A business firm is responsible for profitably providing goods or services to clients utilizing its economic resources. In Nigeria, there are various sorts of companies and corporate structures.
First and foremost, it is important to know that under Nigerian law, only the Corporate Affairs Commission, a Federal Government institution, is responsible for company registration.
In Nigeria, business entities are owned in a variety of ways, which are discussed in this article.
Sole Proprietorship
This sort of business organization is frequently owned by one person who carries the risk and is responsible for all of the company’s responsibilities. It is simple to set up, and it is commonly used by small businesses. This is the most common and least expensive type of business structure. All business decisions are made by the owner, who is also responsible for the company’s earnings and losses. This is the type of business to consider if you want to operate alone and have complete control over your company.
A sole proprietorship is normally registered with the Corporate Affairs Commission as a business name. It can only be registered by Nigerians.
Partnership
This type of company is owned by two or more people who pool their resources to form a business entity. The partners share the company’s risks and obligations equally. They also split the company’s profits among themselves. Limited and general partnerships are the two types of partnerships. In a general partnership, all earnings and losses are shared equally among the partners, however, in a limited partnership, just one partner controls the business’s operations while the other(s) provides money in exchange for a portion of the profits.
The Corporate Affairs Commission will also register a partnership as a business name.
Companies
A company is a type of commercial entity that has its legal personality independent from its owners. A joint-stock company is an example of a corporation. With its legal rights to own a firm, it gives limited responsibility to its investors. It is a legal entity that can sue and be sued, hold property, and pay taxes. A corporation might be a Private Limited Liability Company or a Public Limited Liability Company (PLC).
Types of Companies in Nigeria
The various types of companies in Nigeria are:
Company limited by shares
In the event of liquidation or winding up, a member’s duty to contribute to the company’s assistance is limited to the amount unpaid by its shares. A private limited liability company or a public limited liability corporation can be limited by shares. It is a corporate form in which company members are not individually accountable for the business’s debts or liabilities. It must be registered with the Corporate Affairs Commission (CAC) and the company’s articles must also be filed with the CAC, according to Nigerian law. A private business has a minimum of two members and a maximum of fifty, while a public company has an infinite number of members.
A limited corporation by shares separates the company’s commercial assets from its owners’ holdings. It specifies whether it is a private or public corporation in its memorandum.
Company Limited by Guarantee
This is commonly referred to as a non-profit organization. It’s a type of business entity whose goals are to promote educational, religious, sporting, or charitable causes. Its objective should not be to carry on a company to produce profits to be distributed to its members. Any money gained by the organization cannot be distributed to its members or trustees; instead, it is typically held to cover expenses or projects.
It is not necessary to register a Company Limited by Guarantee with a share capital.
Unlimited Company
A member’s responsibility in this sort of corporation is infinite, and he or she is responsible for the entire amount of the firm’s debt. An unlimited liability company is not the best or most appropriate business structure. In Nigeria, there are only a few limited liability businesses. Mobil Producing Nigeria Unlimited is a well-known Nigerian limited-liability company.
Finally, it is critical to note that, among the different types of companies in Nigeria, the private limited liability company remains the most well-known and desired business structure. Furthermore, for foreigners wishing to do business in Nigeria, a private limited liability corporation is the most appropriate kind of business entity.
