Types Of Business Registration In Nigeria

To offer a detailed overview of business registration types in Nigeria and the procedural steps involved, we will explore each registration category in depth. This aims to provide a clear and thorough understanding of the process. It's essential to highlight that the Corporate Affairs Commission (CAC) oversees all incorporations in Nigeria.

Types of Business Registration in Nigeria

In Nigeria, businesses can be registered under different legal structures depending on their size, ownership structure, and intended operations. The main types of business registrations are:

1. Business Name
2. Private Limited Liability Company (Ltd)
3. Public Limited Liability Company (PLC)

Each type of registration serves different purposes and is governed by specific regulations and procedures. Let us briefly explore each type of incorporation.

1. Business Name Registration

Purpose and Applicability: Business Name Registration is suitable for sole proprietors or partnerships conducting business under a specific name. It does not create a separate legal entity from its owners. A foreigner cannot register a business name in Nigeria, and it can only be formed by Nigerian citizens or legal residents.

Features:

• The simplest form of registration.
• Typically used for small businesses.
• Owners are personally liable for debts and obligations.

Procedure:

• Choose a unique business name that is not already registered.
• Complete the registration form with the Corporate Affairs Commission (CAC) or through CAC-accredited agents.
• Submit required documents such as passport photographs, identification, address, and business objectives, not more than two.
• Pay the registration fee and service fee if an agent is used.
• Once approved, the business name is registered, and the certificate and other incorporation documents can be downloaded online.

2. Private Limited Liability Company

Purpose and Applicability: Incorporated Companies are distinct legal entities from their owners (shareholders). They can be formed for profit-making purposes and are regulated by the Companies and Allied Matters Act (CAMA) 2020. It is usually referred to as an LLC in many countries. Private companies are recommended for a new or start-up business. A private company can also be upgraded to a public limited liability company if required. It is the only form of incorporation recommended for a start-up. It can be registered as a subsidiary of another company (either a local or foreign entity), and it can also be registered as a representative office, depending on the objectives.

Features:

• Most common form of company registration.
• Limited liability provides protection for shareholders.
• Shares are privately held and not traded on public stock exchanges.
• Limited liability companies must have both directors and shareholders, although both can be the same person.
• Only one person can form a limited liability company, provided he/she is a Nigerian citizen
• Limited liability can also be made a subsidiary company of another entity, either foreign or local.
• It is the only form of a company a foreigner can set up in Nigeria. However, the minimum authorized share capital for a foreign-owned limited liability company is NGN100 Million.
• It can be upgraded to PLC in the future if the shareholders decide to open it to the members of the public.

Procedure:

• Choose a unique company name that is not already registered.
• Prepare memorandum and articles of association outlining company objectives, shareholder rights, and governance; this can be prepared by the agents if one is hired for the incorporation, and the CAC also have an editable one on its CRP.
• Appointment of directors and subscription to the shares of the proposed company by the shareholders, as well as the percentage of the shareholding, if there is more than one shareholder. The maximum number of members is 50.
• Appointment of company secretary if applicable (company secretary is only mandatory for a foreign-owned company).
• Appointment of an auditor is optional
• Submit the application to the Corporate Affairs Commission (CAC) with the required documents. If a company registration agent is hired, all the details will be provided to the agent whose CRP access will be used for the incorporation.
• Documents for incorporation typically include directors' and shareholders' details, identification, address, phone number, email, details of registered address for the company, and objectives of the company.
• Pay the registration fee, and if an agent is hired, a service fee will be paid, too.
• Upon approval, a certificate of incorporation and other incorporation documents are issued by the CAC.

3. Public Limited Company (PLC)

Purpose and Applicability: A public limited liability company (PLC) has the same features as a private limited liability company, except the PLC can be automatically opened to public investments and can have unlimited shareholders. A public liability company must maintain a minimum of two directors and a company secretary.

Features:

• Suitable for larger businesses intending to raise capital through public offering of shares.
• Shares are traded on public stock exchanges.
• It is registered just like a private limited liability company; however, the minimum number of directors is two, and there is no limit to the number of memberships.
• It requires more stringent regulatory compliance, which includes approval or authorization from the Securities and Exchange Commission s
• It is recommended for a well-established business, not a start-up business.

Procedure:

• Similar to private limited company registration but with additional requirements:
• The minimum authorized share capital is NGN2,000,000.
• A PLC is expected to have a minimum of two shareholders at the point of registration.
• The company must have at least five directors, three of whom must be independent directors.
• Compliance with Securities and Exchange Commission (SEC) regulations.
• A PLC can easily raise money from the capital market, subject to regulatory approval.
• The appointment of a secretary and auditor is mandatory.

Post-Incorporation Requirements

• Register for taxes with the Federal Inland Revenue Service (FIRS) and obtain a Tax Identification Number and VAT Number (both are the same number).
• Obtain a company seal (optional but recommended for legal documents).
• Open a corporate bank account using the company's certificate of incorporation and other incorporation documents.
• Obtain necessary business licenses and permits depending on the nature of operations.
• Continually file annual returns with the CAC and FIRS (the first one is to be filed after 18 months of incorporation)

In closing, business registration in Nigeria involves navigating various legal requirements depending on the type of business structure chosen. Whether registering a business name or an incorporated company like a private or public limited company, understanding the process and ensuring compliance with regulatory frameworks such as the Companies and Allied Matters Act (CAMA) is important. It is important to know that a foreigner must incorporate a limited liability company to carry on any business in Nigeria.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.