Starting a business in Nigeria and in fact anywhere in the world is associated with some legal implications. While it is fun to consider the potential profits that one may yield from a business venture, one will still have to direct their mind to some factors that will determine the structure of business or company to embark on.

Notably, there are 3 main types of legally recognized profit yielding business entities in Nigeria. These entities are:
1. Sole Proprietorship and Partnership;
2. Private limited companies; and
3. Public limited companies

Each of these entities mentioned have legal requirements for setting up which is stipulated by the express provisions of the "Companies and Allied Matters Act" CAMA and governed by the "Corporate Affairs Commission " CAC.

1. Sole Proprietorship and Partnership

A Sole Proprietorship is a business entity owned and run by a single individual. A Partnership on the other hand is owned by at 2 or more persons. Generally, as provided for by law, there would be no need for registration with CAC where the proprietors are trading in their individual names e.g. Samuel Okoro & Co, Ade & Sons. However, in the event that a Proprietorship seeks to open a corporate business account, it is a condition precedent that their business be registered with CAC.

On the other hand where a Proprietorship seeks to transact business in a name other than their true names (e.g. Carex Opti Ventures) or perhaps with their true name and an appendage (e.g. Samuel Eni Ventures), the such business must be registered with CAC as stipulated by CAMA.

The Procedure and Costs of Registering A Business Name with CAC is as follows:
1. File a business name reservation and availability check - N500
2. Obtain a Business Name form CAC - N250
3. attach photocopies of your id e.g. international passport, national Id, driver's license etc.
4. Attach 2 or more passport photographs
5. File your completed CAC business name application with all required supporting documents - N 10,000

Hence, the total cost for registering a business name at CAC would be N10,750. Whilst you can do the entire application yourself online, it is highly advisable that you consult the services of a CAC accredited lawyer who would have a wealth of knowledge in this area and also taking into account that CAC as a matter of preference work more efficient with such accredited individuals. The general legal fees charged by CAC accredited lawyers ranges between N20,000 - N30,000 for the entire process. Please note that such charges are not fixed and subject to the discretion of the legal professional involved.

The entire process can take up to 48 hours - 2 months depending on the functionality of CAC as well as the efficiency of the CAC Agent.

Some of the advantages of registering a business name include:
1. Entitlement to open up a corporate business account with a commercial bank.
2. Transact business with corporate and governmental organizations.
3. It is cheaper and fast to process

The downside to registering business name is that the financial liability extends to the personal assets of the business owner in the event there defaults in repayment of loans from banks and/or other creditors.

2. Private Limited Company

A private limited company is one that consists of a minimum of 2 members and a maximum of 50 members and must have a minimum share capital of N10,000.

This is perhaps the most sought after business entity consider some of the following advantages:
1, The liability of the business in the event of offsetting debts is limited to the subscribed shares and does not extend to the personal assets of it's members.
2. Banks are more inclined to grant loans and other credit facilities such as overdrafts.
3. Companies, Government Agencies and Multinational Organizations preferred doing business with such organisations.

The major down side to such entities is the fact that they are prohibited from raising funds through offering it's shares to the general public.

The Procedure and cost of registering a private limited is as follows:
1. File a name check availability and reservation - N500
2. Obtain a complete set of CAC company registration forms - N500
3. Preparation and Stamping of Memorandum and Articles of Association - N7,500 for every one million shares plus N1,000 for 2 copies. Hence N8,500.
4. Complete and file the CAC forms - N10,000 for every one million shares plus N9,000 for CAC Admin fees.

Hence, the entire cost of incorporating a private limited company with a share capital of one million and below ordinary shares is N28,500..Please note that only CAC accredited agents are entitled to incorporate such companies and that only CAC accredited lawyers are entitled to endorse their signature on CAC legal compliance form.

The legal fees that lawyers generally charge for incorporating such entities range between N55,000 to N250,000 depending on the share capital involved. The average cost is N60,000.

The average time frame processing such applications is 2 - 8 weeks.

3. Public Limited Company

A public limited company is one which consists of a minimum of 2 members and an unlimited maximum number of members. Such entities are entitled to offer their shares to the public via the capital market. The minimum share capital for such company is N500,000. These type of companies are amongst multinational entities which include Pepsi, Coco-cola, British Tobacco and as matter if law stipulated in the CBN Act all banks are required to be incorporated as PLCs.

In addition to other mentioned factors, such companies must appoint secretaries from the following professions:
1. Lawyers
2. Accountants and
3. Chartered. Secretaries

Some of the benefits of incorporating such company include the following:
1. they can raise capital by offering their shares to the public at large via the capital market.
2. There is no limit to the maximum number of members allowed.
3. They attract greater access to loans and other credit facilities offered by banks and other creditors.

1. It is more expensive to incorporate
2. It takes longer to process
3. It is highly regulated.

The procedure and associated costs for incorporating such companies are as follows:
1. File availability check and reservation of name - N500
2. Purchase a set of forms - N500
3. Prepare and stamp forms - same as indicated in the writeup above pertaining to private limited companies
4. Complete and file CAC incorporation forms N 20,000 for every one million shares.

Hence, the total CAC admin costs entailed in registering a PLC is N38,500 and average fee charge by accredited lawyers range between N70,000 - N300,000 for the entire process.

The average duration to process the application is 2 - 8 weeks.

Having highlighted the information above, you should be able have a clearer understanding as to what is legally entailed to initiating a business in Nigeria as well as be in a position to make more informed decisions. However, the information here is not all encompassing but rather serves as a guideline. You are advised to consult a legal practitioner or a professional like myself for more in depth information.

Best wishes on your business pursuits. I can be contacted via email or whatsapp. See contact details below:
Email - elasburyasuk@gmail.com
whatsapp - 08142826506