What is business registration?
Business registration is a process by which a business is officially registered under the laws of a country in order to give it legal recognition. In Nigeria, businesses are registered through the Corporate Affairs Commission (CAC) which is an arm of the Federal Ministry of Trade and Investments. Upon registration of a business, a certificate of registration is issued as prima facie evidence of the registration.
Under the Nigerian law, there are different legal forms of businesses that can be registered. This article takes you through the list of business structures which you may have access to register provided you comply with the legal requirements.
The laws governing business registration in Nigeria are quite numerous however, the primary legislation on this topic is the Companies and Allied Matters Act, (CAMA), LFN 2020. Under this law, any person can register or take part in the registration of a business regardless of race, colour, nationality religion or sex. It means therefore that, aliens (foreigners) can also register businesses in Nigeria.
The law however places a restriction on certain types of persons from registering or taking part in the registration of businesses in Nigeria. A person is disqualified if he or she is:
- less than 18 years of age; or
- of unsound mind and has been so found by a court in Nigeria or elsewhere; or
- an undischarged bankrupt; or
- disqualified under section 254 of the Act (CAMA) from being a director of a company.
Note however that a person who is less than 18 years can take part in the formation of a company or a business insofar as there are not less than two adult members of the business.
Legal Forms of Business Organizations That Can Be Registered in Nigeria
Below is a brief description of types of business and non-business organisations in Nigeria.
Business Name
A business name is also known as “Trade name” is most suitable for sole proprietors and partnerships. It is simply the case of an individual or set of individuals doing business through a registered trade name. The business is the same as the people running it. Hence the business itself does not have separate legal personality. Business names usually bear names such as: Classic Attorneys, Midas Touch, Emmanuela Enterprise, Veston Ventures.
A business name is quite appropriate for traders, artisans, lawyers, accountants, and small businesses owned by an individual or a small group of individuals who are either required by law to operate through a business name or who have a very small budget.
A Company
A company is a business organisation with shareholders, directors and a secretary. A company is a juristic person and has a distinct personality different from its owners.
Thus, a company can sue and be sued in its name, can own land, can own shares in another company and can do such other acts in its name as are permitted under the law. While a business name cannot have more than 20 members at the same time, a private company can have 50 members while a public company can take in as many numbers of people. There are three different types of companies recognised by the Nigerian law and they are:
- Limited Liability Company: A company in which the liability of its members is limited.
- Unlimited Company: A company in which the liabilities of its members are unlimited.
- Company Limited by Guarantee: A not for profit company where members don’t share profit but plough back the profit into the business. This type of company is usually registered for promoting commerce, art, science, religion, sports, culture, education, research, charity or other similar objects, and the income and property of the company are to be applied solely towards the promotion of its objects and no portion thereof is to be paid or transferred directly or indirectly to the members of the company.
The liability of the members of this type of company is limited to the Guarantee of each member which must not at any time fall below N10,000.
Each of the companies above can either be private or public. A private company must have at least one member who can also act as the sole director. A private company may not have a secretary. The number of members in a private company must not exceed 50, while a public company can have as many as possible but also a minimum of two directors, two shareholders and one secretary.
A public company must have a secretary.
A company is best for any business where the owners wish to be distinct from the company. A company can be registered to carry on any business in Nigeria except the ones on the prohibited list such as trading in firearms, military apparels, narcotics etc.
There is also a list of businesses that only a company can carry out and the list is quite lengthy. Some of them are: Courier business, Financial Institutions, Bureau de Change, Shipping, Airline Operators, Maritime Business etc.
Limited Liability Partnership
A limited liability partnership is a business structure formed by two or more individuals or corporations with a view to making profit.
One distinct feature is that the liability of partners involved are limited. Also, a limited liability partnership must have at least two designated partners who are individual partners or nominees of corporate partners. One of the designated partners must be resident in Nigeria.
Designated partners are the partners responsible for ensuring that the partnership complies with the provisions of the Companies and Allied Matters Act. They are also the ones who would be liable for any breach or contravention of the Act.
A limited liability partnership also has a distinct legal personality just like a registered company. Hence it can sue and be sued in its name or purchase and own landed properties in its name.
A partner in a limited liability partnership is not personally liable for contractual affairs of the Partnership.
Limited Partnership
A limited partnership is a business structure that consists of at least two partners and not more than twenty partners.
A limited partnership must comprise of at least one or more partners called general partners and also one or more limited partners.
General partners are liable for all debts and obligations of the partnership. Limited partners on the other hand have to contribute or agree to contribute to the capital of the company. Limited partners are not liable beyond the amount they contribute or agree to contribute.
Incorporated Trustees
This is not a business organisation but rather a Non-Governmental Organisation (NGO) which could be formed when one or more trustees are appointed by any community of persons bound together by custom, religion,
kinship or nationality or by any body or association of persons established for any religious, educational, literary, scientific, social, development, cultural, sporting or charitable purpose, he or they may, if so authorised by the community, body or association.
Incorporated Trustees may be a church, a mosque, a charitable organization, a club or association. They usually bear names such as: The Transformation Ambassadors of Nigeria, The Oodua People’s Congress, The Church of God Assemblies, Foundation for Child Care Initiative, Association of Debt Collection Agents of Nigeria, The George Washington Research Foundation etc. This type of organisation usually seeks funds from specific sources and must appoint a chairman and secretary to manage its affairs.
Conclusion
The Companies And Allied Matters Act which was amended in the year 2020 and came into effect in 2021 made several welcoming changes to the law. It introduced the limited liability partnership and limited partnership which had hitherto not existed in the Nigerian law.
For questions on business registration in Nigeria, kindly reach out to us, or schedule a consultation with us.
