REGISTRATION OF BUSINESS INTRODUCTION: There comes a time one find doing business as the next thing in line. This could be as a result of many reasons which have its basis on the economic crises in the country, high rate of unemployment, need to add value to the society and the desire to own an establishment being the boss. Nowadays, it is wisdom for a graduate to start thinking of business to invest into, more so for retirees and intending retirees. Doing business therefore seems like an open door to a brighter future to young graduates and for the retirees and intending retirees in Nigeria. To the retirees especially, doing business has become a guarantee to peace of mind and also to keep them away from constantly begging government to pay their entitlement. As interesting as starting or running a business could sound, it is very important to put into consideration some factors, one of which we will be discussing in this paper which is registration of business. Proper registration with CORPORATE AFFAIRS COMMISSION (CAC) is one of the important things many business owners neglect to their detriment. This is because a good number of them think it’s not important and some others who think it’s important assume it will be a very difficult task. AS A BUSINESS OWNER OR A NEWLY START-UP, WHY IS REGISTRATION OF BUSINESS IMPORTANT TO ME AND MY BUSINESS? If you are thinking about starting a business, running a part-time business or presently into a full time business that brings in sporadic earnings, you may be asking yourself- Why go through the legal hassles of registering? The importance of registering a business can never be over-emphasized CREDIBILITY AND REPUTATION: Having your business registered definitely confers some credibility on it, given that it then acquires an identity. It shows potential customers, lenders, and vendors that you are serious about your work and your responsibilities as a business owner. More so, many more important relationship or activity you want to get involve with may require your registration certificate. For instance, the need for corporate account in banks and contract award. BUSINESS NAME PROTECTION: Registering your business name protects it from being used by other businesses. Once your business name is registered, it becomes bared from every other person to use that same name. It is quite interesting to know that you can register the name of your business before commencement of business proper. For instance: if you spend 2 years perfecting the plan and raising the capital for the business, those 2 years from when the business was registered can count for you as years of experience. BUSINESS LOAN: In Nigeria today, there are many government and commercial/merchant bank loans available for small businesses. In addition, state and local economic development agencies and numerous non-profit organizations provide low-interest loans to small business owners who may not qualify for traditional commercial loans. Each loan program has unique application and eligibility requirements, however, most lenders if not all ask for the registration certificate of business in order to process such loan package. LIABILITY PROTECTION: For some category of business registration, it is recognised as a unique entity, separate from the owners, with statutory powers to own property and sue or be sued. There is thus the concept of limited liability, implying that the individual owner (shareholder)s liability relating to the business is limited to the amount of his share subscription. This structure therefore shields the shareholder from personal liability for the companys commitments. CLASS OF REGISTRATION OF BUSINESS: • Registration of Business Names • Incorporation of companies • Registration of Incorporated Trustees REGISTRATION OF BUSINESS NAME: This applies to Sole Proprietorships (one man business) and Partnerships. The sole proprietorship is the simplest form of business structure. It is the one-man business, owned by a single person and called enterprise in local parlance. The attractions of doing business under this structure include: • Lower cost of registration. It costs a little fraction of the cost of incorporation • Ease of registration as requirements are less cumbersome. • It affords the owner full control and ownership. If the business proves successful, the returns are exclusively to you. In running the business, you have the final say, so decisions are faster. • There is no requirement to engage an external auditor to audit your business accounts. Note however that it may be in your interest to do so for the success of your business. On the flip side, consider the following cons of this structure: • There is no limited liability. You are personally liable for the debts and obligations of the business. Your personal assets, even if unconnected with the business, can be applied in meeting the obligations of the business. • The equity capital available to the business is limited to the personal resources of the owner. The scope and growth of the business could be severely hampered, even if the business idea is excellent and potentially capable of rapid expansion. • While it is possible to borrow, this business format may be less attractive to lenders, given the closed nature of its operation. • The business is virtually tied to the person of the owner, implying that the fortunes of the business could suffer if the owner is not available to oversee it. Succession is therefore more difficult than with other business structures involving more than one owner. The death of the owner of a sole proprietorship could threaten the continuity of the