Business Formalization: Costs versus Institutional Efficiency

Reforms to simplify initial business formalization (especially to incorporate new companies) incur huge costs but maintain unnecessary formalities and, above all, they disregard the need for business registers to provide sound evidence for future judicial and administrative decisions. A more ambitious strategy is needed, one which will aim to improve institutional efficiency, to identify and eliminate obsolete formalities and to ensure register reliability. Such reliability is essential if registers are to efficiently perform their social function, that of reducing total transaction costs for companies. This strategy should be adopted in collaboration with private facilitating services providing entrepreneurs with advice and assistance in formalities. Any services requiring independence on the part of the decision-maker should be kept in the public arena while others can benefit from the comparative advantages of private initiative.