Upon the
publication of my blog 6 Practical Hints on How to Create a Registrable Business Name in Nigeria, many readers have either called
or mailed to find out the different business options that are registrable in
Nigeria and the differences between those forms.
If you are
considering starting a business and you want to explore the business
opportunities in Nigeria (as a resident or a foreign investor) you may as well
register a business brand for that purpose. You must therefore know the business
options available to you and the most appropriate for your business; you must
also know the legal implications emanating from each option and the benefits
plus liabilities which the Business options come with.
When a
person walks up to me and says “I want to register my company” (someone even
sent me a mail while I was preparing this article), one of the things that
usually come to my mind is whether the person really understands the context of
that word “company”!
What I
intend to do in this article is to help you to know the different business
options available if you intend to register your business, and I will also
explain some of the benefits and liabilities connected with those options.
Business Options Available Under the Nigerian Law
The
principal body of law regulating business start-up in Nigeria is the Companies
and Allied Matters Act. There are 2 forms of business options which
every business person may choose from under the Law, they are:
1. Company.
2. Business name.
A company is defined under the Law as:
“…a company formed and registered under this Act or, as the case may be, formed and registered in Nigeria before and in existence on the commencement of this Act.”
On the other hand, a “Business Name” is defined as:
“… the name or style under which any business is carried on whether in partnership or otherwise”
These definitions may not make the best of senses to you if you are not a lawyer, but i will try to simplify it here and you can also view my article Amazing Differences between Business Name, and Company Registration in Nigeria for a concise explanation of the two options.
Without having to go into legalese, the key difference between a company and a business name is that a company becomes a person (in the eye of the law) the moment the company certificate is issued to you, whereas, if what you registered is a business name, you merely have a licence to do business in that particular business name once a certificate of registration is issued to you. By implication, a company has a life of its own (distinct from its investors), but a business name (being a mere permission to trade in that name) does not have a life of its own as it is merely your style of trading.
A company registered in Nigeria will usually end with one of the following expressions:
- "LTD/Limited" Meaning that the liability of the joint owners of the company is "Limited by shares"
- "ULTD/Unlimited" This means that the liabilities of the joint owners of the company is unlimited. The fact that each owner's liability is unlimited makes this kind of company undesirable for investors.
- "LGTE/Limited by Guarantee" This expression is used to refer to a company having the liabilities of its owners limited by what each person guarantee (promise) to pay in the event that there is a call on the owners to settle the company's liabilities. Please note that this kind of company does not have share capital and is generally not allowed to be operated as a profit making venture- these factors therefore makes the consent of the Attorney General of Nigeria necessary before such company can be registered.
While the above explanation goes for the types of company arrangement under the Nigerian Law, broadly speaking, a company will either be a PRIVATE COMPANY or a PUBLIC COMPANY.
There are many differences between a private company and a public company, but here are the key differences:
- If you start a public company, you will be able to sell your shares "publicly" (and this includes through public adverts and the floor of the Nigerian Stock Exchange), but if your company is a private company, you can only lure people to buy shares in your company by private means including one on one marketing otherwise known as "private placement"
- Private companies do not permit for more than 50 joint owners (except in limited instances) whereas a public company is allowed to have as many joint owners as it wishes to have.
Business Name registration is the cheapest and most
convenient form of registration that is available under Nigerian law. In this arrangement, you don't need a share capital to start your business, neither do you need shareholders, directors or company secretary. A single person intending to do business alone or partners can register a Business Name to drive the business. Where you intend to operate a partnership, i will strongly advice that you engage a competent lawyer to prepare a partnership agreement for you and your partner(s).
If you are
considering starting your business in Nigeria, you may be interested in checking my blog Important things to know about registration of business in Nigeria, and if
you are a foreigner intending to do business in Nigeria, please watch out for my article titled Step By Step Guide for Foreign Investors Interested in Doing Business in Nigeria.
This article is designed for information purposes alone and is not intended to take the place of a legal advice. Readers are therefore advised to seek proper legal advice.
For more enquiries, you can contact me on my mobile contact: 08060623454, or address a mail to me via eyitayoogunyemi@gmail.com
