According to the Global Entrepreneurship Monitor Report (Nigeria: 2012), Nigeria leads the world in the proportion of the population who believe they have the skills to run a business; almost 90% of Nigerian adults think they have the ability to become entrepreneurs. While it is one thing to start a business, having a legally registered business is proof that one is ready for business…(pun intended).
In most economies, Registration of businesses is often regulated by government agencies. In Nigeria, the body responsible for this is the Corporate Affairs Commission (CAC), and perform the following functions amongst others: (i) formation, incorporation, management, striking off and winding up of companies, (ii) business names, management and removal of names from the register, and (iii) the formation, incorporation, management and dissolution of incorporated trustees, as stipulated under the Companies and Allied Matters Act 2020.
With a population of over 41.5m MSMEs in Nigeria, the Corporate Affairs Commission (CAC) has revealed that only 3.1 million SMEs are currently registered in the country, which we find quite poor. We have highlighted 7 reasons why you should register or incorporate if you are thinking of starting or formalizing your Nigerian business.
1. Separate legal entity
Where a business is registered/incorporated as a limited liability company, the law considers your incorporated business to be a separate legal entity. It has the same rights and privileges as a human being, including the ability to possess property, receive credit facility (it is prohibited for an unregistered business in Nigeria to buy or sell land), do business under its common seal, incur liabilities, and sue or be held personally liable. As a result, you can take reasonable business risks while still protecting your personal assets from financial and legal risks. Your incorporated company is a legal entity on its own right and your liabilities are proportional to the number of shares you own in the company. Your personal assets cannot be seized to pay off your business’s debts, and you cannot be held liable for the debt unless you personally guaranteed the it.
2. Protection of Company Name and Brand
The first step to protecting your business name or brand is by registering the name with the Corporate Affairs Commission and additionally with the Trademarks, Patents and Designs Registry, of the Federal Ministry of Industry, Trade and Investment. Your business name or even a similar name will be protected and cannot be used by anyone else in Nigeria.
3. Access to Credit & Grants
A registered business is more likely to attract investors than an unregistered business with no official structure. If your company is registered, you can approach a commercial bank or other financial institutions to raise funds as seed capital, sustain your business operations or to expand your operations across the globe. You can also apply for private or government related grants such as the Tony Elumelu Foundation Entrepreneurship Programme to help support your business.
4. Reputation and Prestige
Business reputation and prestige is a critical part of business branding and perception. Formalizing your company can improve its reputation and indicate that it has a long-term commitment and responsible management. It instills trust by third parties such as buyers, clients, and contractors as many companies will only hire or work with registered businesses rather than individuals. You may also find that some government MDAs and companies will only do business with incorporated entities if you are a contractor/supplier. Incorporating a company can also open up new horizons and opportunities that would otherwise be unavailable.
5. Perpetual Succession
An incorporated business has its own legal personality, allowing it to continue perpetually. Contracts are made with the “company,” not with you or the other directors, shareholders, or employees. This indicates that the corporation has an unlimited life span; it will continue to exist even if the owners or directors die or leave the company, or if the company’s ownership changes. A company’s existence will come to an end only if it is formally wound up by a court order. This, among other things, helps your company to outlive you and even generations.
6. Corporate Bank account for your company
Operating a business bank account is advantageous since it allows you to separate personal and business activities. To open a corporate bank account in Nigeria, you must show proof that your company is registered with the Corporate Affairs Commission. Furthermore, giving your customers a corporate bank name rather than your own name for payment is more professional and reliable.
7. You can Hire Employees Legally
With a registered company, you will be able to legally hire employees which will also build the confidence of potential employees in your company. Job recruiting firms and other online platforms make it easy to hire and recruit quality and skilled personnel. You will also be able to officially request for members of the National Youth Service Corps to work at your company.
Are you ready to incorporate your business? Get Started with CorporateBestie