The concept of business registration
Business registration is the process of obtaining legal authorisation to start and operate a business in a given locality. It is sometimes referred to as business formalisation. It involves registering the business, products, properties, documents, intellectual property. and many others. Business registration does not only pertain to starting the business but also day-to-day business operations. Evidence of business registration is usually in the form of business licenses, permits, and certificates.
Importance of business registration
The following are the importance of business registration in Tanzania: Enhances freedom to do business: The government of Tanzania instructs business owners in the country to operate a business with a valid business license issued by the respective Authority. Therefore. for any entity to operate the business freely in Tanzania either Mainland or Zanzibar it is important to be registered to avoid the consequences of operating an unregistered.
Increases access to credit: Many financial institutions in the country offer loan access to businesses that have formalised their operations. Businesses that have undergone the formalisation process can use this opportunity to secure funding from financial institutions, government or other formal lenders to expand their operations and hence boost economic developments.
Increases market access: A registered business increases the level of trust to its customers, channel members and general public. Registration of a business has an implication to a third party that the relevant authorities have endorsed the business activities and it is safe to transact/interact with such business. It is that trust which belps a registered business to penetrate various markets. In addition, it enables a medium-sized business to bid for tenders in the private and public sectors.
Enables protection of intellectual property rights: Intellectual property (IP) registration enables companies to protect their core business as well as research and development activities. Apart from protecting businesses, intellectual property registration also belps companies build value. This is because Intellectual property is typically counted as an asset when assessing a company’s value. As a result.
intellectual property assets can even be used as collateral for loans.
Improves tax administration: The sharing of information between BRELA or BPRA and Tanzania Revenue Authority (TRA) or Zanzibar Revenue Authority (ZRA) ensures that all registered and operating businesses in the country pay taxes. By formalising the business, the tas administration burden is significantly reduced as fewer resources are allocated to search for those businesses that are informally operating in the country.
Increases of tax base: More registered businesses expand the accessibility of collecting tax across more entities. Every registered business at BRELA or BPRA or any other authority refleets the same increase in the number of tas payers in the TRA or ZRA. If more businesses fonnalise their operations, the same effect will be reflected on the tax base, hence increase the revenue collected by tax authorities.
Assists in the acquisition of property rights: Business formalisation allows the business in the acquisition of property. By using its registered business name, the business may acquire large investments such as land or properties, something which can be limited in the case of unregistered businesses.
Helps in the planning process: Business formalisation helps the govemment and businesses during the planning process. With foral businesses, the govemment can estimate the amount of revenue to be
collected, the cost of collection, allocation of social serv ices, infrastructure, and levies.
Similarly, business owners can easily estimate the amount of tax liable each year and plan for payment.
Improves tax administration: The sharing of information between BRELA or BPRA and Tanzania Revenue Authority (TRA) or Zanzibar Revenue Authority (ZRA) ensures that all registered and operating businesses in the country pay taxes. By formalising the business, the tax administration burden is significantly reduced as fewer resources are allocated to searth for those businesses that are informally operating in the country.
Increases of tax base: More registered businesses expand the accessibility of collecting tax across more entities. Every registered business at BRELA or BPRA or any other authority reflects the same increase in the number of tas payers in the TRA or ZRA. If more businesses fonnalise their operations, the same effect will be reflected on the tax base, hence increase the revenue collected by tax authorities.
Assists in the acquisition of property rights: Business formalisation allows the business in the acquisition of property. By using its registered business name, the business may acquire large investments such as land or properties, something which can be limited in the case of unregistered businesses.
Helps in the planning process: Business formalisation helps the govemment and businesses during the planning process. With formal businesses, the govemment can estimate the amount of revenue to be collected, the cost of collection, allocation of social services, infrastructure, and levies.
Similarly, business owners can easily estimate the amount of tax liable each year and plan for payment.
Types of business licenses
Business registration of cither a medium- sized or other forms of business in Tanzania is a multifaceted phenomenon as demonstrated in Figure 5.1. Moreover. business registration depends on the form
of the business (size, business organisation. and products), type of sector, locality (Tanzania Mainland versus Zanzibar). ownership tlocal versus foreign). location (rural versus urban), and many other factors.
Based on the Tanzania Small and Medium Enterprise (SME) Development Policy of 2003, capital invested and number of employees are criteria used in determining the category of businesses when the businesses including medium-sized enterprises are registered.
General licenses
These are broad permits, licenses or certificates issued to business enterprises by the LGAs, BRELA, or BPRA or their agencies. They are expeeted to be acquired by a business after applying for the sectoral business licenses. Some of the general licenses include the following:
Business license
This license is usually issued upon registering the business. It is the authorisation given by the business licensing authorities to start and operate a business. In Tanzania Mainland. business licenses are classified into two classes, that is Class A and Class B. Class A business licenses are those issued by the Ministry of Industry and Trade (MIT) through the Business Registrations and Licensing Agency (BRELA) whereas Class B licenses are issued by Local Government Authorities (LGAs).