ADVANTAGES OF BUSINESS NAME
There are different forms of company that can be registered by an individual at the Corporate Affairs Commission (CAC). An individual can either register a Business name, a Limited Liability Company or an Incorporated Trustees, however, these different ventures have their own advantages and disadvantages.
The choice of the venture to register will be dependent on various factors surrounding the registration of such by the individual. Below are some of the advantages of a Business name over a Limited Liability Company
- BUSINESS NAME
This is also known as an “Enterprise”. It is registered under Part B of the Companies and Allied Matters Act (CAMA). A business name could be registered as a Sole Proprietorship or as Partnership.
- ADVANTAGES OF BUSINESS NAME
Below are the advantages of Business name over a Limited Liability Company in Nigeria:
- Business name requires little capital
- Business name is easy to register
- Business name requires less formalities
- A sole person can register a Business name
- Profit of the business is solely owned by the owner
- Tax liability in Business name is minimal
- Decision making is easier with Business name. ie No need for board resolution or annual meetings.
- Level of ownership, shareholding, investment and interest are not publicly recorded
- Easy conversion process. i.e a business name can be converted to a limited liability company, in the event the business expands rapidly.
- CONVERSION OF BUSINESS NAME TO LIMITED LIABILITY COMPANY
One of the benefits of registering a business name is that it can be converted to a limited liability company, whereas a limited liability company cannot be converted to a business name.
A business name can be converted to a limited liability company in the event the business expands rapidly. The following are the requirements needed for the conversion:
- Formal application for conversion made to the Registrar General of the Corporate Affairs Commission. Attached to the application is the Original Business Name Certificate to the application.
- Where the application is made on behalf of the proprietor of the business name, an authorization letter from the proprietor will be attached alongside the formal application to the commission.
- Evidence of up to date payment of annual returns for the business name. Payment of Annual Return for each year is
N1, 000.00 (One thousand Naira) while penalty to pay for failure to pay each year is N2, 500.00 (Two Thousand Five Hundred Naira). Note: Business name annual return is due for payment from 1st January to 30th June each year except the year it was registered
- The consent gotten from the Registrar General of the commission will be used to begin the conversion process.
- The official filing fee will be paid and the necessary documents will be signed by the directors and shareholders of the company, and all signed documents will be uploaded on the CAC portal for approval.
- Once the application is approved, it will be registered and a certificate of incorporation of the limited liability company will be issued by the CAC.
For individuals wishing to start up a business with low income or less capital, then business name registration is a suitable option for you. It is easy to set up, and less formality. It can equally be converted to limited liability company when necessary.
By Omolade Animashaun, an Associate at Resolution Law Firm