You have a brilliant idea and want to explore that idea as an entrepreneur or you want to start a partnership with other people in order to tread that path to entrepreneurship or fulfil a long time dream. Whatever reasons you have for starting your business, the following easy to follow guide will help you know why you should register your business and how to register your business in Nigeria.
Why register your business in Nigeria?
1. The law requires registration: The law states that no company, association or partnership consisting of more than 20 persons shall be formed for business purposes unless it is registered under the Companies and Allied Matters Act (CAMA) as a company. CAMA is the Act that regulates the registration of businesses in Nigeria.
Also, the position of the Law is that every business name must (within 28 days from the date of commencement of that business) be registered where:
• In the case of an individual, there is any addition to the true surname of the individual, any words other than his true first name or his initials. For example, if James John has a business and wants to register that business, he need not register the business if he maintains the business name as “James John” or “James J.” But if he wants the business name to be “James Enterprises” or “James Ventures,” then he must register such business name.
• In the case of a firm or partnership, there is any addition to the true surnames of all the partners, any words other than the true first names or initials of the first names of the individual partners. For example: if James John and Peter Roberts are partners and want to carry on business, they need not register the business name if the name is maintained as “James John & Peter Roberts” or “James J. & Peter R.” But where there are other additions, such business name must be registered.
• In the case of a company/corporation, there is an addition to the corporate name of the company. For example: if Rising Star Nigeria Limited seeks to carry on a separate business name, such business name need not be registered where it is “Rising Star Nigeria”. But where there are any other additions, then the business name must be registered.
2. Protection of the business, its name and brand: It is important to register a business in order to protect that corporate/business name or brand from being plagiarized. When a business is registered, the corporate/business name and brand of that business are distinct and peculiar to that business and its owner. This prevents unnecessary duplicity of corporate/business names, logos and brands. A business name/company which plagiarizes an existing and registered corporate/business name or brand shall be held liable.
3. Your business becomes more desirable to customers: Customers are more likely to be attracted to a business that is recognized by law than others which are not so recognized.
4. Ease of securing loan from financial institutions: When a business is registered and recognized by law, there are higher chances of securing loans to promote the business. This is because financial institutions are usually skeptic of granting loans to businesses that are not recognized in law.
Where is the registration of a business in Nigeria carried out?
Registration of businesses in Nigeria is carried on at the Corporate Affairs Commission (CAC). The headquarters of the Corporate Affairs Commission (CAC) is situated in the Federal Capital Territory, Abuja and there are offices of the Commission in every state of the Federation.
A business name or a company? (Options for the registration of a business)
A business in Nigeria can either be registered as a business name or a company. A business name encompasses sole proprietorships and partnerships. While a company encompasses a private or public company limited by shares, a private or public company limited by guarantee and a private or public unlimited company. As has been earlier mentioned, a company must be formed where an association/business/partnership consists of more than 20 persons for the purpose of carrying on business. Also, there are some specialized sectors of business that require that a company be formed before such businesses are carried on. Examples of such are: banking business, insurance business, private guard business, mortgage business, stock broking among others. Apart from these, there are other factors that influence the decision to register a business as a business name or a company. These factors are:
1. Limitation of liability purposes: A business may be registered as a company in order for that business to be a distinct entity from the owner of the business. This means that the owner of the business will not be held personally liable for the shortcomings of the business. Rather, the company will be regarded as being liable for itself. On the other hand, a business name (sole proprietorship and partnership) is regarded as one and the same with its owner. There is generally no limitation of liability. Although, some limited liability partnerships exist.
2. Cost of registration and expenses: The cost of registration of a company is generally higher than the cost of registration of a business name. A business name requires little start-up capital when compared with a company where there is a fixed amount as the authorized share capital depending on the type of company involved (although companies limited by guarantee do not have share capital).
3. Speed of processing and completion of registration: It is very easy to register a business name because it uses a prescribed Form. The registration of a company is more cumbersome than the registration of a business name.
4. Desire to commence business before registration: The position of the law is that where a company is sought to be registered, such registration must take place before the business commences. However, this is not the case for a business name. The position of the Law is that a business name must be so registered within 28 days of commencement of business. In other words, there is a 28-day period within which business may be carried on before registration of the business name.
5. Post-registration compliances and regulatory supervision: There is less formality in the administration of a business name than a company. As such, a company is more prone to scrutiny and supervision by the Corporate Affairs Commission (CAC) and other bodies to which it belongs.
What are the steps required in the registration of a business name or company?
After an in-depth consideration and a decision has been reached to register either a business name or a company, the basic steps to comply with are:
1. Conduct a search for reservation of name. This is done at the Corporate Affairs Commission (CAC).
2. Prepare registration documents/statutory forms
3. Stamp two (2) copies of incorporation documents (Memorandum and Articles of Association of the company) and Statement of authorized share capital (Form CAC 2) (for a private or public company limited by shares or an unlimited company).
4. Apply for the consent of the Attorney General of the Federation (for a company limited by guarantee).
5. File the incorporation/registration documents at the Corporate Affairs Commission (CAC)
6. Obtain the certificate of incorporation/registration and Certified True Copies (CTC) of other documents from the Corporate Affairs Commission (CAC).