1. Form of Business Structure/Organisation
Before starting up a business, a prospective business owner needs to decide exactly what form of business structure he wants to operate and is best suited to the business he intends to run. In Nigeria, the business options available for registration are:
• Sole Proprietorship, loosely known as “one-man business” or Partnership, both of which are registerable as business names.
• Incorporated companies which can be further broken down into
o Unlimited Private Companies (Unltd.) or Private Companies Limited by shares or guarantee (Ltd.)
o Public limited Companies (Plc.)
These options are to be chosen based on the business owner’s short and long term objectives for the business, the type of business, business needs, availability of capital, liability and tax issues, need to raise capital from external sources in future etc.
Each type of business organization has its benefits and it is important to consider what type of structure suits your intended business.
2. Preparing Proper Partnership Agreements
It is always best to work out how you and your business partners will interact with one another as owners of the business. Each of you should have a clear understanding of your individual legal rights and responsibilities to the proposed business. This is why it is usually best to prepare and sign legally binding agreements such as Partnership Agreements or Joint Venture Agreements. This will reduce the possibilities of disputes during the course of business.
Some of the questions the agreement should answer are:
• How will decisions relating to the business be made?
• In what circumstances can a business partner be required to leave the business?
• What happens when a business partner wants to leave the business?
• What happens if a business partner dies or becomes incapacitated?
3. Trade or Business Licenses and Permits and Professional Qualifications/Certifications
Before registering your business, one important thing to consider is whether the business requires any kind of permit, license or qualifying certificate. For instance, before a school can be registered, the business owner must have a qualifying degree in Education. A bank, for example will require an Approval-in-principle from the Central Bank of Nigeria and other financial regulatory bodies before its incorporation can be done.
Every prospective business owner should undertake an in-depth study of the industry he wishes to enter into and the requirements for registration as regards permits/licences or certification. Failure to obtain them might result in penalties from regulating bodies in the industry or queries at the point of registration.
4. Intellectual Property (Trademarks & Patents) Protection and Non-Disclosure Agreements
Another thing to consider is registration of brands, colours, symbols, logos as trademarks both on the local or international level and in the case of invention, obtaining of patent in the name of the business.
A thorough search should be done by the prospective business owner to prevent the use of an already trademarked name or brand to prevent huge financial losses and loss of reputation in future.
Where a business idea or plan will be perused or discussed with people other than the business owner, it is advisable to ensure a confidentiality or non-disclosure agreement is signed by the other parties to prevent them from appropriating one’s business idea/plan.
5. Commercial Contracts
Contracts are usually used by most businesses for different situations and transactions. You need to understand when you need to have a written contract for particular transactions and when you may bind yourself to a contract. You should take the time to consider how you intend to deal with your customers and suppliers and how to document it in writing.
You also need to consider contracts such as appropriate employment contracts for your employees, lease agreements for the premises which you intend to to run your business, etc.