There are three types of business registration in Nigeria. These are business names, companies and guarantees. Business owners need to decide on what type fits their business. This article provides guidance on business name registration in Nigeria.
How does business name registration work?
You can decide to register a business name. This can be in the form of a sole proprietor or a partnership. A sole proprietor is a business owned by one person. Partnership is owned by at least two persons.
The registration process is simpler for a sole proprietor than for a partnership. In a partnership business registration, each partner will sign an agreement known as a deed of partnership. This makes the registration formal.
Advantages of registering as a business name
Simple to register: A business name registration with the Corporate Affairs Commission (CAC) is straightforward. The individual(s) will provide their name(s), suggested business name, and their means of identification.
Less Expensive: The simple process makes the charges by agents less expensive. Therefore, it is affordable for small businesses
Secrecy: The financial accounts of these businesses are kept secret. They are not made available to the public. The entities in this category are funded by the owners with little help from family and friends.
Enjoyment of profit: The business owner enjoys all the profit alone. However, for a partnership, the partners share the profit based on the agreement in the Deed.
Quick decision-making: The entrepreneur can make decisions without any interference from others. A sole proprietor will make decisions faster than partners in a partnership.
Disadvantages of business name registration
Unlimited liability: They have unlimited liabilities. This means that, if an entrepreneur is in debt and cannot repay. The debt can be repaid from his/her personal properties.
Bankruptcy: It is easier for a business name entity to go into bankruptcy. This is due to a lack of adequate funding.
Lack of funding: The owners are the ones who can fund the company. Investors are not interested in funding entities registered as business names. Therefore, a lack of finance from investors means lower capital for business operations and growth.
High payment of taxes: Owners have to pay taxes on the business through personal income tax laws. They might pay up to 25% progressive taxes if their total chargeable income is above 50 million.
Lack of perpetual succession: They lack continuity. The death, retirement, or bankruptcy of an owner or partner will lead to the closure of the entity. And a new one must be formed if a successor wishes to continue running the business.
In final words, a decision to register a business name entity needs to be made with the information. If you can finance the business without investors, you might consider a sole proprietorship or partnership. Also, weigh the advantages and disadvantages before making a final choice.