4 Types of Companies You Can Register in Nigeria

The #business structure you choose to operate on will have legal and tax implications. That is why you have to carefully select the type of business you want to register. This the first decision you must take before you proceed to register as the #Corporate Affairs Commission.

A good business plan will give you the business model that best fits your idea, yet another reason why you should take time to do a business plan.

There are four types of companies that can be registered in #Nigeria. You can choose to register either a Sole Trader or Sole Proprietorship, Private Limited Company (Ltd), Public Limited Company or a Guarantee Company.

1. Sole Proprietorship

This is the simplest form of enterprise, it does not require registration although the sole trader may wish to register the busine
ss name so as to prevent other businesses from #trading by the same name. This type of business exposes the owner to a great personal risk because the sole trader is personally responsible for all aspects of the business and has unlimited liability to all debts and legal actions.

The sole trader does not file accounts or records with the Corporate Affairs Commission (#CAC) and this might hinder investors and partners because they cannot verify the background and status of the business via an official third party.

A crucial component of a sole proprietorship within a business plan is the provision of an essential guideline, for actions that require implementing for the business to achieve growth. The owner is exclusively liable for all business activities conducted by the sole proprietorship and also accordingly, entitled to full control and all earnings associated with it.

2. Private Limited Company (Ltd)

A private limited company is a legal entity in its own right, separate from those who own it (the shareholders). This is the most common type of registered business in Nigeria. As a shareholder of a private limited company, the shareholders’ personal possessions remain separate (unless they are secured against the business for borrowing), and the shareholders risk is reduced to only the money they have invested in the company and any shares the shareholder holds that has not been paid for.

A shareholder’s personal assets are thereby protected in the event of the company’s insolvency, but money invested in the company will be lost.

Limited liability companies are also considered prestigious due to their legitimate nature and the way important information is recorded at the Corporate Affairs Commission. Anyone willing to do businesses with a limited liability company can verify who is connected to the company. This level of transparency is very beneficial in terms of building confidence and trust in the company.

The requirements for registering a LTD include

  • The company must have a registered office in Nigeria
  • The company name must not be exactly identical to any other company name currently held in the registry of the Corporate Affairs Commission
  • At least twenty-five percent of the authorised shares must be allotted at incorporation
  • At least two people above the age of 18 must subscribe to the memorandum and articles of association.
  • The total number of members in a private limited company must not exceed 50, not including those who are in the employment of the company
  • The authorised share capital shall not be less than 10,000

3. Public Limited Company (PLC)

A Public Limited Company (PLC) can be either an unlisted or listed company on the stock exchange. A public company must have at least 500,000 authorised share capital and the subscribers must take up at least twenty-five percent of the authorised share capital.

A PLC may have as many different types of shares as it wishes, all with different conditions attached to them. The cost of running a public limited company is far higher than that of a private limited liability company and tt is better suited for large organizations and corporations.

4. Guarantee Company (Not for Profit)

A Private Company Limited by Guarantee (LBG) is an alternative type of corporation used primarily for non-profit organisations that require legal incorporation. A guarantee company does not have share capital, and the members do not own the company, they do not receive any profits and have no claim to the company’s assets. All income generated is used to cover operating costs and to achieve the objectives of the company.

Common uses of companies limited by guarantee include clubs, membership organisations, students’ unions, residential property management companies, sports associations, workers’ co-operatives, other social enterprises, non-governmental organizations (NGOs) and charities.

By Jumoke Alarape


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