MONEY TALKS: From registered business name to incorporated company
- A company is a separate legal entity from its owners. Imagine birthing a newborn baby.
- A company trades by its company name.
- It’s made up of X number of shares. The owners each hold a certain number of these X shares.
Picking up where we left off, about how to stop running your business like a kiosk and how to run it like the giant corporation it can grow up to be, let’s talk about a business name and a company.
There’s a difference between registering your business as a company and as a business name.
Pay attention, good people.
A business name is a registered trade name. The owners of the business use it for trading purposes only.
One person or ten can own the business name. It doesn’t matter.
These owners are listed in a certain form at the point of registration.
When you register your business as a business name, the Registrar of Companies gives you a business certificate. Frame it and hang it up on your wall.
With your business certificate, you can (a) get a KRA PIN for the business (b) open a bank account (c) set up a Till or Paybill number for managing your sales proceeds (d) get a business stamp (but just to be fair, you can get a stamp for almost anything.)
A business certificate costs Sh3,500.
You will still need to pay up for a name search. Each name search costs between Sh200 and Sh500, depends on if you’re working with an agent or applying of the certificate directly through e-Citizen.
KRA PIN is Sh1,500.
A company is a separate legal entity from its owners. Imagine birthing a newborn baby.
A company trades by its company name.
It’s made up of X number of shares. The owners each hold a certain number of these X shares.
These shares have a nominal value assigned to them. Some have a value of Sh1, others Sh100.
These owners can be the company directors or company shareholders.
Some directors are by default also a shareholder. A shareholder, however, is not necessarily a director. Does that make sense?
A company can bring more shareholders on board by floating its shares. All it needs to do is value each share then float them to the interested people. The shareholders by these floated shares, as they are available.
Registering a company can cost anywhere between Sh13,000 to Sh25,000. Again, depends on whether it’s through e-Citizen or through an agent.
All else after – KRA PIN, stamp, bank account – costs the same.
Now on to the bigger concerns about what each means for you as a small business owner.
Concern one: Do my clients know the difference?No, your clients don’t know if your business is registered by name or as a company. It doesn’t really matter to them, to be honest. As long as they’re seeing a distinction between the business itself and its owner, then it’s all good.
Concern two: Does my bank?No, your bank doesn’t care much either.
A business account is a business account, they operate in the same way – you’ll open it with either your certificate of incorporation or your business certificate. Have your –co-directors/co-owners present their ID copies and PIN certificates for the account opening to be completed and have it up and running.
Concern three: What about Safaricom?Safaricom doesn’t care if the Paybill or Till number you’re running with them is with a company or business name. They all operate in the same way, too.
You aren’t denied services or privileges, either, because of having one or the other.
Concern four: What about the stamp people?The gentlemen downtown who make stamps don’t really care for anything. Give them a name, their Sh1,500 and one hour, and return to collect your stamp.
Final and most important concern: You as the business owner, what happens if I’ve registered my business as a business name and want to upgrade to a company, what happens next?
Well, the business name becomes your company name. And think about, you’ve already taken it up for your business, which means it’s not available to somebody else anyway.
The business owners may not necessarily become company directors or shareholders. You can nominate a completely new group to take the step of maturity with you into the company.
Your business postal address and physical location can become your new company address and location.
Your KRA PIN remains as is.
Alert your bank and Safaricom that you are now trading as a limited liability company, no longer a business.
The Paybill and Till number with Safaricom will remain the same. Simple scan and email them your new company documents, to update your records with them.
With the bank, you may have to open a new account because your company now has the ‘Ltd’ suffix. You could also ask your bank to change your bank account name, it all depends on how their internal controls are structured.
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