Oftentimes, clients ask questions about which type of business they should register. The difference between a business name and a limited company? Some asked, what are the gains to have your business/company registered? What are the number of directors, share capital, continuity of the business, acquisition of properties, and many other questions? In this piece, I have addressed the numerous questions by providing the answers squarely. Below are the questions and answers:
What is business name?
Business name is also called sole proprietorship, one-man business, or enterprise.
A business name has no legal personality, this means it cannot buy properties/ cannot sue or be sued in its name.
For the Business name, the owner is liable to pay for any legal compensation that may arise while running the business.
If the owner of a business name dies or becomes bankrupt, the business comes to an end.
Business name is not acceptable for certain transactions, and contracts (preferences of the organization issuing the contracts).
A business name has a maximum of 20 proprietors. –
What is a limited liability company?
A limited liability company is a form of business structure that prevents the owners from being liable to the company’s financial losses and debt liabilities. It can be private company limited by shares or public company limited by shares.
A limited company has a legal personality, the company is usually held liable for any wrongdoing case filed against the company, not the directors.
The death of a director cannot end a limited company, it continues to exist, only if the promoters decided to wind up the company or at the instance of court of competent jurisdiction. In this case, the Federal High Court according to Chapter 20: Modes of Winding-Up, section 564 (1) The winding-up of a company may be effected:
(a) by the Court
(b) voluntarily; or
(c) subject to the supervision of the Court.
Then, Chapter 21—Winding-Up by The Court Jurisdiction, section 570 (1) The Court having jurisdiction to wind up a company is the Federal High Court within whose area of jurisdiction the registered office or head office of the company is situated.
A limited company usually has no limitations as to transactions to be carried out or contracts to be executed unlike business name.
A limited company has up to 50 directors.
Who is a director in a company?
A director is the person appointed by a limited company or shareholders to direct, conduct, manage or supervise the affairs of the company. A company director is appointed to a limited company to manage day-to-day business activities and finances, ensuring all statutory filing obligations are met and that the company is run in accordance with the Companies and Allied Matters Act 2020, the articles of association, and the shareholders’ agreement.
Who is a shareholder?
A shareholder is an individual or entity that holds shares or stocks in a company. The term ‘shareholder’ is used to denote any person, institution or company that has ownership of at least one share of a company’s stocks.
What is share capital in company law?
Share capital refers to the amount of money the owners of a company have invested in the business as represented by common and/or preferred shares.
What are the different types of share capital?
Share capital is of two types namely, equity share capital and preference share capital.
What does equity share capital means?
Equity share capital is generated by raising of funds from the investors.
What does preference share capital means?
Preference share capital is obtained by the issuance of preference shares.
Types of share capital
• Authorized Capital: Authorized capital is the amount of the share capital in which a company is allowed to issue its Memorandum of Association. The company is not supposed to raise more than the amount of capital as detailed in the Memorandum of Association. It is also known as Registered or Nominal capital. The authorized capital can be either decreased or increased in reference to Companies and Allied Matters Act 2020. In blog
• Issued Capital: It is that portion of the authorized capital which is usually circulated to the public for subscription comprising the shares assigned to the merchants and the endorsers to the enterprise’s memorandum.
• Subscribed Capital: The subscribed capital is referred to as that part of issued capital that is subscribed by the company investors.
• Called up Capital: The amount of share capital that the shareholders owe and are yet to be paid is known as called up capital. It is that part of the share capital that the company calls for payment.
What is equity in business?
Equity is the amount of money that a company’s owner has put into it or owns. On a company’s balance sheet, the difference between its liabilities and assets shows how much equity the company has. The share price or a value set by valuation experts or investors is used to figure out the equity value.
Can a business name be used to open a corporate account?
Yes
Can a business name later be upgraded to a company?
Yes
Where is your Location?
Ota, Ogun state, but we deliver nationwide.
I’m in Kaduna, how do I get my certificate?
Kindly note that CAC no longer dispatches physical certificates, what you get is the electronic copy which will be sent to you via email or WhatsApp, but if you want it hard copy, we do a waybill at a cost.
How long does registration take?
Registration usually takes 3-7 business days, except for Incorporated Trustees popularly called NGO which takes up to 5-6 weeks. This is because a consent code must be filed to the Registrar-General of CAC before the reservation of name, thereafter newspaper publications on two (2) national dailies with details of the trustees for 28 days before registration commences. Please note, the minimum number of trustees for NGOs is two (2). So just be patient as we guarantee you professional handling of your registration.
Does my registration come with Tax Identification Number (TIN)?
For limited liability companies yes, for enterprise, No.
How do I get my TIN for enterprise?
Once your business is registered, we assist you to get TIN.
How do you ensure that CAC approves the first name I submitted when applied for reservation?
Approval of the name depends solely on CAC. So whatever name is approved, is the name available on the portal, kindly take note.
Are the documents I am getting the original ones or are you sending the original ones to me via waybill?
Once again CAC no longer gives physical certificate, so all the documents you get after the approval of your registration is the original documents, kindly keep it safe. You can also print it out at your earliest convenience.
Let’s look at this case….
Eze is a graduate of the University of Nigeria, Nsukka(UNN), Enugu. After his graduation, he joined his brother who is in the business of building materials. His brother supplies cement, aluminum roofing sheets, and other building materials to individuals and companies. Three years after learning about the business under the guidance of his brother, he decided to start his own.
Having understood the business very well and supplying building materials to his customers, he eventually had a customer who so much loved how he attended to him that he recommended him to the state government as one who would supply them with all the building materials for a project that the government had at hand, he received this good news and he was so happy that he was going to be a millionaire with that amount of money.
Eze was asked to come to the state government house for the deal to be completed and for all parties to sign the contract. On the day that he was to sign the contract with the state government for the supply of the building materials, he was required by the state government to provide:
- Certificate of Incorporation
- Company Account
- Tax Clearance Certificate and others.
Unfortunately, he didn’t have any of the above-listed papers required of him and that was how he was sent out of the office, and he lost the contract worth millions of naira.
Don’t be like Eze oh! Don’t wait till your next big break before doing the right thing because you never know when the next contract that will change your life will come your way. Always be prepared with all necessary documents to avoid stories that touch the heart.
Make use of this opportunity to incorporate your business and make your brand stand out at the discounted rate of:
- Business Name Registration N22,990
- Company Registration N58,990
- Incorporated Trustees N124,990
Contact us now to book your place
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