Company registration is the process of incorporating (registering) a business in Zimbabwe either as a Private Limited Company (PLC), Private Business Corporation (PLC) or any other business entity as stated in the Companies and Other Business Entities Act (Chapter 24:31). When a company is incorporated, the business becomes a separate legal entity; separate from its owners. The business becomes an individual ‘person’ in the eyes of the law. Essentially, this means that the company is completely separate from its owners in terms of finances, liabilities, contractual agreements, and ownership of property and assets.
Do I have to register a company?
Strictly speaking, you don’t have to register a company to operate a business in Zimbabwe. However, they are many opportunities that you might miss out on as unregistered. Some of the opportunities you might miss out on are as follows:
- Limited liability: When your business is registered, your personal and business finances will be treated as separate. This means that your personal assets cannot be seized to repay debts owed by your business and you cannot be held responsible for the debts. This is different when your business is not registered where there is potentially unlimited personal liability (e.g. your private residence at risk) for the debts of the business.
- Tax benefits: Unregistered businesses operated by sole traders pay PAYE tax while companies pay income tax. Income tax is generally lower than PAYE.
- Credibility: A registered company suggests that the business has permanence and is committed to effective and responsible management. This gives customers and suppliers a sense of confidence and many companies, especially larger businesses and the government, will not do business with a business that’s not registered.
- Easier and more options to raise capital: Sole traders or unregistered businesses generally have to raise capital from their own pockets, whereas a registered company can raise capital at any time by issuing shares. The new shares can be offered to existing shareholders or new investors. If the company is going to borrow money from a bank it may be possible to secure the loan without the need for the directors to give a personal guarantee/charge over their house.
- Protection of your company name: Once your company name is registered with the Companies Registry, it is legally protected by the laws of Zimbabwe. This means that your business name can’t be used by another business, which helps to protect your brand from incidents like brand copying or imitation.
- Easy transfer of ownership