Post updated April, 2019
EASY STEPS TO REGISTER A BUSINESS IN NIGERIA
Whatever be its nature, to get your business registered is one of the very important steps you must take to bring your business idea to reality. Some people would have commenced trading before registering their businesses but it is advised that you do this at the preliminary stages of your business planning process.
This post Easy Steps to Register A Business in Nigeria highlights the advantages you derive from registering your business and how entrepreneurs can register their business in Nigeria.
Benefits of Business Registration
Generally, business registration comes with a lot of benefits:
- It protects your business or trade name: once your business is registered you can be sure that no other individual, company or organization can trade in that name
- It gives your business legal recognition
- It promotes your brand and image.
- It gives your business some form of credibility and seriousness, hence customers are willing and comfortable dealing with you
- It preliminarily qualifies you to bid for contract and jobs both in the private and public sectors
- It helps you to raise funding from banks, development finance institutions, venture capital, institutional investors and individual fund providers
- It reduces your personal liability in the ordinary course of business (this advantage is associated with the limited liability company model)
- It is a definite step towards institutionalizing your business
We can go on and on. The point here is to understand that registering your business is not only legally necessary but also commercially beneficial. For instance, to open a business bank account, you must first present your business registration documents for verification by the bank.
In Nigeria the organization that is responsible for business registration and regulation, including non-for profits organizations such as churches, mosques and NGOs is the Corporate Affairs Commission which was established by the Companies and Allied Matters Act 1990 as amended.
Business registration can take either of two forms, viz: Registration of Business Names or Enterprise and the Incorporation of companies.
The type of registration you need will depend on how you want to structure your business. The law recognizes three forms of business structures, namely: sole proprietorship, partnership and limited liability companies.
If you are operating as a sole trader or you are operating as partnership with your friend or family member in a loosely or informal way, then you do not need more than the registration of business name or enterprise.
Registration of business names or enterprise
If you are trading in your true names, the law does not require that you register it. However, if you are trading in any name other than your true names, the law provides that you must register that name with which you operate your business.
For example, if Taiwo Musa operates a supermarket in his true name as Taiwo Musa, he needs not register that name but if he operates the business as Taiwo Super Mart, or Taiwo Musa Express Super Market, then he must register the name as an enterprise.
In this case, the law recognizes him as Taiwa Musa trading as Taiwo Super Mart, etc. Registration of business name is easy, requires limited documentation and is cheap. Registration of Business Names is covered under Part B of the Companies and Allied Matters Act, 1990.
Incorporation of company on the other hand is ideal for more structured businesses and is necessarily required for limited liability companies. The limited liability company model is suitable for SMEs owners that want to properly structure their businesses and have better access to emerging opportunities.
To some extent, the legal form your business takes will impact on your ability to take advantage of emerging opportunities but an important reason you should be interested in the kind of registration you give to your business is that the law treat each type differently, particularly in areas such as tax, business debts and personal liability.
For example, a sole proprietor is liable for the debt of his business up to his personal assets, whereas promoters of a limited liability company are not so liable. The liability of the promoters of a limited liability company is limited to the extent of their investment in the company, except in case of a criminal investigation.
Registration of businesses and incorporation of companies can now be initiated and concluded online through the website of the Corporate Affairs Commission. The CAC accredits professionals for the purposes of relating with the commission on the services they render.
Most importantly, the law recognizes three categories of professionals as capable of engaging in company registration and administration business. These include Chartered Secretaries, Lawyers and Chartered Accountants who additionally have to be accredited by the CAC or work in organizations that are so accredited.
Before You Register Your Business
Before you register your business you have to first resolve the following issues
#1 Decide on a Name
The first step to registering your business is to decide on your business name. In naming your business or company, choose a name that conveys something either to represent the nature of your business or a name that define your goals, values or vision.
The right name can make all the difference, so be creative in naming your business. It is also important to know that there are certain names that are prohibited by the law, acquaint yourself with such names and avoid using them for your business.
#2 Write Down What The Business of Your Business Is
This is called the object clause and will be required as a major content of the memorandum of association of your company. Think through it carefully and write down the things that your business will be doing, i.e the services you are going to render. CAC requires your object to be itemized, simple, unambiguous and straight to the point.
#3 Decide on the Amount of authorised capital
The amount of capital you register in your incorporation document will impact on the overall cost of your registration. This is because in addition to paying CAC fees which is standard, you also pay stamp duty on your authorised capital. Stamp duty is usually a percentage of the capital, so the higher the capital, the higher the stamp duty payable.
For SME’s operating in unregulated sectors where capital is not usually determined the regulatory authority, a N1 million authorised capital is ideal for the purpose of incorporating your company. You can increase later to accommodate the demands of your operations.
