Business entities are usually formed by one or more persons to sell goods or services for profit.
In Nigeria every citizen is free to carry on business as an individual or as a member of a group, provided they are not breaking any relevant laws in the process.
Business entities are usually formed to sell a product or a service. However, they may be used to distribute business risks, or manage projects.
For people who wish to engage in charitable, health, sport, or social activities; it is preferable to structure their businesses either as Companies Limited by Guarantee (Ltd/Gte) or as incorporated Trustees
What about Non-Nigerians?
In theory, non-Nigerians are required to obtain a business permit from the minister of Internal affairs before establishing or taking over a company or practicing a profession in Nigeria.
In reality, the foreign investment drive undertaken by the government has led to the relaxation of several rules, especially in respect of foreign participation in business. As a consequence, foreigners are now permitted to own and manage businesses in Nigeria.
However, foreigners are prohibited from participating in certain business areas. This is important to protect the country and its economy.
What is the benefit of doing business under a Trade name?
Individuals and partners often carry on business under names other than their own names. With time, the business builds a reputation for the quality of its offerings. This reputation is called brand equity.
If consumers like a business, it is said to have positive brand equity. This generates more credibility and trust from their customers, banks, suppliers and other business partners. This goodwill is a valuable business asset.
Why can’t I just carry on business without registration?
Businesses are required to be registered under the Companies and Allied Matters Act Cap 20, LFN 2004 (as amended). Registration protects your business name from infringement by third parties. It also protects the public from the misleading or fraudulent use of business names by third parties.
A business name may be registered by a single person. However, where more than 20 people desire to form a partnership or carry on business in common, they are required to incorporate a limited liability company.
Exceptions to this rule are co-operative societies registered under the provisions of any law and partnerships formed for the purpose of carrying on practice as legal practitioners or as accountants by duly qualified persons.
If you would like to learn more about business name registrations in Nigeria, we have written a short guide on the legal requirements and process for registering your business name.