Business name and legal personality

I registered my business name with the Business Registrations and Licensing Agency (BRELA). I’ve been operating under that name for two years. At the time, my wealthy friend told me that registering my business would create a separate legal entity, like a company. I took some loans from him for the business and failed to repay them. The friend is now after my personal property. I’m confused, does registering a business name mean my business has its own legal personality? Enlighten me please.

NK, Morogoro

This is a classic misunderstanding. Registration of a business name under the Business Names (Registration) Act, Cap 213 [R.E. 2023] does not create a separate legal personality. It is simply a legal disclosure mechanism that ensures the public knows who is behind the trade name. Look at it this way, a business name is like a mask that identifies the business in the marketplace, but does not shield the owner from liability. If debts arises, creditors can pursue the individual or partnership behind the name.

By contrast, incorporation under the Companies Act, Cap 212 [R.E. 2023] creates a distinct legal entity, separate from its shareholders. A company can own property, sue, and be sued in its own name. If you only registered a business name, you are personally liable for debts. Consult a lawyer who can advise you on the options available to address your situation.