Formalization for business prosperity

Becoming an entrepreneur is among the best options you can take to pursue your life. By becoming an entrepreneur, you have already demonstrated your leadership trait and the drive to see your idea materialize. You have decided to take the next major step to realize your vision, that is, running your own business. While generating profit in your business, it is important to comply to rules and regulation of the state and thus necessary to formalize it.

Formalizing your business comes with a number of benefits including improved  access  to  public  services  and  formal  credit,  recognition, trust for your product/services and access to other facilities like insurance services for your business.  Experience shows that many entrepreneurs avoid to formalize their business thinking that it will be costlier. Others believe that formalizing makes operation difficult as it attracts all regulators including the taxman to the business.

But the truth is, by operating legally you get more benefits than losses. Below are extended benefits of  registering your business

Profits

Business benefits  of  operating  officially  include  higher  profits,  better  access  to  credit,  increased  investments  and  higher  customer  demand  due  to  the  ability  of  the  firm  to  issue tax  receipts as mentioned earlier.

Investments and Credit

Money lenders are more willing to lend to legally operating businesses than informal businesses. Access to credit can lead to performance improvement, increased profit which will in turn support your business expansion or growth plans. Formalization is often explained by better access to credit allowing firms to increase their investments.

Network and customer size

Experience shows that formally operating companies are more invited to networking events and exhibitions both local and international than the informal businesses. This helps to widen the customer base and improve business networking which is very crucial for business expansion.

After seeing some of the benefits of formalizing a business now let us discuss about  the actual business formalization process. This process involves key stages that need some careful consideration.

Who can register a business?

Any individual resident or nonresident, who is doing business or proposing to do business in the United Republic of Tanzania under a business name is required to register under the Business Activities Registration Act, 2007 .

The Business Activities Registration Act, 2007 requires that all business whether sole proprietorship/individual or partnership/corporation should obtain a certificate of registration from the business registration centre  in respect of every business.

Business name application procedures and requirements

Choose a Business Name

A Business Name is the name or style under which any business is carried on. In Tanzania, They are registered under the Business Names (Registration) Act (Chapter 213 of the Laws) [R.E 2002] A business name helps to identify your business and hence advertise it. Business Names do not acquire Corporate personality after their registration.

People are not compelled by the law to use names in their business, but they are compelled to register them if they use names in their business.

Remember that your business name should describe the nature of your business. Business Registration and Licensing Authority (Brela) is responsible for business name registration.

Applicant has to fill an application form for registering a business name, for sole proprietor, fill form number 3, for firms fill form number 2, for bodies corporate, fill form number 1.

 Apply for the proposed business name by submitting three names. Submitting three names aims to ensure that your business name doesn’t coincide with already existing business names. The good thing is that business registration can now be done online by visiting Brela website.

The name you choose for your business, while being unique and relevant for your business, requires Brela’s approval. Choose a name that is not obscene or vulgar. It must not infringe with any trademark or be too similar or identical to that of any existing companies. The approval process is fast, within a day, however if the chosen name includes certain restricted words involving regulated and strategic sectors such as bank, law, finance, media etc then the relevant government agency or authority will need to review it. In such cases the approval may be delayed by a few days.

To avoid any delay or disappointments, check availability before choosing a name. You may do it online on Brela’s website. Make sure that the name you choose is representative of your business philosophy, nature, product or service and positioning.

Make sure that you choose the right name. Choosing the right name for your new business is extremely important because it distinguishes your products and services from those of your competitors, and helps to establish your identity in the marketplace.

Brela will do a name clearance search and approve or refuse the application.

After your business is registered, you will receive a notification confirming your registration.

After payment of fee and if approved applicant is issued with certificate of Registration and an Extract with which the applicant can then open a bank account

This process involves a fee which- according to Tanzania Investment Centre (TIC) is is estimated at Sh87,120. Further information on business registration and name clearance can be obtained at Brela website.

Have a registered Address

At the time of registration you will have to provide a local physical address. All official notices and correspondence will be sent to this address only. Local Government Authorities of which your business is to operate must approve the premises for commercial use.

If you are a small business owner or decide to operate from your house to save on office rental expenses in the initial years, then permission for such use must be obtained the Tanzania Bureau of Standards (TBS) and from the Tanzania Food and Drugs Authority (TFDA).

Apply for Taxpayer Identification Number (TIN) at Tanzania Revenue Authority.

An individual whether  resident or nonresident  is required to visit TRA regional or district office and fill TIN application form to apply for Taxpayer Identification Number. The application can also be made online, however the applicant must physically visit TRA offices for biometric scanning which involves taking photograph, finger prints and signature.

After obtaining TIN certificate the applicant will be required to apply for business license from the Trade office in District, Municipal, City and the Ministry of Trade and Industry depending on the type of business

The registered name can be obtained before or after application for TIN. The registered business name shall be indicated on the TIN certificate together with an individuals’ name showing the owners name trading as (T/A).

TRA has introduced a Taxpayer Identification Number (TIN) registration and issuance desk at the BRELA offices.

The intention is to ease provision of TIN certificate to newly businesses on a one stop shop arrangement thereby making it convenient for them to commence operations in a much shorter duration.

Prepared by Veneranda Sumila

Tanzania Private Sector Foundation (TPSF

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