Presently in Nigeria, you can carry on a legal business pursuit under: a Business Name, Partnership or a Company among others. In either of the forms, you have varying degrees of rights, obligations and liabilities. With regards to the Companies and Allies Matters Act 1990; the function of registering business outfits is vested on the CORPORATE AFFAIRS COMMISSION (CAC), located at plot 420, Tigris Crescent, off Aguiyi Ironsi Street, Maitama, Abuja. Corporate Affairs Commission has branches in the 36 states of the Federation. CAC equally registers churches, associations, clubs and Non Government Organisations. For a guide on how to register clubs, churches and associations, click on this link ; A GUIDE ON HOW TO REGISTER A CHURCH AND AN ASSOCIATION IN NIGERIA.
Note; you can only be helped in this corporate work by a professional like a lawyer or an accountant who is duly registered with the Corporate Affairs Commission (CAC). Consequently you have to diligently make sure that your professional is duly registered else you might be giving a fisherman money to by gold for you; what a loss!
REGISTRATION OF BUSINESS NAME.
A business name is an appellation being used by an individual or partners in pursuit of their business. It helps you to be easily identified against imitations and prevents the deception of the public. If you register such under the CAC the entire public is precluded from using such or imitating it. You can sue any person that imitates your business name such that the public might be confused; same was held in the Nigerian case of NIGER CHEMIST V. NIGERIAN CHEMIST. Then close names like “nokla”, “nokiya”, “mokia” can not be allowed when “Nokia” is a registered business name. Consequently, with such registration your products, services, customers, property, goodwill and franchise are adequately protected from piracy and undue competition.
To register your business name in the CAC Ebonyi State office,(if its principal place of business will be Ebonyi State) you have to pay N200 to obtain a “FORM CAC 1” for availability check and reservation of name. If your chosen name is not already in use, offensive, deceptive and prohibited it will be reserved for you for 90 days; within which you are expected to finish your registration. On the completion of registration of the name, the registrar will issue a certificate to that effect bearing the business name and its distinguishing state identification letters in bracket at the end of the name. This seems to be the cheapest of all registrations, with a lesser paper works. Note that a business name that is of only the surname, forenames and initial of an individual or partners and may be with words like “& SONS and & CO.” is not obliged to be registered with the CAC. So, with this you can evade a lot of corporate disturbances.
REGISTRATION OF PARTNERSHIP.
Partnership is the relationship that exists between persons with a common goal of carrying on business and making profit therefrom. It is a known fact that no sane man carries on partnership business with an enemy although most often in Nigerian the partnership turns into enmity later. So are you in a partnership without a legally backed agreement or the registration of such; then you are on a wild goose chase. What will be your faith when your partner loots your common fund and property or you want to quit?
To safeguard your investment you ought to have your partnership agreement written and duly registered. Unlike in company, a partnership is easier to form; since its paper work and requirements are not much. A partnership agreement should contain; “the names of the partners and firm; the business or object of the partners and place of the business; capital of firm; the profits and loss sharing ratio; account of the partnership, arbitration clause; date of commencement and duration of partnership”. In partnership the act of one partner is deemed to be the act of the other; since each partner is an agent of the other. Partnership will beget continuity in business, easy access to capital and other factors of production. Partnership can choose a business name and register same to aid its business. Professionals, artisans, merchants and others alike with common business interest are advised to partner and synchronize their resources towards an unquenchable economic success, on a well outlined legal frame work. Partnership shatters the shackles of sole proprietorship where there is no continuity of business, adequate human resources, proper accounting, mega capital and expansion plans; that is corporate slavery!
Note that; a partnership can not be of more than 20 persons unless such a partnership is being formed by professionals only; like lawyers and accountants. Where a partnership, which ought to be registered, is not duly registered, such partnership is illegal.
REGISTRARION OF COMPANY
Most people do believe that their business outfit is a company while in the actual sense it is a mere business name. Not until you understand your outfit you can not ascertain your rights and duties in the corporate world.
Company is the most important unit of a business organisation for modern economic activities. In Nigeria a company can be formed by at least two (2) persons who are not less than 18 years old, not bankrupt, not insane among others and in line with the provision of the Companies and Allied Matters Act, 1990. A company is complex and in turn offers a lot of protections outweighing other forms. Among the benefits of turning your business outfit in to a company are; business continuity, protection of members and creditors, easy transfer of shares, legal personality and right to borrow and quotation on the stock exchange and access to public fund to say but the least.
The formation of a company entails strict requirements like business name check, filing of a memorandum of association, article of association and some other supporting documents. After the formation and registration with the CAC, the Registrar-General will issue a Certificate of Incorporation and same is to be displayed at the place of its business. Henceforth, the company is now a legal corporate personality (a juristic being) that can sue and be sued; and totally different from its owners (promoters and members) with overwhelming rights and duties as seen in the cases of Salomon V. Salomon and Lee V. Lee Farming Ltd. When the owners borrow for the company, there can not be held liable jointly and separately rather the company would be held. The owners (members) stand to function as the eyes, mouth, legs and hands of the company within the powers of the company. A registered company must either be a Private or a Public company that is Unlimited or Limited in Shares or Guarantee.
A Private Company has a membership of not more than fifty members, whose shares can not be easily transferred and it is not open to the public while a Public Company just as the name implies is open to all.
A Company limited by shares has an approved share capital which has been divided into shares of a fixed amount for its members (investors) to hold. The share capital may be paid up and unpaid that is callable. Shares are the unit of holding and ownership of an investor in a given company. The liability of the company can only be paid off by its capital and property and does not extend to the company owners and their own property. A share limited company must be either a public or a private company. The share capital for a private company is N10, 000 while that of a public company is N500, 000 and not less than 25 per cent must be taken by the subscriber (promoters and investors). A private company end with the word LTD while a public ends with PLC.
Company Unlimited by shares has a share capital subscribed but the liability of its members does not end there rather members a personally liable for the debts and liabilities of the company. Such a company ends with the word ULTD.
Company limited by Guarantee has no share capital and it is not formed for profit making and distribution among members rather its for promoting commerce, art, science, religion, sports, culture, education, research, charity or other similar object. The whole liability of its members is based on a guarantee that they each would contribute to the company’s assets which shall never be less than N10, 000 in the event of a winding-up. It can not be registered without the authority of the Attorney-General of the Federation. Such a company ends with the letter GLTD.
Finally a private or public company limited by shares stands to be the best with an avalanche of benefits and protection to keep you in business. So won’t you rather incorporate you business and smile back home; like wise men do?