Has your registered business started doing well? Has the business started growing to the point that you may need to expand your business objects? Are the confines and limits of a registered business name too limited for you?
There are limits to what you can do with a business name and the advantages enjoyed. You may need to convert your registered business name to a private limited liability company. A private limited liability company has many more advantages to be enjoyed than a registered business name. Some of the advantages of converting from a registered business name to a limited liability company are:
1. Converting to a private limited liability company instead of incorporating a fresh company has the advantage of you being able to keep the name used with the addition of “Limited” or “Ltd” at the end of the name. For example, if you convert the business name “Naija People Ventures” to a private limited liability company, it will become “Naija People Ventures Limited”.
2. Converting from a registered business name to a private limited company projects a more professional image. It shows the world that you are focused on the business and committed to abiding by professional corporate governance structures created by the Corporate Affairs Commission. It shows that the business is permanent and committed to effective and responsible management as well as instilling a sense of confidence in customers and suppliers.
3. Converting to a private limited company has the added advantage of increasing the number of business objects your company can have. The CAC currently has a policy that limits the number of business objects a registered business name can have to just three (3) objects as well as limiting the kind of business a registered business name can do. With a private limited liability company, there are no limits to the number of business objects the company can have or the type of business it can do.
4. Unlike a business name, a private limited liability company is a separate legal entity (an imaginary person) from the people who create/run it in the eyes of the law. It can sue and be sued in its own name.
5. The liability of the shareholders of a company is limited to the value of the shares they hold unlike business names such as sole proprietorships where the owner of the business bears the full liability or a partnership where the liabilities are evenly borne by the partners.
6. The private limited company has more sources of capital compared to the business name organizations. There is a higher number of people that can co-own the business and make financial contributions. The limit to the number of shareholders in a private company limited by shares is fifty, compared to the limit of twenty people in a partnership and just one person in the sole proprietorship.
7. Also, the status of a private limited company grants it the opportunity of loans and overdrafts from financial institutions. Banks are more willing to grant loans to limited liability companies than business names.
8. A private limited company is more likely to receive credit facilities from business suppliers than registered business name.
9. Because of the higher number of shareholders in a limited liability company, there is a greater pool of knowledge, skills, ideas and expertise compared to the partnership and sole proprietorship.
10. There is continuity in a private limited company. The death or withdrawal of a shareholder does not bring an end to the business unlike in sole proprietorship and some partnerships.