Choosing the right business structure
Transitioning from informal to formal sector is necessary in creating an ever expanding private sector but the SME’s Compete Director Danny Meyer notes that many businesses fail in correctly choosing the right business structure that meets their immediate needs. SMEs Compete provides assistance and support for income growth and job creation in the SME sector through consultating up and coming business.
The primary objective of the firm is to improve entrepreneurial, management, marketing and information technology skills of SMEs
“If the informal business is a one-person show or an owner managed enterprise, selection of a Sole Proprietor status as the one for registration purposes, should be a good starting point. The registration process is simple, swift and affordable, “ Meyer said.
He adds that a company’s ownership setup can also be equally important just like making partnerships, close corporation or proprietary limited perhaps more appropriate. In routine interaction with emerging and fledgling entrepreneurs at SME’s Compete, the cost of doing business, bureaucracy and an absence of knowledge come across as the more prominent blockages in registering a business enterprise.
This Meyer said could be reason that some choose to remain an informal business with the registration process and following the rules associated with doing business formally. Stressing that it is important to the economy overall that more and more informal business graduated into the formal sector.
“There are hundreds of enterprises all over Namibia who have operated for decades in the informal sector. It must be acknowledged that they do make a contribution towards the economy and when it comes to employment creation,” Meyer said.“The cost relates directly to the registration process, bureaucracy to the paperwork not only when it comes to the actual registration process, but also compliance, which comes in the form of monthly or annual returns to various government ministries and statutory bodies,” he added. Said Meyer, entrepreneurs who do make the transition have the benefit in the longer term making it possible to access enterprise and entrepreneurial development support programmes offered by government ministries.
“This allows employees to register with the Social Security Commission.
Also allowing the firm and its owner to access finance to grow business from commercial banks and other funding entities,” he added.