One of the major things to consider when starting your own company is the type of registration you want to do. This is because there are different registration titles as outlined by the Corporate Affairs Commission (CAC), the only organization responsible for company registration in Nigeria, to suit the stage of your business. Your business could be at the early stage or market testing stage or the growth hacking stage. The structure of the business you want to run also has a key role to play in determining your registration.
Below are the types of business/company registration titles as outlined by the Company and Allied Matters Act of Nigeria (CAMA) 1990, Pursuant to Section 659
Sole Proprietorship:
This is the simplest, easiest and cheapest form of starting your own business. Especially, when your business is at the early stage or infancy level, your best option is sole proprietorship. The process of registration with the corporate affairs commission (CAC) is equally without sweat once the chosen name is approved. The owner of this business bears all the risks of the business alone and owns all the profit. He/she is also the full custodian of the liabilities and assets of the business. However, the risk of this type of business is that, it is difficult to attract investment from investors and the death of the owner may terminate the existence of the business.
The structure of the business you want to run has a key role to play in determining your business registration.
Private limited Company:
A private limited company is separate from its owners and has more credibility over the sole proprietorship. It comprises of directors and shareholders with an authorised share capital of not less than N10,000. At least two people must subscribe to the memorandum and articles of association and must be above 18 years of age. Apart from the employees, total number of members in this type of company must not exceed 50.
Public limited company:
A public limited company has a greater advantage over the sole proprietorship and private limited company put together, because it can sell its shares to the public and has the tendency to be quoted on the stock exchange. The cost of running this kind of business is quite very high; therefore it can only be afforded by large organizations or corporations.
Guarantee Company (not for Profit):
This is the type of company mostly run by associations, clubs and charity organizations. It does not have a share capital and it is not owned by the members. Nobody can claim its assets and all its income is solely channelled towards the operations and objectives for which it was formed or registered.
However, the risk of this type of business is that, it is difficult to attract investment from investors and the death of the owner may terminate the existence of the business.
When starting your own enterprise, it is better to begin as a sole proprietor. This is because you have a reduced overhead in terms of labour cost as well as your tax payment. Monitoring and managing the business is much easier particularly at the early stage. However, you may have to consider changing your registration to the limited status, when your business expands outside your current location and your profit is in the neighbourhood of seven figures and above, that is million or billions of Naira as the case may be. You will also need to work with professionals such as lawyers, accountants and tax auditors.
Choosing the appropriate business structure is pivotal to running a successful business. As such, you should be careful in selecting the best fit for your business.