#4 Decide who the subscribers to your share capital are
You will be required to provide and write the names of your initial shareholders – people who are contributing to your capital. The thing to note here is that for a limited liability company, the law requires that there must be a minimum of two members, that is the subscribers to your capital must be at least two people. This is understandable because in the eyes of the law you are not a one man business once you decide to register your company as a limited liability.
#5 Write Down the names of your Directors
Shareholders are different from directors. While the shareholders are those who provide the capital for the business, directors are those engaged in the oversight management function in the business.
There must be a minimum of two directors for a limited liability company. Most SME’s will usually use their wives and children or family members to fulfill requirement 4 and 5, but it is advisable that when you are setting up a business you select to work with people who will add value either as shareholders or directors.
Now The Easy Steps to Register A Business In Nigeria
If you have done the foregoing successfully then you are ready. Here are the steps you now have to take effect the registration of your business.
#1 Create an Account on the CAC Portal
You can conduct the registering of your business by yourself using the CAC online portal. To do this, you have to first create an account. Go to the CAC website and click on online registration, then click on register and fill out the forms as required.
With your username and password, you can log in to the portal at any time and continue with the process of registration of your company.
#2 Do A Name Availability Check
Having created an account and received your login details, log into the portal, click on public search, type in the proposed name to see if there is existing company or business trading in that name.
If there is a company trading in the name or using what is very similar to that name such that it is capable of causing confusion in the mind of the public, CAC will deny you the use of that name. If there are no existing companies or businesses using that name, then proceed to step (3), which is Reservation of Name.
#3 Reserve the Name
You will use the business name reservation feature to reserve the name. If you do not incorporate your company within the period the name is on reservation, you stand the risk of losing the use that name to someone else who is ready.
#4 Complete an Online Registration Form
This is the Form CAC1.1 which seek to get information about your company, its members, its capital and address
#5 Pay the relevant Filing Fees and Stamp Duties.
You will see the scale of fees on the portal. While the Filing Fees is payable to CAC, Stamp Duties is payable to the Federal Inland Revenue Service and is usually a percentage of the authorized capital.
#6 Prepare, complete, scan and upload the pre-incorporation documents
These documents include :
Pre-incorporation form (Form CAC1.1) – this can also be completed online
Part A – Company Address
Part B – Authorised Share Capital
Part C – Particulars of First Directors
Part D – Particulars of Secretary
Part E – Statutory Declaration of Compliance by a Legal Practitioner
Even if you decide to incorporate your company by yourself, you will need the services of a lawyer, at least to complete Part E of registration form.
Memorandum and Articles of Association
In this document, you will state the object of your company, the authorized capital and the subscribers to the capital, the name of the company and internal governance structure. Your lawyer, accountant or chartered secretary will guide you in the preparation of your MEMART.
Proficiency Certificate – Before April 2018, it was required that promoters of certain types of businesses, particularly those to be engaged in professional services present proficiency certificates as part of the requirements for business registration.
This requirement has now be removed. Thus when taking steps to register a business in Nigeria, it is no longer a requirement that you present proficiency certificate to evidence your competency in the business you intend to do
Means of Identification such as Drivers’s License, National Identity Card or International Passport of each of the directors and the Secretary is required
Stamp Duty Receipt – this will be issued by the FIRS on payment of stamp duty
Evidence of payment of Filing Fees – this is usually receipt issued by the CAC when you pay the filing fees.
CAC will go through all these documents upon upload and revert to you if there are any queries. Sometimes, the reviewing officer may have problems with the object clauses and ask that you correct them.
On satisfactory review of your documents and the payment of the relevant fees and stamp duties, your application for registration will be approved and same communicated.
#7 Collection of Certificate of Incorporation and CTC of your documents
On communication of the approval of your application for incorporation of your business, you will go to the office of the CAC nearest to you with all the documents that you uploaded for review, submit these documents and you will be given the original copy of the Certificate of Incorporation and the Certified True Copies of the Incorporation Documents.
These steps to register a business in Nigeria apply whether you are registering an enterprise or a limited liability company.
This whole process, if all things are done right, will take not more than 14 days to complete.
Though members of the public are at liberty to register their businesses by themselves, it is advised that you hire the services of a professional such as a lawyer, a chartered secretary, or a chartered accountant to guide you through because as easy as it may seem, issues often arise along the line that may require the input of these professionals.
Moreover, you will need to be guided in the articulation of your Memorandum and Articles of Association, authorized capital decisions and even choice of name for your business.
We at kobotalk are on hand to handle your business registration and incorporation processes with the highest level of professionalism.
With just N20,000 we can get your business name registered and for between N80,000 to N100,000 we shall incorporate your company and it could be less if your authorised capital is less than N1 million.
Here you have it, Easy Steps to Register A Business In Nigeria.