Are there any advantages to formalizing/registering your business?

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According to the Global Entrepreneurship Monitor (GEM) 2014 Global Report stated that Uganda topped a ranking of the world’s most entrepreneurial countries. However, most businesses in Uganda are informally setup without registration or any formal structures.

There is also a lack of apparent appreciation for formalising business because the process is seen by many as expensive both in form of paperwork, taxes and the formalities of compliance are considered tedious moreover, it is not against the law to run an unregistered business.

Our law firm encounters clients who are in a hurry to register their businesses in order to participate in an advertised bid or prevent their business name from being used by another entity in the neighbourhood.

Usually, this is too late because a call for bids requires a business to have a track record with audited accounts for a minimum of 2 financial years and those who are looking to safeguard a name find it’s no longer available for registration for their business because it’s in use.

So why go through the effort to move your small business into the formal sector?

Despite the many disadvantages to formalizations, as your business grows, the benefits become clearer.

Obtain legal Identity/status. This implies that a company is capable of enjoying rights and being subject to duties, separately from its members.

It Safeguards your business name by acquiring a trade name.

Access to credit. Banks don’t lend to unregistered business. Individuals have access to micro-credit, but if you’re looking to expand your enterprise, you’ll need access to more funds with much more favourable terms than most micro-credit institutions can provide.

Access to government contracts. The government does not do business with the informal sector. The contracts government offers private businesses go to tax-paying businesses with all their papers in order.

Entering the formal sector establishes your credibility. Formalizing your business makes you more trustworthy to other businesses which means that businesses are more likely to trust you with large contracts and delicate projects.

Better marketing and advertising opportunities for increased clientele.

Lastly, formalizing your business shows that you have confidence in your own stability and your willingness to invest in your own future.

How to decide if formalization is worth it?

  • If additional income generated is greater than registration fees.
  • If additional income generated is greater than potential annual taxes.
  • If additional income generated is greater than revenue lost due to time invested in the formalization process.
  • Then being a formal business would be worth it.


All these services and more can be accessed online on our platform. Register and get to know more about it.


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