Why you should formalise your MSME business

Is your small business operating formally or informally? What are the benefits and costs associated with formalising your micro or small enterprise? What are the challenges associated with formalising your business?

These are all very important questions, which are faced by the vast majority of micro small and medium scale enterprises (MSMEs) in our economy.

Most are operating as informal businesses. The Finscope survey on the MSME sector in 2012 estimates that there are 3,1 million MSMEs operated by 2,8 million entrepreneurs in the economy. However, the vast majority of these MSMEs are operating as unregistered businesses.

There are, however, significant gains to be made by partially or fully formalising one’s business operations, both for the economy at large and the businesses themselves.

While there are attendant costs and difficulties in formalising small businesses, there are significant gains and benefits of formalising each and every small business to a small or greater degree. Invariably, formalising your business will begin by the owners or promoters registering a company to conduct or deliver the services or products that they set out to deliver.

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