7 BENEFITS OF REGISTERING YOUR BUSINESS AS A LIMITED COMPANY IN NIGERIA

Protect your business and build credibility with a legally recognized company structure. At Cachub, we help you register your Limited Liability Company seamlessly with the Corporate Affairs Commission (CAC) — ensuring full compliance and accuracy every step of the way.

In Nigeria, the law regulating businesses is the Companies and Allied Matters Act, (CAMA) 2020 and the Corporate Affairs Commission (CAC) is the government Agency responsible for managing business formation and their operations.

Right off the bat, any Accredited Agent would mention that incorporating your business first as a limited company is the best choice you could ever make. And that is the truth about it as it has lots of benefits.

Before looking at the benefits, let’s consider some of the characteristics of a private company limited by shares.

Some of the characteristics include:

• Management of the company could be by a single director or a board of directors
• The number of shareholders ranges from one to fifty members
• Where there are shareholders who contribute capital for its formation they are co-owners of the business
• The business can sue or be sued in its own name, without involving the owners
• The liabilities of the shareholders is limited to the amount contributed
• The financial structure is defined with a share capital base
• The name of the company ends with ‘Limited’ (Ltd)
• It holds yearly statutory meetings with its members
• A member’s right to decision-making is attached to the amount of his shareholding
• A shareholder’s profit sharing interest from the company depends on the vesting scheduling agreed to at the beginning of formation.

benefits of registering your business as a private company limited by shares.

1

Your business gets legal recognition. In this case, it becomes a separate entity with its own life, duties and responsibilities. Meaning, it can acquire properties/assets (share, real estate, cars, trust funds, etc) in its own name or even negotiate contracts, it can sue and be sued, also, in its name. It assumes a legal personality as it has become a formal corporation.

As a result every other entity is obligated to relate with it as if relating with a human person. For example, it would directly resolve settlement of debts/compensation from the company’s resources. The personal assets of the members do not attach at all.

2

Your business enjoys legal protection of name. You become the sole user of that name as against any other entity. With this in mind, you’ll be able to build a business brand identity knowing that the name is registered and secured. However, it is advisable you take a step to further secure it as a trademark.

At this point, after securing the name with the CAC it is advisable that you register your company name as a trademark, which is a further and better step in business name protection. An earlier trademark registration takes priority over that of the CAC. To capture your market totally, it is also recommended that you register your company domain name as a website so that internet searches would effectively direct sales leads meant for your business.

3

Another major benefit is tax efficiency. There are relevant laws in Nigeria that provide that companies with a gross turnover of less than N25m are exempted from paying the minimum income tax like that contained in the Company Income Tax Act (CITA). For example, a company in its first four years of business, like companies into agriculture, manufacturing or small companies, are exempted from paying the minimum tax.

There are also other tax incentives from the Federal Government, invariably reducing a company's tax compliance and payment burden.

4

Access to funding opportunities. An incorporated business stands a better chance of being eligible for grants and loans. In practice, banks and local or foreign funding institutions are more likely to extend fundings as loans and other benefits, especially because there is a shore of assets as collateral.

5

Investors’ preference - a company limited by shares is preferred by every investor because it provides a clear and structured way to own a part of the company through shares, as he intends to make profits from his venture.

6

Ease of shares transferability is another benefit. A shareholder who owns certain shares in a company has the right to sell or transfer his shares to another with little or no effort, and he can exercise this right at any point in time.

7

Because a company has a legal personality as distinct from its original owners, there’s business continuity. This means as enshrined in the company’s articles there are plans and procedures in place to ensure that its operations can continue in situations like a financial depreciation/loss or death of a member, so it can maintain essential services and recover quickly afterwards. In essence, a business can outlive its founders.

8

The company can open a bank account with its incorporation documents in any bank of choice. This goes to show that the company can handle the challenges of dealing with its finances prudently.

Again, to a client or to prospective investors it shows that the company understands corporate financing and management.

So a company having a corporate bank account:

• makes your business look more professional
• it’s easier to keep personal and business finances separate and makes it easier to prepare taxes
• it can protect your personal savings from business debts and legal issues.
• helps the company build its credit history which can aid it to get loans
• there are exclusive offers accorded a corporate bank account that has a share capital base.

CONCLUSION

So the next time you consider registering your business as a limited liability company, these are some of the benefits the business will enjoy. Don’t hesitate to take that decision. This is about the best option available to business owners who are considering starting off on their business establishment.