Types of Businesses you can register in Nigeria

You cannot just choose a name and commence business operations in Nigeria

Starting up businesses is the goal of many an entrepreneur or business person who wishes to make their mark in any of Nigeria’s industry sectors, or even internationally. However, that said, you cannot just choose a name and start a business in Nigeria. You should first know the type of Enterprise you are venturing into and whatever legal requirements you may need to fulfill before you can commence business. That is where sound legal advisory comes to play; you should first seek the advice of a lawyer or law firm to advise you before you take the plunge to register your business you do not make a mistake when registering the business.

In Nigeria, businesses are regulated by numerous laws, the first and most important one which is the Companies and Allied Matters Act [CAMA]. The said law is administered by the Corporate Affairs Commission and this Commission is the parent body that regulates businesses in Nigeria. Asides, the CAMA, we have other laws that regulate commercial activities, including the Business Facilitation (Miscellaneous Provision) Act, 2023.

What Legal forms of Businesses can Operate in Nigeria?

• Sole proprietorship
• Limited Liability Partnership
• Private Company Limited by Shares
• Public Company limited by Shares
• Private unlimited company
• Public unlimited company
• Private company limited by guarantee

Sole Proprietorship

The sole proprietorship is the most basic, most widely known form of business operated in Nigeria, especially in the informal sector which makes up a staggering percentage of Nigeria’s workforce. As the name “sole proprietor” suggests, this is a type of business anyone doing business in Nigeria can open, manage and operate on their own without operational input from others. In sole proprietorships, the owner/manager controls the business, takes all profit that accrue from the business, and also bears all legal liabilities whether criminal or civil which may arise in the business in the course of their doing the said business. Sole proprietors can manage their business without registering these businesses with the Corporate Affairs Commission; however, they are required to register a Business Name if they trade under a given name. For example, Mr. Olu deals in motorcycle spare parts. He runs a shop for the said business but chose no name for the business. Whenever he chooses a name for the business, Mr. Olu will be required to conduct a name availability search at the Corporate Affairs Commission to check if that name is available for use. If it is, he has to register it. It is a legal compliance requirement. If the sole proprietor doing business dies, then the business will likely die with him.

Limited Liability Partnership

Under the new companies regime which commenced with the commencement of the Companies and Allied Matters Act, 2020, businesses in Nigeria can now operate as a Limited Liability Partnership which will have a separate legal personality different from the partners of such an entity. Like a company, a Limited Liability Partnership has perpetual succession as partners can be succeeded, but must operate with a minimum of two partners. Even if one partner dies, the remaining partner has a responsibility to fill the gap within six months, or face penalties.

To operate a Limited Liability Partnership, the Partnership must have “designated partners” who must be individuals (not companies). At least one of these designated partners must be a Nigerian resident. The designated partners in a Limited Liability Partnership are responsible for ensuring compliance with regulatory requirements in Nigeria.

An advantage of doing business in Nigeria under a limited liability partnership is that the Partnership can sue and be sued in its own name, acquire and hold properties, and be entitled to every other incidents as companies in Nigeria. This limited liability partnership is usually a preferred choice for operators in the professional services sector, including law firms, accounting firms, audit firms, among others.

Companies

A company in Nigeria is an entity incorporated with the Corporate Affairs Commission which shall have perpetual succession, a share capital, and subscribers to its share capital. Before the commencement of the Companies and Allied Matters Act, 2020, every company was mandated to have a minimum of two shareholders. With the commencement of CAMA 2020, the law introduced single-member companies to ease doing business in Nigeria, just like is obtainable in other jurisdictions. A company has a legal personality different from its principal officers (directors and secretary), can acquire and hold properties on its own, can be sued and sue in its own name, among others.

In Nigeria, every company incorporated with the Corporate Affairs Commission must either be a private company or public company. A private company can have a minimum of one shareholder and maximum of twenty shareholders, while a public company’s subscribers start at twenty, without a maximum number of shareholders.

Private companies can have the liability of shareholders limited by shares, or unlimited. Public companies can have the liability of shareholders limited by shares, or unlimited. Companies can also be limited by guarantee.

Choosing a Business Vehicle in Nigeria

As a business owner in Nigeria, your choice of business vehicle will depend on what you want to do, the industry you wish to operate in, regulatory requirements (for your industry), and the best options available to you. For some, registering a business name is the better option. For professionals trying to set up shop, registering a business name might be an option, but if there are two or more persons that intend to work together, then they might consider registering a Limited Liability Partnership as their business vehicle so they can do business in Nigeria.

Generally, though, limited liability companies remain a great option/choice because you can set whatever share capital you wish (subject to the general minimum share capital of ₦100,000 and industry-specific share capital requirements that can go as high as ₦200 Million).

Legal Requirements for Registration of Businesses in Nigeria

After choosing your business vehicle, be it sole proprietorship (to be registered as a Business Name if you have a name you intend to trade under), a limited liability partnership, or limited liability company, the next step is to register your chosen business vehicle so your Enterprise can have legal backing.

In Nigeria, the Corporate Affairs Commission (CAC) is the Regulator in charge of business operations and ensuring compliance with the CAMA. To register your business, you are required to make a formal application to the CAC in the prescribed format, submit all required information and documentation, signatures, passport photographs and IDs, pay filing fees, then submit application and await CAC approval of the registration. It is quite an involved process and we advise you not to undertake the procedure by yourself if you are not absolutely sure of how to do it.

Key documents needed for registration

• Government-issued IDs of the proprietors, partners or shareholders, depending on the type of entity you are registering.
• Certificate of incorporation, if a company is to be a partner or shareholder in a Limited Liability Partnership or company undergoing registration
• Signatures of partners/proprietor/directors
• Signatures of shareholders in case of a company
• Passport photograph of proprietor in the case of a Business Name

Benefits of Registering Businesses in Nigeria

• Legal recognition and protection
• Access to government incentives and support whenever feasible
• Enhanced credibility and trust with clients and partners
• Ability to open a Bank account with any Bank in Nigeria in the name of your Enterpise, Partnership or Company.

Article written by Kingsley Ani

The content of this article is intended to provide a general guide to the subject of running enterprises in Nigeria. You should seek specialist advice about your specific circumstances.

We do hope that we have provided you with enough information to understand the types of businesses you can register in Nigeria for business purposes. If you have any questions, concerns, or need clarification, you can reach out to us at [email protected] and someone from our team will respond to you as quickly as possible.