Business entity types & details

Sole proprietorship

Sole proprietorships represent the most basic form of business structure in Nigeria, where a single individual possesses and manages the enterprise.

Partnership

As the term implies, partnerships involve two or more individuals jointly owning and managing a business. These partnerships typically take the form of either general or limited partnerships. In a general partnership, each partner holds equal authority in the management of the company and the settlement of its debts. Conversely, in a limited partnership, members' liability is restricted to the extent of their initial investment.

Limited liability company

In limited liability companies, the business and its proprietors are legally acknowledged as distinct entities. The financial exposure of a business owner is confined to the amount of their investment in the company. The registration process for an LLC is more comprehensive, and shareholders appoint directors to manage the company's operations.

Private Limited Liability Company (Ltd):

The ownership of private limited liability companies is divided into shares. However, the shares cannot be sold or listed on the stock market. This business form works well for companies with a moderate to large employee count.

Public limited liability company

Unlike private LLCs, public LLCs can list and sell shares on the stock market to the general public. Moreover, this business form is subject to stricter regulatory restrictions.

Branch office

Foreign corporations with principal operations abroad may pursue expansion by establishing branch offices in Nigeria. Consequently, the branch office is recognized as an independent legal entity, subject to the jurisdiction of Nigerian law.

Cost Of Registering a Business

• Business Name Registration: 
  Registering your business name online or in person usually costs between ₦10,000 and ₦15,000.
• Limited Liability Company:
  It costs around  ₦50,000 to ₦150,000 to register a limited liability company.
• Trademark Registration:
  The price of registering a trademark in Nigeria varies from around ₦50,000 to ₦200,000.
• Professional Fees:
  You must hire a lawyer or company registration service provider when registering a business in Nigeria. The costs may vary depending on the complexity of the registration procedure and the help you need.
• Other Fees & Charges:
  Depending on your business's characteristics and location, obtaining licenses, permits, and other regulatory criteria may incur additional fees.

Business Registration Requirements In Nigeria

1. Registered address and contacts of the proposed company.
2. Identification Documents (I.D/ Passport)
3. Approval note of name reservation from the Corporate Affairs Commission
4. Details and information of Director(s) and shareholder(s)
5. Company secretary details for foreign companies
6. Constitutive documents, e.g., Article of association and memorandum of association
7. Incorporation certificate

Steps

1. Select your business structure

In Nigeria, typical business structures include corporations, sole proprietorships, limited liability companies, and partnerships. Each structure offers varying degrees of operational flexibility, tax implications, and liability protection, so take these factors into account.

2. Secure your business name.

Reach out to the Corporate Affairs Commission (CAC)  to check the availability of your preferred business name. Once approved, reserve it to establish your brand identity.

3. Organize documentation

Gather all necessary registration documents to establish your business. This usually includes constitutive documents, such as a memorandum of association indicating that certain individuals (shareholders) have agreed to create a company. The article of association outlines the regulations that will oversee your company. You also need to provide identity documents and a physical address.

4. Pay registration fees

Submit all required documents to the Corporate Affairs Commission (CAC). Pay the stamp duty, filing fee, and other registration costs to receive approval certificates.

5. Adhere to tax regulations.

Nigeria's tax authority is the Federal Inland Revenue Service (FIRS). Your business must be approved by FIRS to begin taxable operations in the country. Upon approval, you will receive a Tax Identification Number (TIN). Additionally, if your company’s annual revenue exceeds a specified limit, you need to apply for Value Added Tax (VAT).

6. Acquire necessary permits from regulators.

Various government agencies in Nigeria enforce policies through licenses and permits. The specific licenses required depend on your industry, business activities, and employee profiles.

7. Open a business bank account

Remember, all businesses aim to generate profits. Open an official business bank account to manage your finances effectively. Additionally, banks often serve as reliable credit sources when you need loans.

Requirements

1. Proposed company's registered address and contact details.
2. Identification Documents (ID/Passport)
3. Name reservation approval note from the Corporate Affairs Commission
4. Information and details of Director(s) and shareholder(s)
5. Company secretary information for foreign companies
6. Constitutive documents, such as the Articles of Association and Memorandum of Association
7. Certificate of incorporation
8. Type of company being registered
9. Company's registered address
10. Company's business objectives or nature
11. Information on company secretaries
12. Minimum issued share capital (Note: companies with foreign participation are required to have a minimum issued share capital of N10,000,000, though this amount may differ based on the sector in which the company plans to operate).
13. Details of proposed shareholders.
14. Details of proposed directors.