business. Partnership applies to a business where two or more persons agree to jointly own and carry on the business. Ownership may not necessarily be equal but rather in accordance with their agreed individual capital contributions. They will share in the profits or losses of the business. The benefits include: • The pooling of resources, i.e. capital, skills, contacts, etc and the consequent benefit of synergy. • The partners similarly share in the burden of a loss or liability. It therefore permits the spreading of risk. • More operational flexibility as partners can easily share responsibilities. For instance. a partner could be located in Kano to run the northern operations while another stays in Lagos to control the Southwest. • The partnership is not liable to corporate tax. The income from the partnership is therefore not taxed twice as in the case of incorporated companies. The disadvantages include: • If the terms of the relationship are not properly set out, internal frictions can arise which could cripple the partnership. Partnerships often seem a veritable ground for disagreements, largely because of the failure to recognise the need to structure them properly. • There is unlimited liability, except where there is limited partnership (limited partner engaged in management is still fully liable). • Related to this is the fact that a partner is bound by the actions of another partner which could, unfortunately, impose commitments. INCORPORATION OF COMPANIES There are four categories to choose from under incorporation: • Private Limited Company (Ltd) • Public Limited Company (PLC) • Company Limited by Guarantee (Ltd/Gte) • Unlimited Company (Ultd) Requirements: Membership - minimum: 2 for each case; maximum:50 for private limited company, no limit for public limited company. Sharecapital - Minimum N10, 000 for private N500, 000 for public minimum subscription in each case is 25% Benefits: The standing of the business is enhanced before financial institutions and other parties it does business with. It consequently could have better access to credit and on even better terms. The business is distinct from the individuals; the death of a member does not dissolve the company. Major disadvantages Registration requirements are more complex and the cost of registration much higher than for sole proprietorship or partnership. The tax burden on individual members is higher since the company is subjected to corporate tax while the individuals still suffer tax on their share of earnings by way of dividend. For public limited companies, requirements of public disclosure and external audit are additional challenges. REGISTRATION OF INCORPORATED TRUSTEES This registration category applies to usually to public institutions and associations, operated by a Board of Trustees. For example, churches, mosques, Non Governmental Organisation. REQUIREMENTS FOR REGISTRATION OF BUSINESS NAME: 1. Form of approval of name 2. Duly completed business name application form 3. Two passport-sized photographs in case of individuals and photocopy of certificate of registration together with certified true copy of resolution in case of a corporate body 4. Updated annual return in case of a corporate body 5. Proficiency certificate where applicable. REQUIREMENTS FOR REGISTRATION OF A COMPANY 1. Form of approval for name 2. Duly completed set of incorporation forms 3. Duly stamped memorandum and articles of association 4. Photocopy of information page of international passport or national identity card for each director and subscriber 5. Evidence of consent letter where applicable 6. Proficiency certificate where applicable 7. Residence permit in case of resident foreigners 8. Photocopy of duly verified Particulars of Directors, Statement of ShareCapital and Return of Allotment of Shares together with memorandum and articles of association for certification as true copies 9. Duly signed and sealed resolution of the company authorising the subscription where a company subscribes to the memorandum and articles of association. 10. An affidavit stating circumstance of cancellation or alteration in the signature on any document or any difference in the name on stamp duty receipt and name on other documents REQUIREMENTS FOR INCORPORATION OF TRUSTEES 1. Form of approval for name 2. Duly completed set of incorporation form 3. Formal application for registration signed by the chairman and secretary or the Solicitor 4. Extracts of minutes of general meeting appointing trustees and adopting Special Clause in the constitution signed by the chairman and secretary 5. Two printed copies of the constitution 6. Trustees declaration form duly deposed to by each trustee in the High Court 7. Impression of the common seal of the association on the application form 8. Notice of the situation of the address of the association or any changes therein Payment of filing fee CONCLUSION: The choice of business registration to embark on will depend on the nature of the business, ownership and an evaluation of the benefits and disadvantages as stated above. However, CAC specifically requires that only accredited persons carry out the actual registration processing. It also limits such accreditation to lawyers, chartered accountants and chartered secretaries. What this means is that you will necessarily have to engage the services of one of these professionals to register your business. With the involvement of one of the professionals, the registration certificate should therefore be in your hands, hopefully, in a short while.
Posted on: Fri, 07 Nov 2014 11:18:41 +0000
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