Unregistered Businesses

Operating an unregistered business is illegal. The owner of the business could face both fine and legal actions, and authorities can shut down those businesses. The registered business adhering to the rules and regulations can enjoy the benefit of limited liability, which protects personal assets from business debts and lawsuits. Likewise, such types of businesses pay taxes to the state and help in revenue generation. Operating a business without registration may help them avoid extra costs and evade tax, but such a bad practice can ultimately land the business people in the soup. They face serious legal and financial risks while the consumers get cheated.

The report of the Nepal Distributive Trade Survey, 2022, conducted by the National Statistics Office (NSO), indicates that approximately 68 per cent of business establishments are registered with government agencies, while the remaining 32 per cent operate without getting properly registered. The survey covered all types of trade activities including motor trade and repair, wholesale and retail trade. The objective of the survey was to measure the contribution of the wholesale and retail trade sector to the national economy as well as finding key indicators such as number of employees, salaries and wage, trade margin and income and expenditure of trade establishments. Informal sector businesses like business on streets are not registered, though such businesses play a huge role in the economy. As these businesses go untaxed, the government does not have a data of how many people are employed in such businesses and how much turnover they make, and how they influence the economy of our country.

The survey findings indicated that Madhes Province has the highest proportion of businesses operating without registration with any government agencies, while Bagmati Province has the largest number of registered businesses. This disparity between provinces may reflect varying levels of awareness about registration requirements, accessibility to government services, enforcement of regulations, and other socio-economic factors influencing business in different regions of Nepal. It's important for policymakers and relevant stakeholders to do deep study of the underlying reasons for these regional differences and to implement strategies to promote registration of businesses, particularly in regions with lower registration rates. This could involve increasing awareness campaigns, streamlining registration processes, providing incentives for registration, and strengthening law enforcement mechanisms to ensure greater adherence to regulatory requirements across all provinces

This finding shows a significant portion of businesses are operating in the informal sector, without adhering to the obligation of formal registration. Unregistered businesses have limited access to resources and business opportunities. Thus, it is essential for policymakers and relevant authorities to address the reasons behind the high rate of running businesses without getting registered and take measures to encourage them to undergo proper registration process, as it benefits them as well as the government. It is also a duty of citizens to abide by the state's law enacted for their own wellbeing. Doing so can help formalise the economy, improve tax compliance, enhance legal protections for businesses and consumers, and foster a more environment conducive for sustainable economic growth and development of the country.