Steps

Prepare and Strategize Your Business Launch

Prior to embarking on any venture, it is imperative to conduct thorough research to acquaint yourself with the Nigerian business environment and prevailing market conditions. Develop a comprehensive business strategy outlining your objectives, target clientele, projected revenue, and pertinent legal considerations.

Determine an Appropriate Legal Structure for Your Enterprise.

Once you have gained insight into the market and legal landscape, select an appropriate structure for your business. Options include forming a partnership, corporation, sole proprietorship, or limited liability company.

Select a Name for Your Business.

The Corporate Affairs Commission (CAC) has established specific guidelines for naming businesses in Nigeria. Ensure that the name you choose complies with all CAC requirements. Additionally, you must reserve your business name with the CAC, either in person or via their online platform.

Organize Necessary Documentation.

Based on the type of business you are establishing, prepare all requisite documentation, including:

• Identification documents (for all directors and shareholders)
• Residential addresses
• Memorandum of Association
• Articles of Association
• CAC 1.1 document (proof of name reservation)
• Receipts for application fees

Submit Documentation to the CAC.

Once you have compiled and completed all necessary documentation, submit it to the Corporate Affairs Commission (CAC). Confirm that you satisfy all capital requirements for your business entity prior to finalizing registration fees. Upon successful review by the CAC, and provided all is in order, you will be awarded a Certificate of Incorporation (for corporations) or a Business Name Registration Certificate (for other business types).

Register Your Business with Tax Authorities and Other Regulatory Bodies.

Your business must be registered with the Federal Inland Revenue Service (FIRS) for taxation purposes to obtain a Tax Identification Number (TIN). You may also need to acquire additional licenses from relevant regulatory agencies, contingent on your business's nature.

Establish a Bank Account.

To establish a bank account in Nigeria, you must provide your tax identification number, certificate of incorporation, and business name registration. 

Register as an Employer.

Should you require labor, it is necessary to register as an employer with the National Pension Commission (PENCOM) and the Employee Compensation Scheme (NSITF).

Annual filing documents & requirements

1. Annual Returns

You are required to submit your company's financial statements, details of directors and shareholders, and any amendments to corporate information to the Corporate Affairs Commission (CAC) annually.

2. Tax Returns

It is imperative to file your company's annual tax returns with the Federal Inland Revenue Service (FIRS) or the relevant State Internal Revenue Service (IRS). Additionally, if your business is registered for VAT, it is necessary to submit Value Added Tax (VAT) returns.

3. Audited Financial Records

The submission of audited financial records is also a mandatory annual requirement for businesses operating in Nigeria. These records must adhere to the standards established by the International Financial Reporting Standards (IFRS) or Generally Accepted Accounting Principles (GAAP).

4. Pay As You Earn (PAYE) Returns

All employers in Nigeria are obligated to submit Pay As You Earn (PAYE) returns to the tax authority. As a business owner, it is essential to report the income tax withheld from your employees' salaries and earnings in the PAYE filings.

5. Employee Compensation Returns

As an employer in Nigeria, you are required to submit annual reports on your company’s social security and pension contributions to the Nigeria Social Insurance Trust Fund (NSITF) and the National Pension Commission (PENCOM).

Frequently Asked Questions

1. What is the duration required to register a business in Nigeria?

The duration required for registering a business in Nigeria is contingent upon the nature of the enterprise and the efficiency of the registration process. The completion of the registration can range from two weeks to several months.

2. What are the tax implications associated with registering a company in Nigeria?

Companies registered in Nigeria are obligated to pay various taxes, including value-added tax (VAT), withholding tax, and corporate income tax. It is essential to fully understand your tax obligations and to ensure compliance with all relevant tax regulations.

3. Is it possible to alter your business structure after registering it in Nigeria?

Yes, it is possible to modify your business structure. You must follow these steps::

1. Dissolution: The initial step involves dissolving your existing company structure, which may require settling any outstanding debts and liabilities.

2. Incorporation: Proceed to register the new business structure (such as a Limited Liability Company) with the Corporate Affairs Commission (CAC) through the standard company registration procedures.

3. Transfer of Liabilities and Assets: Facilitate the transfer of contracts, obligations, and assets from the former organizational structure to the new one.

4. Notification: Notify all relevant stakeholders, including suppliers, customers, and government agencies, about the change in business structure.