Founders and entrepreneurs usually find it easy and cost effective to register their business as an enterprise at the initial stage, with a dream to grow and expand as the business does. This growth would usually mean that the corporate structure of the business would metamorphose from being an enterprise to becoming a limited liability company. However, if not properly done, converting from enterprise to a Limited Liability Company can lead to complications including loss of original name, brand goodwill and structure.
Considering the advantages of LLC status over an enterprise, some entrepreneurs may wish to convert their businesses from the latter to the former. One such advantage is that the liability of an LLC owner is limited to a number of shares subscribed, unlike an enterprise where the owner’s liability is unlimited. Additionally, any legal action will have to be taken in the name of the owner of an enterprise as the business does not have a legal personality like the LLC. To learn more differences, you can see Limited or Enterprise, a one-minute guide for registration of start-ups in Nigeria.
Although this it is not practicable to directly convert an enterprise to an LLC, the following procedure would aid a smooth upgrade so that the business name and brand can be retained while the status of the company changes.
Annual returns must be paid if due, for the enterprise/business name. To learn more about Annual Returns read:Why And How You Should File Annual Returns At The Corporate Affairs Commission
Apply For Cessation of Business Name
The proprietor must apply for a cessation of business name; if the business is a partnership, then consent to the cessation by all partners would be required.
Return Original Business Name Documents
Original business name documents should be returned for cancellation by the Corporate Affairs Commission
Search & Reserve Name
Submit an Availability name search/reservation form with the letter of cessation attached to it. Normally a business name or enterprise would not have the word ‘Limited’ or ‘PLC’ which is required as part of the name of an LLC. Thus for e.g., one can conduct availability name search to change from ‘Diamond Enterprises’ or ‘Diamond Ventures’ to ‘Diamond Enterprises Limited’.
Follow the company registration procedure
Undertake the normal procedure for registration of a fresh company.
Transfer the Business Assets
Transfer the business assets of the enterprise to the new company that has been formed. This might include writing to your banks, trading partners, customers and updating all records to reflect the new status.
*Please note that adequate professional guidance should be sought as this does not constitute legal advice and is solely for enlightenment purposes.