A Business Name in Nigeria is a legal trading name. There are different forms of company that can be registered by an individual at the Corporate Affairs Commission (CAC). A Business name and Private Limited Liability Company may be registered by one person (sole proprietor). The Companies and Allied Matters Act 2020 now allows for single membership private limited liability companies (LTD) and that is good news for you if you wish to operate as LTD. By implication, you can have full control of your business while the company maintains the status of an artificial person which is capable of owning properties in its name.
Limited Liability Partnership and Limited Partnership: These arrangements demand that you operate together with at least one other person. They are therefore unsuitable for sole proprietors. The choice of the venture to register will be dependent on various factors surrounding the registration of such by the individual. Below are some of the advantages of a Business name over a Limited Liability Company.
The process for registering a business name in Nigeria typically involves the following steps:
- Name search: Before you can register your business name, you need to conduct a search to ensure that the name you have chosen is not already in use by another business. You can do this by searching the CAC’s database of registered business names.
- Application Submission: Once you have confirmed that the business name is available, you can submit your application for registration. This will typically involve filling out an application form, providing the necessary documentation, and paying a fee.
- Wait for approval: After you have submitted your application, you will need to wait for it to be approved. This can take several weeks.
- Obtain your certificate: Once your application has been approved, you will receive a certificate of registration, which serves as proof that your business name has been registered with the CAC.
You will also need to renew the registration every year, and there’s a fee for it.
It’s important to note that there are some restrictions on the names that can be registered. For example, the name of your business must not be too similar to an existing name, and it must not contain any prohibited words.
In addition to registering the name, there are other legal requirements for setting up a business in Nigeria, such as obtaining the necessary licenses and permits, and registering for taxes.
Advantages of a Business Name over other type of business incorporation
- Tax liability in Business name is minimal compare to all other ones
- Business name is easy to register
- Business name registration requires less documentation
- Business name requires less registration protocols
- A single person can register a Business name
- Profit of the business is solely owned by the owner
- Decision making is easier with Business name. ie No need for board resolution or annual meetings
- Level of ownership, shareholding, investment and interest are not publicly recorded
- Easy conversion process. i.e a business name can be converted to a limited liability company, in the event the business expands rapidly.
Difference between A Business Name and a Limited Liability Company
A business name is simply the name under which a company conducts its operations. A Limited Liability Company (LLC) is a specific type of business structure recognized by state law. An LLC is a separate legal entity from its owners, known as members unlike a business Name. It offers the personal asset protection of a corporation, but with the pass-through taxation of a partnership. This means that the company is responsible for its own debts and liabilities, and the members are generally not personally responsible for them. Below are some differences between a business name and a Limited Liability Company:
- Legal Status: A business name is simply a name used to identify a company, whereas an LLC is a legally recognized business structure.
- Asset Protection: An LLC provides personal asset protection for its owners (members), whereas a business name does not offer any legal protection for personal assets.
- Taxation: An LLC is typically a pass-through tax entity, meaning the business itself does not pay taxes on its income. Instead, the income is passed through to the members and they pay taxes on it as personal income. A business name does not have any specific tax implications.
- Ownership: An LLC is owned by one or more individuals known as members, while a business name does not have any specific ownership structure.
- Formalities: Forming an LLC typically requires more formalities and paperwork to be filed with the state government, such as articles of organization and an operating agreement. Registering a business name is usually a simpler process and does not require as much documentation.
- Management Structure: An LLC has a more defined management structure, with a designated manager or group of managers, whereas a business name does not have a specific management structure.
- Continuous Existence: An LLC has a continuous existence, meaning it remains in existence until dissolved, whereas a business name can be abandoned or changed at any time.
- Transfer of Ownership: The ownership of an LLC can be transferred through the transfer of membership interests, while a business name can only be transferred by transferring the rights to use the name.
