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;
- If 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.
- Do 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.
- Do 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).
- Do you want to obtain a visa to travel to any country of your choice for business purposes? You need evidence of business registration.
- Do you need to obtain a 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 question we realize most of these individuals ask is ”what type of business entity do I settle for, a company or a business name”?
In this article, we would briefly highlight the differences between a business name and a company, we hope this will help you decide on the most suitable type of business entity to opt for when setting up your business.
Before we get to it, please note that in Nigeria there are different types of business entities, and they are suitable for different circumstances. To find out more, you may read our article on the TYPES OF BUSINESS ENTITIES IN NIGERIA
WHAT IS THE DIFFERENCE BETWEEN A COMPANY AND A REGISTERED BUSINESS NAME?
|When you register a business name, you register the name with which you do business, and nothing else.||Registering a company goes beyond registering a name to include creating a legal entity that has a separate identity from its founder.|
|The death of its registered proprietor(s) automatically results in the death of the business||With the presence of directors and shareholders, the death of a founder does not result in the death of the company|
|A registered business name cannot acquire assets in its name, and in the event, it is sued, it is sued in the name of its proprietor(s)||A company possesses human attributes in law. It is capable of owning assets, initiating a court suit, and being sued, all in its name.|
|Its registration number on the certificate is accompanied by the letter “BN” after registration||Its registration number on the certificate is accompanied by the letter “RC” after registration|
|All profits and losses incurred in the course of business are solely borne by the proprietor(s)||A company as a legal person is not solely entitled to all profits and losses. In most cases, it is required to share its profits with shareholders and directors as dividends, etc.|
|There are no directors or shareholders in a business name||All companies have directors and shareholders|
|There is no limit to the liability of a proprietor(s). In the event the business goes bankrupt for instance, the proprietor(s) may have to get money from his/her personal assets to pay creditors.||The liability of members of a company is limited to the extent of their contribution in the event of unpleasant circumstances such as bankruptcy.|
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 the legal aspects of business entities before you proceed to get your business registered.
Having done justice to this question, are you ready to get the registration aspect of your business structure sorted? Please reach out to us by clicking the Whatsapp icon on your right or reach out to us HERE let’s get started.