6 Key Benefits Why Your SME Should Trade As A Company

Starting a business can be a challenging process, and entrepreneurs must make various decisions to set up their operations. One of the critical choices that an entrepreneur must make is to decide whether to operate as a sole proprietorship or incorporate their business as a company. While both options have their advantages, incorporating a company has numerous benefits that can help a business grow and succeed.

Here are some reasons why your SME should operate under a company structure:

1. Limited Liability: One of the primary reasons entrepreneurs choose to incorporate their business is to protect their personal assets from any liabilities incurred by the business. By forming a company, the business becomes a separate legal entity, and the owners' personal assets are separate from the company's liabilities. This means that if the company goes bankrupt or faces legal action, the owners' personal assets will not be at risk. The owners are not personally responsible for the debts and liabilities of the Company, instead, their liability is limited to the unpaid (if any) amount of capital they have invested in the company or to the amount that they have guaranteed to pay should the company face legal action.

2. Separate Legal entity: A Company is a separate legal entity from its owners. It can enter into contracts, own property, and sue or be sued in its own name. This provides greater flexibility and protection to the owners, as they conduct business without exposing their personal assets to risk.

3. Increased Credibility: Incorporating a company can increase a business's credibility with customers, vendors, and partners. A company structure demonstrates to stakeholders that the business is serious about its operations, has a long-term plan, and is committed to grow.

4. Easier Access to Capital: Incorporating a company makes it easier to raise capital, as investors are more likely to invest in a company rather than a sole proprietorship. A company structure allows for the sale of shares, which can be an attractive option for investors looking to invest in a growing business.

5. Perpetual Existence: A company structure offers perpetual existence, which means that the business can continue to exist even if the original owners leave or pass away. This can be important for businesses that have a long-term vision and plan to operate for many years.

At CM SME Club, we specialize in providing expert legal advice on company incorporation and restructuring. Our team of experienced lawyers has a deep understanding of corporate law and can guide you through the process of setting up your company, ensuring that your business is structured in the most effective way possible.

Whether you are starting a new business or restructuring an existing one, we can provide you with the legal guidance you need to make informed decisions. We will work with you to determine the best legal structure for your business, taking into account your unique circumstances, goals, and objectives. Get in touch withus via email or call +254 745 342 125.

Published on Aug. 22, 2024, 1:10 p.m.