There’s no doubt, that a lot of business owners in Nigeria are beginning to appreciate the need to have their businesses registered with the Corporate Affairs Commission. But just in case you are one of the few who are still skeptical about it, permit me to highlight what you are obviously missing out on;
- You’re looking to apply for funds from the government or private investors, you must be a registered business or at least have intentions to get your business registered before you can be attended to.
- You want to avoid mingling your personal funds with that of your business by creating a corporate account with your bank? The bank would request for your business/company registration certificate.
- You want your company to bid for that government contract? You must present your certificate of business registration as well as evidence of tax remittance (if you are already in operation).
- You want to obtain a visa to travel to any country of your choice for business purposes? You need evidence of business registration.
- You need to obtain loan for your business? Your business needs to be registered.
- Want to build trust and credibility with new clients’ especially corporate organizations? Your business needs to be registered.
I could go on and on. The way I see it, if you can’t beat them, you join them and get noticed, or keep your business hidden beneath the rocks and get crushed for it! But i believe you’ll make the right choice.
However, for those who wish to have their businesses registered, the challenge i realize most of these individuals face is ”which class of business registration do I settle for, a company or a business name”?
Honestly, there’s no one size fits all answer to this question as each individual or prospective business has circumstances that are peculiar to each of them. As a lawyer to business organizations and entrepreneurs, i realize that the choice of what kind of business organization to settle for in terms of registration in Nigeria, depends largely on many factors such as;
- Cost of registration and expenses.
- Speed of processing and completion of registration.
- Documentation and legal compliance.
- Regulatory supervision and post registration compliance such as; tax remittance, filing of annual returns.
- Scope or extent of operation.
However, to provide a satisfactory answer to this question, I believe an insight to what registering a business name or a company with the Corporate Affairs Commission entails would do justice to the question.
WHAT DOES REGISTERING A BUSINESS NAME WITH THE CORPORATE AFFAIRS COMMISSION ENTAIL?
In simple terms, when you decide to register a business name, you are simply registering a name (other than your name) with which you wish your business to be known and addressed as. So Mr Eze for instance has a business which he wishes to be addressed as “Haven Ventures” instead of his name “Eze Ventures”. To enable him do business under the name “Haven Ventures” exclusively, he must ensure the name is registered with the Corporate Affairs Commission. Upon successful completion of the registration process, Mr Eze would be regarded in law as “trading or doing business under the name and style of Haven Ventures”. You could register under the business name category as either a sole proprietor or a partnership.
Having your business registered as a business name has its implications as well as advantages. They are as follows;
- Registration process is simple and straightforward.
- The law sees the proprietor or partner(s) as one and the same person.
- Cost of registration is cheap.
- It requires less documentation and legal compliance.
- You enjoy exclusive use of the name alongside other businesses.
- You enjoy use of the name except in event of litigation where the proprietor or partners are sued in their names as against that of the business.
- Less formality in administration.
- Procedure for dissolving the business is easy.
- In the event of death of a proprietor of partner(s), the business seizes to be in existence.
- In event of financial crises, example bankruptcy, the liability of the proprietor or partner(s) for such debt may include his personal assets.
- The scope of operations of a registered business name is limited even if it’s registered for the purpose of performing general contracts and services.
WHAT DOES REGISTERING A COMPANY ENTAIL?
This is a more preferred option because it is highly organized and regulated by law. A company could be registered as;
a. Private company limited by shares; has a minimum of two members and maximum of 50 members and liability of its members is limited to their contributions. Must end with the phrase “Ltd” or “Limited”.
b. Public company limited by shares; has a minimum of two members but no limit to maximum number of members.
c. Company limited by guarantee; formed for promoting of commerce, science, sports, culture, education, etc. Its income is directed towards promoting such objects. Its liability is limited to the amount its members undertake to contribute to the assets of the company in the event of its winding up as contained in its Memorandum of Association.
d. Unlimited Company; there is no limit to the liability of its members,
After registration, such company acquires a “legal personality” status, capable of owning assets, suing and been sued in its name.
Another beautiful feature of a registered company is that members of such company (i.e directors and shareholders) may decide on the extent of their liability to the company. Their liability could be limited or unlimited depending on what choice of company they opt for.
CAN I REGISTER A BUSINESS NAME FIRST AND MAKE AN UPGRADE TO A COMPANY IN THE FUTURE?
Yes, you can. But, please bear in mind that you must always file your annual returns on or before the 30th of June of every year after your business is registered, as you would be required to show proof of payment of annual returns with the Corporate Affairs Commission before post registration concerns such as an upgrade could be entertained by the Commission.
Before I draw this to a close let me say this; registering your business as a business name is not a bad option, registering as a company isn’t bad either. However, there are certain circumstances where a registered business name may not be a suitable option such as; the sector of business you wish to operate, regulatory policies in such sectors, the kind of future collaborations you anticipate, your overall vision for your business, etc.
I recommend you seek appropriate consultation from lawyers who have a firm grasp of corporate structure before you proceed to get your business registered.
Having done justice to this question, are you ready to get the legal aspects of your business structure sorted? You may click on the link below let’s get started.