A Limited Liability Company (LLC) in Nigeria is a type of business structure that combines elements of both a corporation and a partnership. Like a corporation, the owners of an LLC have limited liability for the company’s debts and liabilities. This means that their personal assets are not at risk if the company is unable to pay its debts.
Also, the profits are taxed separately from the personal income of the shareholders unlike in a sole proprietorship or partnership. It is a separate legal entity from its owners, which makes it easy to raise capital, enter into contracts and own property.
Characteristics of a Limited Liability Company in Nigeria
The main characteristics of a Limited Liability Company (LLC) in Nigeria are:
- Limited Liability: The shareholders of an LLC have limited liability for the company’s debts and liabilities, meaning their personal assets are not at risk if the company is unable to pay its debts.
- Separate Legal Entity: An LLC is a separate legal entity from its owners. This means that the company can enter into contracts, own property, and sue or be sued in its own name.
- Flexibility in management: LLCs have the flexibility to choose how they are managed. They can be managed by the shareholders or by appointed directors, it depends on the company’s articles of association.
- Easy to Raise Capital: LLCs can easily raise capital by issuing shares to new investors or by taking out loans.
- Taxation: LLCs are taxed separately from the personal income of the shareholders, which can provide tax benefits.
- Transfer of ownership: Ownership of an LLC can be transferred by selling shares to new investors.
- Minimum Shareholders: LLCs are required to have at least two shareholders and at least one director.
- Minimum Capital: LLCs are required to have a minimum share capital of N10, 000 ($20)
- Annual Return: LLCs are required to file annual returns with the Corporate Affairs Commission (CAC) in Nigeria.
- Dissolution: An LLC can be dissolved voluntarily or by court order.
Requirments for registering a Limited Liability Company in Nigeria
- The first step required by the applicant is to choose two suitable proposed names for the company. Where this is done, an availability check will be conducted by CAC to find out if the name is available and not already in use by another company.
- The Memorandum and Articles of Association of the company to be registered, which is advisable to be drafted by a Legal Practitioner. However, the Nigeria Entrepreneurs Network is making provisions for such templates, which any new company may adopt.
- The objectives and business of the company must be provided.
- The registered principal address of the company.
- The share capital and shareholding formula among shareholders will be required.
- The particulars of a minimum of one director will be required. A copy of their means of identification such as voter’s card, national ID, drivers’ license or international passport and signatures on plain paper.
- Particulars of the company secretary (this is optional for a private company in line with CAMA 2020).
- The applicant will be required to furnish details of the shareholders of the company. Details such as names, occupation, residential address, email address, mobile phone number and means of identification such as driver’s license, international passport or national identity card. The director can also be the shareholder of the company.