Types of Businesses that Can Be Registered in Nigeria

Starting a business in Nigeria can be rewarding and fulfilling, but it can also be a complex process with many different steps and requirements. In this blog post, we will explore the different types of businesses that can be registered in Nigeria, the cost of registering a business, and the documents required for registration.

However, before you take that bold step to register your business, you must familiarize yourself with the different types of businesses registered in Nigeria, as there are specific pros and cons for each.

In Nigeria, like in other countries, business operations are regulated by law, which allows for certain types of business operations. Some of these business structures range from enterprises to limited liability companies. The Companies and Allied Matters Act (CAMA) 2020 also has rules about how these businesses can register and run. The Act empowers the Corporate Affairs Commission (CAC) to conduct the affairs of registering businesses in Nigeria.

Legal forms of business in Nigeria

• Sole Proprietorship
• private limited company
• public limited company
• Public Company Limited by Guarantee
• Private Unlimited Company

Different types of business entities can be registered in Nigeria. These are:

Sole Proprietorship

Apart from being the simplest, it is the most popular and oldest form of business operation in Nigeria. This is simply because a sole proprietorship is a “one-man business.” Although a sole proprietorship business model is not a full legal entity, it’s still a unique business structure.

In this type of business, the business owner is the same as the business itself and bears the liability incurred by the company rather than the industry taking the risk. Also, the business owner enjoys the profit for the business alone.

One of the significant advantages of this business type is that it allows the business to operate a corporate business account in its name. For instance, a sole proprietorship business is called an “enterprise.”

Private limited company

Unlike a sole proprietorship, a private limited company operates as a full-fledged company. In law, this type of corporation is regarded as a “juristic person,” meaning that it has the right to sue and be sued in its registered name. 

In the Nigerian ecosystem, a private limited company can be registered by one individual of at least 18 years. Some of the features of this type of business include that the members must be at most a maximum of fifty, the minimum issued share capital is N100,000, and the company’s owners are different from the company. This means that the company owners are not liable for an act done by the company, and their liability is only limited to the number of shares they own. So, in the event of liability, the owner’s assets are safe.

Furthermore, a private limited company operates under a memorandum of association.

One of the downsides of this type of company is that its shares are private, meaning that you cannot trade them on the public stock exchange market.

Public limited company

The public limited company is an extension of the private limited company. This business structure is most suitable for large companies. Its shares are publicly traded on the stock market and are required by law to publish their financial records annually for transparency and accountability. Of course, this type of corporation can only be registered in Nigeria by a minimum of two adults. And it operates with a share capital of N2,000,000. Examples of this kind of company are banks.

Public Company Limited by Guarantee

These types of companies are otherwise referred to as “non-profit organizations.” They are registered not so they can make money, but so they can help people in need. They may have unlimited shares, but the owners’ (shareholders’) liability is limited. And because they are not in business to make profits, they don’t sell their shares on stock exchanges.

Private Unlimited Company

A private unlimited company is not a very popular type of business registration in Nigeria, even though it’s similar to private and public limited companies. In this kind of company, the shareholders have unlimited liability because a business registered as such can have unlimited share capital.

Documents needed to register a business in Nigeria

The documents necessary for the registration of companies in Nigeria include the following; 

• Notice of the registered address of your business 
• Memorandum of Association
• Articles of Association 
• Particulars, lists, and consent of the first directors of your company.
• Particulars of the company secretary (this is optional for a private company in line with CAMA 2020).
• The objects and business of the company must be provided. 
• Statement of compliance by a legal practitioner

The procedure for registering a company

The processes involved in company registration in Nigeria are;

• Carry out a name reservation by choosing two suitable company names and checking for their availability with the Corporate Affairs Commission. Name reservation costs #500
• Commence the company registration with the availability code provided by the Commission after the approval of the name reservation.
• Prepare the Memorandum of Association and all related documents based on the objects of the companies to be registered. It is best to consult a lawyer for this. (The Commission provides a template for this on the registration portal). 
• Fill out the registration form on the Corporate Affairs Commission (CAC) portal to be submitted alongside other required documents.
• After filling out the registration form, and confirming the information provided, the filing fee and stamp duty fees are paid online via the Remita platform.

The cost of registering a business in Nigeria

The cost of registering a business in Nigeria varies depending on the type of business and the state in which it is registered. For example, the cost of registering a sole proprietorship or a partnership in Lagos State is approximately 25,000 Naira (about $65). Registering an LLC in Lagos State is about 75,000 Naira (about $200). In addition to the fee for registering a business, there may be other costs, such as legal fees, accounting fees, and the cost of getting any licenses or permits that are needed.

How Long Does It Take To Register A New Company In Nigeria?

Depending on the Corporate Affairs Commission (CAC) workload and other factors like server downtime, company registration in Nigeria may take about a week or less.

CONCLUSION

A sole proprietorship business doesn’t require the services of a lawyer, a chartered accountant, or a chartered secretary. But for the other kinds of companies, any of the people listed above must sign up as promoters on behalf of the business owners.