WHAT IS A COMPANY?

A company is essentially an artificial person—also known as corporate personhood—in that it is an entity separate from the individuals who own, manage, and support its operations. Companies are generally organized to earn a profit from business activities, though some may be structured as nonprofit charities

The law guiding the company formation in Nigeria is the Companies and Allied Matters Act, (CAMA) Laws of the Federation of Nigeria (2004). The Act is the guidelines for the formation of any type of company in Nigeria and other ancillary matters.

TYPES OF A COMPANY

There are different types of company formation allowed under Nigeria’s company law. Several people seeking to do business in Nigeria, especially for the first time, often want to know what type of company is most suitable or appropriate in Nigeria.

They are;

1. Private Limited Company (LTD)
2. Public Limited Company (PLC)
3. Companies limited by guarantee and
4. Unlimited Companies.

Having stated the 4 types of companies available for registration in Nigeria, it is very relevant to further restate that among all the 4 types of companies mentioned, private limited liability companies are the most widely used form of business enterprise in Nigeria. Private Limited Liability Company has several advantages, which include but limited to perpetual succession, limited liability, and separate legal personality. Above all, it is the only form of company that can easily and be swiftly registered in Nigeria.

PROCEDURES FOR REGISTERING A COMPANY IN NIGERIA

The procedure for company registration in Nigeria are as follows:

Any person proposing to register a company is advised to speak to a consultant, especially a corporate lawyer, however, the services of accredited agents or lawyers are still requested for attestation of the incorporation documents. The following information must be furnished to proceed with company registration in Nigeria:

Name of the proposed company (two names are to be submitted by the applicant: the proposed name of the company and an alternative name)

Objects of the proposed company (summary of the work or business the company intends to engage in).

Names, addresses and email of the shareholders ( the shareholders can also be the directors

The sharing formula or ratio of the company shares among the shareholders.

Names, addresses, and emails of the first directors of the company (the same shareholders are qualified to also be directors).

Copies of the means of identification of the shareholders and directors, such as driver license, international passports etc.

The availability check and reservation of the name of the proposed company must be conducted with the Nigerian company’s registration agency, Corporate Affairs Commission (CAC).

The consultant or lawyer prepares the necessary incorporation documents and completes the incorporation forms obtained from the CAC. The incorporation documents include:

Duly verified particulars of the director and statement of share capital known as CACForm 1.1

Duly stamped Memorandum and Articles of Association

The individual completes all the incorporation documents with the input of an accredited lawyer to duly attest to the incorporation documents.

The payment of the prescribed fees will now be duly made online and the incorporation documents immediately stamped online.

The stamped incorporation documents will now be duly uploaded into the CAC online portal again for the final review of the commission

If all the incorporation documents are well completed and executed, the commission will incorporate the company and issue an incorporation number immediately online.

Certificate of Incorporation and the Certified True Copies of the other documents will be issued by CAC and received by the consultant or lawyer, usually in less than 48 hours after the company is duly incorporated by CAC

BENEFITS OF REGISTERING YOUR COMPANY

1.  You will limit your liability

As a sole trader or partnership, you are legally responsible for all aspects of your business, including debts and losses. Further, if you sell a defective product or make an error, you will be personally liable. Running a business this way can be risky because it means that your assets are also on the line.

By contrast, a company is a separate legal entity and it is an easy way to protect your assets from your business actions. Debts which attach to the company will not attach to you, which means that you can focus on building your business.

2. You will minimise your tax liability

Depending on how much revenue your business brings in, you will likely pay less tax under a company structure. In Australia, the current tax rate for companies and small businesses is lower than the highest tax rate for an individual. As a sole trader, you are taxed as an individual and your business’s profits form part of your income.

Also, your company will be entitled to a range of tax deductions for advertising, education, and training and repairs and maintenance.

3. You can avoid conflict with your founders

Registering a company helps immensely if conflict arises with your cofounder. When you register your company, the control which owners have is subject to the number of shares they own. The owners will have a clear understanding that their investment in the company is not by any pre-registration verbal or written promises. If a dispute arises, share allocation will also determine who has the most decision-making power.

Similarly, companies can allow you to separate the ownership and management of the business. For example, you may have several shareholders, but appoint managers who do not own the company. This allows the business to be run by expert professionals, who are focused on generating profits for the shareholders.

4. Legitimacy and brand awareness

Think of the biggest brands in the world today – Google, Nike, Facebook. All of these are registered companies. For a business to be as successful and expansive as it can be, having a company structure is necessary.

Registering your company enhances the reputation and perception of your business. A company is its entity, which operates separately from you. You will also be accountable to ASIC and operate under an Australian Company Number (ACN).

Becoming a registered company is also important for any future dealings with third parties, as many businesses will only hire or engage with registered companies. This means that your business contracts will have your company’s name on it, rather than your own.

5. You can raise significant capital

As a company, your ability to attract investors and raise money for your business will be easier. Registering your company gives you the ability to borrow and incur debt but more importantly, sell shares and raise equity capital. If you had any other business structure, then you would need to pay taxes on your income tax statement even if that money is staying in the business.

Raising money could be essential for the development and expansion of your business. It is also preferable for investors to invest in a registered company rather than a sole trader or partnership, mainly because they know that there is a formal structure in place to accept their investment.

Conclusion

Registering a company can be one of the best ways you can expand your business and help ensure its success. Not only will you be free of liability, but lower tax rates will mean that you can focus on turning your business into the lucrative venture you want it to be. If you’re unsure which business structure is right for you, a business lawyer can help you determine which option is right for you.