Are you looking for information on how to upgrade your business name to company incorporation in Nigeria?” This post will provide you with all the details.
Moving from a business name to company incorporation is a big step. However, it can mean many positive things for your business. Entrepreneurs with registered business names in Nigeria can successfully upgrade their business name registration to company incorporation. How does one go about this? This is a question many business owners may have. Many entrepreneurs who desire to implement this transformation are unsure of how to do it.
They might also think that this process will take a long time and cost a lot of money, although that is not the case.
This post will show you how to upgrade from a business name to company incorporation in Nigeria. Before that, it’s important to know the differences between a business name and a Company Name
Business Name Registration
A business name is a name other than the business owner’s real name used to conduct business transactions. The law in Nigeria states that any person, partnership, or corporation that conducts business under a name other than their real name must register such a name as their business name. Its objective is to reveal who the individuals or legal entities are responsible for using the business name.
A sole proprietor, a partnership, or a company may possess this name. The person who owns the business name is still responsible for the debts contracted under that name. There is no restriction on liability and no creation of a legal entity. A business name does not have shareholders, directors, or a secretary. Also, it is free from many legal obligations that apply to corporations.
Company Registration
This kind of registration takes your company through the process of incorporation to become a separate legal entity. There are many benefits to incorporating your business. The most popular benefit is the enjoyment of limited liability and business growth.
In Nigeria, businesses and companies are registered only by the Corporate Affairs Commission (CAC).
As a business owner, you might be wondering if upgrading to company incorporation is right for you. Some of the common reasons entrepreneurs with registered business names might choose to upgrade to company registration include:
Business Growth or expansion.
You’ve been in business for some time, and your business is expanding beyond your original plans or goals. It might be time to get Company Incorporation.
Are you trying to do things like getting investors, taking your business International or repositioning yourself in your business environment? If yes, you may consider upgrading your business registration.
Legal personality
A company is a corporate personality on its own. It has privileges that do not apply to a business registered as a business name.
A company is an individual in the eyes of the law. Whereas a business name registered business has no personality that is separate from its owner.
For instance, a business with a business name registration cannot enter into a contract. The business owner goes into the contract. However, an incorporated business can go into contracts without the owners of the business taking full liability.
Limited Liability
One of the most common reasons business owners upgrade to incorporation is because of limited liability. A public company or private company that is limited in liability has nothing to do with the personal assets of its directors and shareholders from the liabilities of the company. The debts of the company do not belong to the owners of the company. For instance, a company that can’t pay its debt will simply have its assets sold. It does not mean that the owner(s) must sell all their personal assets to pay such debts.
Requirements to Upgrade your Business Name to Company Incorporation in Nigeria
Are you sure that the upgrade is for you? According to the Corporate Affairs Commission, these are the necessary steps to take. The change can either be to a private or a public company. Each of them has 3 options of limited liability. These include a company limited by shares, a company limited by guarantee, and an unlimited liability company.
The Requirements for the change include:
- Formal application for conversion submitted to the Registrar General of the Corporate Affairs Commission.
- Original copy of the Business Name Certificate
- Letter of authorization from the proprietor of the business. This is necessary if the application for conversion is made on behalf of the proprietor
- Proof of up-to-date payment of annual returns for the business name. Yearly Payment of Annual Returns at the cost of ₦1, 000. The deadline for Business name Annual return payment is 30th June each year. This is after the year the business name was registered. The penalty for each year missed is ₦2,500.
- Approval of conversion application from the Registrar.
- Conversion application fee and company registration fee.
- Means of identification of the directors
- Memorandum and Articles of Association
The procedure of Conversion from Business Name Registration to Company Incorporation
- Apply in writing that your company name is registered as a limited liability company (limited by shares or limited by guarantee) or an unlimited liability company to the Registrar of the Corporate Affairs Commission. You should include the following files with your letter:
- Duplicate of the certificate of business name registration.
- Duplicate of your BN1 form.
- The documentation proves that you paid your company’s annual returns from the time of registration until the time you filed for conversion.
- When an application is submitted on behalf of a business owner, a letter of authorization attesting to the owner’s approval of the conversion should be attached.
- Pay the required amount of N5000 into the permitted account, often the CAC via Remita, and then wait for your application to be approved.
- Once your application has been approved, you may now fill out the company registration form. After you have submitted your form and the necessary supporting documentation, your company will be registered and given a Certificate of Incorporation, especially if the legal requirements are met.
It usually takes about 2 weeks for applications for upgrades from business name to company incorporation to be approved. Meanwhile, feel free to read through other articles on SME360 to help you establish and grow a business in Africa.