Other than the obvious personal liability issues, which leave the founder(s) of a business name exposed, an important consideration in choosing a Business Name is whether the entrepreneur intends taking OPM (other people’s money) into their business. Particularly if these other people are institutions. No institution worth its salt would put money in an entity that is a business name, whether by way of debt or equity. So if you plan on borrowing money from the bank or attracting accelerator or VC funds, a business name is not for you, despite its few advantages.
So, what are these advantages?
The greatest benefit of registering a business name is the absence of double taxation. Unlike a company, a registered business name pays income tax at one level only, i.e. none by the entity itself, but by the founders alone after distributions from the business must have been made to them. Of course other non-income taxes need to be remitted, such as withholding tax, value added tax, etcetera.
Of all available entities, a business name is also the least expensive to set up and maintain. The statutory fees are the lowest. In addition, there are fewer statutory filing obligations with the CAC , thereby making it not only less expensive but offering some degree of privacy.
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