For many small to medium-sized businesses particularly those operating in Nigeria, it would appear that a review of legal issues affecting business operations seem to take second place when compared to profitability. While profitability is considered a key metric for measuring the success of a business idea, there are also key legal matters that could affect the viability of the business as a whole; a sudden fine by a regulator can be a really disturbing event for your business. For a business owner interested in developing a sustainable well-structured business, it is necessary to take certain legal issues into consideration in the early days of your business. These tips are as follows:

1. Register your business with the Corporate Affairs Commission (Nigeria)
This is the first step you should take as a business owner following the recognition that your product or service is one that is profitable. Many business owners run away from registering their businesses due to fear or ignorance.

There is so much that can be said about the most suitable form of business association to be adopted by your business and the advantages or disadvantages of each form of business association. Suffice to say at this point that for commercial businesses, a business entity can register as a “business name” or as a “company”.

A business name would be your best bet if you do not desire to spend a lot on the cost of registration yet. It would however give you the benefits of limited liability (separating the liabilities of the business from your personal liabilities).

The first stage of registering your business is to ensure that the name you are choosing for the business is not similar to any name that has been registered at the Corporate Affairs Commission (CAC). You can confirm this by going to the website set up by the CAC.

2. Obtain necessary licenses and permits
Another necessary step is to identify laws both at the federal, state and local government levels that affect or are applicable to the business of the company. Once you have identified such laws, the next step is to assess the level of your business’ compliance with applicable laws. There are general foundational laws that apply to all business such as the Companies and Allied Matters Act, Companies Income Tax Act, Personal Income Tax Act, Value Added Tax Act and Labour Act.

Other laws that may affect your business depending on the size of your staff include National Pension Reform Act and National Housing Fund. Other laws are industry-specific; for example, if you play in financial services, the Central Bank of Nigeria Act and other guidelines released by the Central Bank of Nigeria from time to time would regulate you. It is best to do what is known as regulatory environment scanning in the early days of your business to ensure that you do not fall foul of the law and end up with a fine or any other form of penalty.

3. Agree on the structure of the business
This is another legal tip and this step is closely related to step 1. Prior to commencing operations, you need to determine the structure you desire to adopt for your business. Will the business be run solely by you or would you be running it in partnership with other individuals?

If the business is to be registered as a business name and run in collaboration with other individuals, it would be necessary to decide on key terms of the relationship and reduce this into a partnership agreement. On the other hand, if you have decided to run the business as a limited liability company, you might want to consider outlining the agreement of the shareholders (share allocation, dividends, preemptive rights etc.) in a shareholders’ agreement.

4. Try to ensure that contracts with vendors are in writing
As you engage third parties to carry out work for your business as much as possible reduce the terms and conditions of these relationships into writing to govern the relationship. For example, to manage your company’s social media, develop or maintain software or to purchase goods or services on your behalf. The legal agreements need not be voluminous as long, as it documents the agreement of the parties and is signed properly.

5. Protect intellectual property
You have registered your business and your brand name is growing. Customers are associating your brand with prompt service and your customer loyalty is increasing daily. It is time to protect your intellectual property. Legally, Intellectual property registration protects the creations of the mind. Intellectual property can be registered as a trademark, patent, design or copyright.

Big brands such as Coca Cola have registered the “Coca-Cola” logo as a trademark and the Coca-Cola bottle as a registered design.

As a business owner, you can choose to register your business logo as a trademark or if you invented a unique product, register your invention as a patent at the Trademarks, Patents and Design Registry in Nigeria. Click here for more information.

6. Comply with your employment obligations
As a business owner in Nigeria, once you begin hiring employees, take time to understand the payment obligations under the Labor Act, National Pension Reform Act, National Health Insurance Act, Employee Compensation Act etc.

7. Adopt a record-keeping program
Once you begin to remit taxes, draft agreements and hold meetings, ensure that you designate an employee to keep your payment receipts, agreements, minutes, licenses and CAC Registration Forms appropriately.

In conclusion, though profitability is a key metric for judging the growth and “scaling” of a small business in Nigeria, it would be greatly beneficial to take note of the aforementioned legal tips in order to build a business that lasts.