Business registration is the process of obtaining legal authorization to conduct business within your chosen jurisdiction. It is a legal obligation in most jurisdictions and ensures that a business is operating under the lawful obligations of its control
There are a number of formalities that must be completed prior to completion of the business registration stages. The first important stage in business registration is deciding upon which jurisdiction to establish the business in. It is important to consider the financial and economic advantages and disadvantages of setting up the business within that jurisdiction. Once the jurisdiction has been chosen, the process of business registration and licencing can then begin.
In Nigeria, It is important to submit a range of documentation including certifications and professional references, as well as a detailed outline of the structure of the company and/or business. In addition, the company or business owner must present a proposed company and/or business name that comply with legal requirements within the jurisdiction, which will then be assessed by the Registrar-General.
Business registration is very important as it establishes the business as a legal entity. Without business registration, your company cannot be legally considered and will not be protected under any grievance procedures etc. It will also not be protected from any economic, legal or social instability.
It must be noted that one of the basic laws that governs Corporate entities in Nigeria is the Companies and Allied Matters Act, LFN, 2004. By the provision of Section 18 of the Companies and Allied Matters Act, It takes two or more persons to form a company.
Section 21(1)(a-c) of the Companies and Allied Matters Act provides for the types of Companies registered that can be registered under the law as follows:
- A company limited by shares
- A company limited by guarantee
- An unlimited company
Any of the above companies maybe a private company or a public company; see section 21(2). The most popular form of Company is the ‘Company Limited by Shares’ and at least two people must subscribe to being shareholders of the company. But where a person is interested in running a one-man business where everything would revolve around him alone, then the registration of a business name maybe suitable in the circumstance.
More often, people do ask the following question; do I really need to register my business? “While at face value, it seems registering a company is not a necessity; years of research has proven it is indeed important. In fact, your success in business may actually depend on it.
Recently, the cost of business name registration has been reduced by 50% since the 2nd day of October, 2018 by the Corporate Affairs Commission. The processes involved in the registration of business names are spelt out in Section 573 and 574 of the Companies and Allied Matters Act, while that of a company is seen in Section 36 of the Companies and Allied Matters Act. By Provision of Section 37 of the Companies and Allied Matters Act, the effect of registration includes but not limited to the following:
- An incorporated business is deemed by law to be a separate legal entity. It has rights and privileges as a human person as it can own properties, it can carry on business under its common seal, incur liabilities, sue and be sued in its own name. See Salomon v Salomon (1897)
- Registration ensures continuity of your business; this is also known as perpetual succession. Continuation of the business will not be affected by the withdrawal or death of one of the owners. See Section 37 of the Companies and Allied Matters Act.
- It gives you legal protection as it secures and protects your business name from being used by other businesses as it is reserved to you only. See Section 30(1) (d) and 31(4) of the Companies and Allied Matters Act
- It limits your personal liability, in that you will not be held personally responsible/liable for certain accidents and other liabilities or risk.
- It affords you the opportunity of being issued a certificate of incorporation by the Corporate Affairs Commission, which serves as operating license to engage in your choiced business.
- Registration raises significant capital for your business, there is an increased access in funding sources, loans etc. It helps to participate in tender processes. In order to apply for both government and commercial tenders one needs to be a legalized business entity.
- It helps to avoid conflict with your founders and gives your business more credibility.
- Registering your business or company establishes you as a professional in your field.
- It enhances your brand image and improves the relationship with your customers and clients.
- It helps to promote Trust from customers and clients of your business
- Bank accounts can be opened in the name of your company or business and all legal transactions are easily made possible.
- It minimizes your tax liability. Under Nigerian Tax law, registered businesses do not pay company tax. They pay only personal income tax. The implication of this in a Federal State like Nigeria is that if you have a Director of a company, you pay your company income tax to the Federal Inland Revenue Service (FIRS), and you pay your personal income tax to the relevant state Inland Revenue Service.
It is to be observed that not only the Companies and Matters Act governs the incorporation, administration and regulation of companies in Nigeria, but several other laws and rules. Those laws and rules of corporate governance are applicable when the circumstances and needs arise, depending on your needs and scopes of engagement. In the circumstance, there would be great need to employ the service of a competent lawyer to handle the legalities involved.
In conclusion, the importance of registering a business can never be overemphasized. Registering your business ignites that corporate and professional consciousness to the business owner. It also lets you become conscious of the law, you gradually build trust, integrity and dependability.
Zammy Adewunmi Owodunni is a legal Practitioner and Associate Partner at Sun Natha-Alade & Partners (SNATHAP)firstname.lastname@example.org Whatsapp line: 08155377099
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