In this post, we explained the meaning of Business Name or Enterprice and Limited Liability Company in Nigeria. The differences between the two and Laws Guiding Business Name/ Enterprice and Limited Liability Company Registration.
Contrary to what some may think, a business name and a company name (LLC) are not synonymous with one another. The key difference between a company name and a business name is that a registered business name is the name in which a venture operates under.
A company name, however, is a legal entity on its own. You must have a business name (unless you meet the exception), however you only need a company name if you choose to register as a company. Naming your business is an essential part of its future success. The name is a huge part of your business’s brand. The name under which your business operates will likely become its public identity.
Beyond that, the name you chose for your business will also impact its functions, protections and limitations. A huge aspect of this is registering your business name and deciding whether or not your business will benefit from having a company name. Knowing the difference between a company name and a business name is a good place to start.
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What Is a Business Name?
A business name is the name a business is known by. It might be the business owner’s own personal name, or it might be something entirely different and unique to the business. If your structure is something like a sole trader, then having a business name by itself may be sufficient. That said, you should always seek advice where you can (especially if you have bigger plans for your business’ future!). Business names should be used on all official correspondence, such as letters and invoices. Certain businesses will also need to display their name in the locations where their business operates.
What Is a Company Name?
A company name is the legal registration of a company. Once a business is registered as a company, the following points will apply to them:
- The company will enjoy the same rights as a natural person. They can own property, employ others, incur debt and be liable for legal action just like another person (this is also known as being a separate legal entity)
- A private company will have PTY LTD at the end of its name, while public companies have LTD.
- All legal acts, including contracts and other legal documentation, are done under the company name.
- The Corporations Act 2001 applies to the company.
The Differences Between a Business Name and A Company Limited by Shares.
New business owners often have a lot of questions about the difference between a registered business name and an incorporated company limited by shares and which of these best suits their business needs. In light of this fact, some of the differences between a business name and a company limited by liability will be briefly discussed below:
- A company limited by shares is required to have a director(s) and shareholder(s) while a business name is only required to have a sole proprietor or partners (proprietors).
- A Company limited by shares is a separate legal entity that is distinct from its shareholders and directors. It can sue and be sued, own properties and other assets in its corporate name. A business name on the other hand has no distinct legal personality from the owner and can sue or be sued only in the name of the owner(s) of such a business.
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- A company limited by shares is a taxable legal person and pays its taxes to the Federal Inland Revenue Service (FIRS) in its corporate name under the Companies Income Tax Act. A business name does not pay taxes to the FIRS, rather, it is the proprietor of such a business that is required to pay taxes under the Personal Income Tax Act to the State Board of Internal Revenue.
- A company limited by shares acquires a legal personality upon incorporation. The liabilities of the shareholders of the company are limited by the number of shares that have been allotted to such shareholders that have not been paid for in the event of winding up (shutting down of company). What this means is that if the company has debts or liabilities, the debtor cannot go after the personal assets of the shareholders of the company as they are only liable to pay for the number of shares that have been allotted to them that have not been paid for. However, if a registered business name goes bankrupt or runs into debt, the debtors can sue and recover their money from the personal assets of the owner of such a business.
- A company limited by shares obtains a certificate of incorporation and other documents such as Memorandum and Articles of Association (MEMART) upon registration with the Corporate Affairs Commission (CAC). This is important as most organizations and government agencies require these documents to award contracts or to do business with a company. A business name on the other hand obtains a certificate of registration of business name and application for registration of business, it is limited in capacity to bid for big contracts from government agencies or other companies.
- A company limited by shares can have a maximum of 50(fifty) shareholders while a business name can have a maximum of 20 partners except for law and accounting firms.
- A company limited by shares is required to file returns at the CAC and hold annual general meetings while a business name is not required to hold general meetings before reaching its decisions.
- A company limited by shares can obtain a loan in the name of the company and can also raise funds by issuing its shares to private investors. A business name does not have shares and is mostly funded from the personal funds of the owner.
- A company limited by shares is appropriate for medium scale to large scale businesses while a business name is appropriate for small scale to medium scale businesses.
- A limited company may choose to go public and be converted to a public limited company (PLC), whereas a business name can only be converted to a limited liability company.
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- A business name is automatically dissolved upon the death of its founder(s) unless there are other surviving partners to carry on the business, but a limited liability company cannot be dissolved upon the death of the shareholder, the other director of the company will continue to carry on the business upon the demise of any shareholder or director. And where the company has a single director/shareholder that died, the family of such person can apply for a Letter of Administration or Probate to take over the shares of the company and appoint a new director. A limited liability company will not be dissolved until it has been officially wound up with the CAC in accordance with the law.
Laws Guiding Business Name and Company Registration.
Starting a business is a very great idea. But there are laws guiding business names and company registration in Nigeria no matter how small it is. The size of the company depends on your capital and structure
Laws Guiding Business Names;
Whether you begin small or big, certain laws oversee the operations of businesses in Nigeria. Put in mind, the Companies and Allied Matters Act (CAMA) 2020 is the principal legislation governing business name registration in Nigeria. Remember that CAMA 2020 has repealed CAMA 2004.
Other laws are:
- Investment And Securities Act 2007.
- Investment and Security Rules 2007
- Trade Union Act Cap T14
- Trade Dispute Act Cap T8
- Factory Act Cap F1
- Employees Compensation Act 2010
- Bank And other financial institutions Act (BOFIA ACT 2004)
- Money Laundering Act 2004
- CBN ACT
- Constitution of federal republic of Nigeria 1999 as Amended
- NAFDAC laws
Below are different types of businesses that can be registered in Nigeria under the provisions of CAMA 2020.
- Business name
- Limited Liability Partnership (LLP)
- Companies
Below is the procedure for business name registration in Nigeria
- Check the availability of your business name.
- Fill out the prescribed CAC Form(s)
- Pay your fees
- Upload documents
- To register your company with. CAC, the following steps should be taken.
The Services to Obtain at Corporate Affairs Commission
The services include:
- Business Name Registration.
- Incorporation Trustees Registration
- Registration of Share capital increase, mortgages, etc.
- Arrangements of investigations.
- Company management and wind-up.
- Conducting Searches.
- Issuing Certified True Copies of filed documents.
- Sale of all statutory forms and publications of the Commission, etc.