Consequences for Failing to Register Your Business

When you start running your business and it starts bringing in revenue, it is tempting to leave things as they are since the lacking of registration is not inhibiting you from transacting your business. However, failure to register your business will have consequences, if not today, it will undoubtedly happen in the future. You should seek business registration complete the same time that you intend to start and run your business. Here are some of the consequences and even possible penalties that might occur when business owners fail to have foresight and incorporate early.

Failure to get financial assistance from lending institutions

When you register a company, you can open a company bank account. As the company director, your personal bank account may not be sufficient to tell the actual status of your business’ finances. Having separate bank accounts also shows professionalism.

Banks prefer individuals who are organized and can be trusted with the responsibility to meet loan obligations. A registered business that has a bank account separate from the business owner’s personal account clearly depicts the flow of funds in the business account. It is easier for financial institutions to gauge the viability of lending money to such a company.

Inability to initiate a lawsuit

Should your company find itself in an awkward position and in need of legal support, it is difficult to initiate a claim if the company is not registered. It is vital for business owners to separate their personal life from the business. This is something registration of the company does since the business is considered to be independent of the owner.

Should an issue arise and the business feels justified to sue a client or another company, initiation of this lawsuit can be difficult or even impossible because questions will be asked about the status of the business and why it has not been registered. You could open a can of worms that may lead to questions about your tax obligations which may lead to an audit. Should a client file a complaint against the company, chances are, the owner and the company are considered to be the same entity.

When you finally register, you will lose the years you worked before registration

One of the reasons for registering the company before you start or as soon as you have started attracting clients is so that you can have a record of the growth of the business. It is easy for one to analyze the growth of a business entity from the moment it earned its first revenue. If you choose to register the company after a year, it will be like you are starting over. Instead of losing your hard work or losing potential partnerships, it is best to give your business on a solid foundation.


There is no doubt that failing to register your business has some repercussions. Understandably, most entrepreneurs worry if the capital they have is sufficient to incur additional costs such as registration fees. However, neglecting registration because of the required fees can have adverse effects later on, especially if you become too comfortable running your business without proper registration. For example, your company may be accused of tax evasion, especially if it grows too fast yet it is not a registered business.