Limited or Enterprise: A one-minute guide for registration of start-ups in Nigeria - Biztorials

Limited or Enterprise: A one-minute guide for registration of start-ups in Nigeria

Many entrepreneurs find themselves in a fix when it comes to registration of their businesses because they are not sure which mode of registration would work best for them. For profit making ventures, there are two main avenues of registration available at the Corporate Affairs Commission: company and business name. The option chosen by the entrepreneur depends on some key parameters which are outlined in the table below for guidance. Some organisations actually start out as a business name and later restructure to become a company. Whichever way, it is imperative that you choose the option that would maximize the potential of your business because structures matter. It is advisable to seek professional guidance from the onset.

Parameter Company (LLC) Business Name (Enterprise)
Membership Minimum of two persons are required to form a company One person can register a business and be the sole proprietor
Succession Since the company will be a legal person entitled to sue and be sued, own property and corporate seal, it can outlive its members as shares are transferrable though with some measure of restriction for a Limited liability company (LLC) Business ends with the death of the owner. In other words, there is no continuity. In the case of a partnership, death  of a partner would end the business except the agreement states otherwise.
Liability The members’ liability is limited so that they are only liable to the extent of their unpaid shareholding because the company is a separate legal entity, thus the company itself will be liable for its debts and not the members or shareholders. The owner of a business is not protected from the liability of the business. He will be personally liable to pay if the business is in debt. Liability is unlimited.
Legal Personality A company duly incorporated has legal personality and so can sue and be sued in its own name. What this means is that the company is a person in the eye of the law distinct from its owners. Business name has no legal personality therefore a law suit has to be in the name of the owner or proprietor
Tax liability A company is required by law to remit tax from its income under the Companies Income Tax Act 2004. A business name is not required to pay tax on its income but it is required to remit VAT for goods and services it deals in where such goods/services are not exempted from VAT. The VAT is usually borne by the consumer in the final analysis.
Cost of registration Registration of a company will cost minimum of N35,000 excluding legal fees Business name can be registered with as low as N12,000 excluding legal fees
Governance A company requires a Board of directors to administer its affairs and the law requires every company to have at least two directors at all times. The law requires every company to have a secretary who will assist with the governance of the company and advise on compliance with company laws & regulations A business can be run by a sole proprietor and he/she can do all that is required to keep the business going. There are no formalities as with the company and no company secretary is needed. Also in the case of a partnership, every partner is entitled to participate in the management of the business.
Restrictions A company is required to abide by its objects in the memorandum of association and so could be restricted on the business it could carry out if such is not stated in the objects. A business name does not need any memorandum of association and could have a wider coverage of businesses it could undertake.

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About the Author

Teingo Inko-Tariah
Teingo Inko-Tariah is a Port-Harcourt based corporate commercial legal practitioner who is passionate about supporting the growth of small businesses and start-ups.
  • Giddy2.com

    Thank you so much.I have a product with the product name register in Uk, i want to bring it to Nigeria and sell it to interested customers. Do i need to register the product brand name here in Nigeria too?

    • Biztorials

      Hello, if you would like to protect your brand name you need to register it in Nigeria. It is not the same thing as registration of company. You will need to register with Trademarks, Patents and Designs registry, Abuja. Thank you.

  • Ahmad

    Hello, thank you for the post, but I need to clarify if there is a limit to financial transactions that can be embarked upon by any of both?

  • Tina

    Hi. I want to know if 5% VAT can be charged differently for a Limited Liability Company and Enterprise

    • Hello Tina. Your question is not very clear. However, 5% VAT is applicable to all goods and services that are not exempted from VAT and every organisation, whether Limited Liability company (LLC), Enterprise or Non-profit organisation is liable to pay VAT for all goods and services subject to VAT. VAT returns are usually made by entities separately so if the same person has a LLC and enterprise, you should charge VAT separately according to the service and according to the entity. Hope this answers your question, if not please clarify. Thank you.

  • adeola alabi

    Hello. My company name has LTD attached to it can it be reverted to an enterprise?

    • Hi Adeola, you cannot revert a Limited Liability Company (LLC) to an enterprise and vice versa. They are under two different categories under the Companies and Allied Matters Act (CAMA). While LLC is registered under Part A of CAMA, enterprises or business names are registered under Part B.