every business.
In this article, We have enumerated the differences between a Business Name and a Company.
SIZE
A Business Name is suitable for small businesses, sole proprietorships or partnerships. So, If you are starting small, you can consider registering a business name. However, if you are planning to start a large-scale business with multiple shareholders then you need to register it as a company.
LIABILITY
The liability in a Business Name is personal/unlimited, unlike a Company, the liability of the owners of a company is limited to the number of shares subscribed to. The main difference between these two is that while the former may have unlimited liability for each owner (i.e., no transferable shares), the latter has limited shares owned by each shareholder and therefore each shareholder has limited liability.
SHARE CAPITAL
A Business Name does not have shares, unlike a Company.
LEGAL PERSONALITY
Business Name is not recognized in law as a legal entity and as such does not enjoy separate legal existence distinct from its owners. A business name cannot hold property or sue in its name. A Company is recognized as a legal person in law, distinct from its owners and can hold property in its name, sue and be sued.
REGISTRATION AND COMPLIANCE REQUIREMENTS
A Business Name has fewer legal requirements for registration and is cost-efficient to register, unlike a Company. A Business Name is not required by law to file a financial statement for tax purposes or board resolution, this is required by a Company.
SUCCESSION
A Business Name; if perpetual succession is not in place, the death of the owner can lead to the end of the business. A Company has perpetual succession and can exist after the death of the shareholders/directors.
CAPITAL RAISING
A company can easily raise capital, by selling its shares and using shares as collateral for loans. Transfer of ownership is easy with a Company. A Company is more attractive to investors than a Business Name.
TAX LIABILITIES
A Business Name is not required to pay Company Income tax. A company must file company income tax.
REGULATORY COMPLIANCE
You cannot operate/register some businesses under a business name i.e Aviation, Travel & Tour, Clearing & Forwarding, export, securities & exchange etc.
By Fathenso Professional Services
The information in this blog post is provided for general information purposes only.