To start with, there are several benefits for starting up a business in Nigeria- depending on the kind of structure you decide on. Some of these benefits include:
- Separate personality: This means you are separate from the business you set up (particularly where it is a company that is started). For example, Abimbola starts MonaMatthew Limited, but Abimbola is not MonaMatthew Limited; MonaMathew Limited can sue and be sued, it can own landed properties and so on, and it is considered to be an artificial person capable of enjoying most of the benefits of a natural person.
- Depending on the structure of your business, it can attract investors; A fascinating business idea or an existing business can attract lots of investors based on the structure of the business. With that kind of opportunity, you can diversify and also expand your business.
- There is limited liability connected to Value Added Tax. By implication, the tax and other obligations are on the company and not on you as a private person.
- It affords you perpetual life. In other words, the business can outlive you. You can therefore decide to retire while the business continues because there is an established value.
- If what you started is a company, you will have the opportunity to add your shares and other benefits in the business to the list of benefits to be divulged or willed out upon your demise. Therefore, you can divulge shares and other benefits to your family, your children, or other persons that you desire to assist.
- It gives you control. Where in particular the business that you started is sole proprietorship, you do not need to consult anyone before you can control your business; you have absolute control over the number of staff you want in your business; you can hire and fire staff without any consultation as such; you have control over what you want to produce, when, and where.
Having identified some of the benefits of starting your own business, you may wonder next on the kinds of business structures that are available in Nigeria, and also on your own best option. Some guides are provided below:
1. There is sole proprietorship business: As the name implies, this kind of business refers to one man/woman ownership of the business. For sole proprietorship, you are the business and the business is you. You are the boss of the business; you have all the control you want over the business except for some interference by the government. In other words, you bear the risks alone, and you enjoy the profit alone.
2. The partnership: if you are not capable on your own or you like to have other person(s) come together with you to run the business, you can invite one or more partners to join you in the business administration. The law gives room for 20 people entering into partnership; while in law firm or accounting firm, you can have more than 20 people. In this kind of business structure, all the risks (as well as the profit of the business) will be shared amongst the partners.
3. Limited liability company; it could be public or private limited liability company; both are regulated based on their membership. For private limited liability company, you can only have 50 members (although, there are exceptions); but for public limited liability company, you can have as many members as you decide on. Either ways, your liability is limited only to the extent of your unpaid shares.
4. Unlimited Liability Company: This kind of structure is uncommon. Unlike limited liability company, the liabilities of members are unlimited and they are liable separately and jointly. By implication, in the event, for instance, that the company has accrued liabilities and it is being wound-up, the creditors can go after any or all of the members together.
5. Non-profit or Non-governmental organization: This includes charity organization, cooperative societies as we have amongst taxi drivers, farmers, and so on. The interesting thing about this kind of structure is that the aim is not to transact business and make profits.
The most common structures in Nigeria for businesses that are going to be profit making ventures are the business name, and the Limited liability Company.
The business name could either be set up as sole proprietorship or partnership.
For sole proprietorship, you must bear in mind that you are the business, everything you will do is about the business, you have complete control of the business- but it may be difficult for you as a sole proprietor to raise a substantial capital for the business, and you are not also guaranteed that your business will continue- which means succession on the business is not guaranteed as a sole proprietorship business owner.
As for partnership, financial commitments are shared amongst the partners; where you seek to operate one, you and your partners must share the load of profit and every other benefit that come out of the business and the risks. The principal issue is where dispute arises in the business and the partners are put to the test of carrying on together.
Lastly is the limited liability company structure which benefits hinge on the facts that the company is a separate legal personality from its members, it can transact business in its name, it can sue and be sued too, and there is perpetual succession of the business, plus the brain of the business which is referred to as Board of Directors. Conversely however, the tax liabilities on companies are higher, and companies are obliged to keep records and file annual papers and audited report.
From all stated, you may agree that the decision on which business structure to adopt has to be made as early as possible because not all the structures will be appropriate for the kind of business that you intend to run.
