The Major Differences Between a Business Name vs Limited Liability Company (LTD) in Nigeria!
Knowing the peculiarities between registering a Business Name vs Company Name [Limited Liability] in Nigeria will help inform a better decision making. Similarly, will also show which will serve long-term benefits. But, when it comes to deciding on the type of business registration to carry out and why; we have realized over the years that most startups and entrepreneurs do not fully grasp the difference between a Business Name (Enterprise) vs Limited Liability Company.
In a bid to save cost, most startups prefer to register a business name as opposed to incorporating a Limited Liability Company. Even more, consideration for factors such as Expansion, Cost, Returns, Structure, Brand identity and others is extremely important. Knowing the peculiarities of the different categories of company structure helps in the decision-making process for long-term benefits.
Difference Between Business Name vs Company Name Registration in Nigeria
What is Business Name in Nigeria?
A business name also called enterprise or venture is a trading name for purposes of business. In other words, it is a title under which a sole proprietorship or a partnership carries out its business. It gives the business a unique identity through a combination of words and symbols.
If you want to know more about Choosing a Suitable and Brandable Business Name; Read more on that here How Do I choose a Suitable and Brandable Business Name? | 4 Step Guide.
How to Register a Business Name in Nigeria?
Do you want to be an entrepreneur in Nigeria? which one of the two forms of business registration would you prefer? For Business Name Registration process Click Here!
A Business name registration provides legal backing for the business. Under the Nigerian Law, Part B of the Companies and Allied Matters Act; a business name is one of the 3 general company structures which you can register in Nigeria with the CAC Nigeria – Corporate Affairs Commission. The other 2 are Limited Liability Companies and Incorporated Trustees. But a business name also is known as a trading name; is simply a name or title with which a person trade. In addition, the law doesn’t see it as a separate entity but a single entity with the sole trader or partners.
What is a Limited Liability Company in Nigeria?
LLC is the acronym for Limited Liability Company often denoted as Ltd in Nigeria. LLC registration is the incorporation of a separate legal entity to conduct business. At the completion of the registration, a new entity is created in the eyes of the law. An entity (artificial person or legal individual or being) separate from its owners – shareholders. It can sue and be sued. This means that the owners are protected in the event of any unforeseen circumstances in terms of liability.
An LLC can choose to register a business name to serve a particular business line it has interest in. Therefore business name (enterprise) can be registered by an individual (sole proprietor) or by an existing limited liability company.
There Are Two Forms of Limited Liability Company In Nigeria:-
- Private Limited Liability Company. Private Limited Liability Company does not issue shares to the general public. The Nigerian law permits Private LLC to sell shares to certain individuals for purposes of partnership [financial or technical].
- Public Limited Liability Company. Public Limited Liability Company can issue shares to the general public when it announces such and allows anyone, anywhere the right to purchase its shares listed through the Nigerian Stock Exchange (NSE). Established in 1960 as the Lagos Stock Exchange, in 1977; its name was changed from the Lagos Stock Exchange to the Nigerian Stock Exchange. As of June 28, 2016, it has about 180 listed companies with a total market capitalization of about N10.16 trillion. All listings are included in the Nigerian Stock Exchange All Shares index. In terms of market capitalization, the Nigerian Stock Exchange is the third largest stock exchange in Africa.
Business Name vs Limited Liability Company In Nigeria | Key Differences
Both a Business Name and Limited Liability Company enjoy the full backing of the Nigerian law. However, the law doesn’t see a business name as a separate entity but a single entity with the sole trader or partners. But in the case of a Limited Liability Company, an entity has been created (artificial person-legal individual or being) separate from its owners – shareholders.
Structure And Control
In an enterprise, the proprietor or in the case of a partnership, the partners have full control of the business. In an LLC, control is via the board or as per the shareholdings held by the shareholders. Decisions are usually more complex in a Limited Liability Company compared to an Enterprise or Business Name. However, the owners can decide that it doesn’t need a board, this may lead to quick decision making but this depends on how big the company is or wants to be.
Cost And Capital
A business name is cheaper to register and setup while a limited liability is slightly costlier to incorporate and establish. But both enjoy different arrays of benefits compared to each other. Therefore, the registration of business solely depends on the consideration of the person intending to do so. Compared to a business name, the death of the proprietor brings the business to an unexpected end, but in LLC, the death of a shareholder or director doesn’t affect the life of the business. In addition, the company continues to exist in the foreseeable future because it operates under the principles of a going concern. As a result, some creditors and banks won’t trade with businesses that are not a “going concern” because of the high risk involved.
Growth And Expansion
Limited Liability Company enjoys more in terms of future growth and expansion. Moreover, an LLC is more recognized than a business name. Meanwhile, established and big corporations get government patronage easily by way of contracts, tax holidays, waivers etc because of its capacity to deliver and fulfill certain obligations.
We offer Free Business Consultation and a Name Reservation for all our prospects. If you want to register your business name or Limited Liability with the CAC? Click Here to see our amazing best value discounted offers or Click here to Open a Ticket.
Ideally, the entire process takes about 3–7days for business name registration and 7-14days for LLC. To clarify, sometimes could exceed depending on the workload of the Corporate Affairs Commission at the time.
If you want to know more about the business name registration process with the CAC Nigeria – Corporate Affairs Commission, read more on that here – Registration of Business Name with the CAC | Complete Guide.
Whether you are starting a small venture, want to grow an existing one or launch a big company, you should always have Scalability in your thoughts. Roman philosopher Seneca once said, “Luck is What Happens When Preparation Meets Opportunity”.
We do hope you have benefited from this article, we have provided a birds-eye view of the two forms of business registration readily available to entrepreneurs in Nigeria, which one would you prefer? Business name registration or limited liability? You can get started with the registration process now!
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This article on Business Name vs Limited Liability Company is mostly for information purposes alone and is not intended to take the place of legal advice. Readers are advised to seek proper legal advice. If you need help in reaching a lawyer, you may consider sending us an email at [email protected] and we would be glad to connect you with a lawyer.
If you haven’t decided on a business name yet, read How do I choose a business name? page for some tips.