TYPES OF BUSINESS ENTITIES IN NIGERIA

BUSINESS AND NON-BUSINESS ENTITIES IN NIGERIA: TYPES, STRUCTURE, AND FORMATION

It is crucial for anyone desiring to establish and register a corporate entity in Nigeria to understand the various types provided under Nigerian law. The Companies and Allied Matters Act, 2020, makes provisions for the formation, registration and structure of different business and non-business entities in Nigeria. This article aims at providing a useful guide which entrepreneurs and investors can consult while deciding on the subject.

Below are the business and non-business entities recognized under Nigerian law and registrable by the Corporate Affairs Commission:

BUSINESS NAME

A Business Name registration refers to the registration of the name and style under which a business is carried on. A Business Name may be registered as a Sole Proprietorship or a Partnership. This type of business entity does not enjoy legal personality. Also, the liability of the proprietor or partners is not limited as the entity is not separate from the proprietor or partners for the purpose of liability.

COMPANY

A Company is a corporate entity that is separate from its members (owners). It enjoys legal personality as such, it can own properties, sue, and be sued in its own name and capacity. The liabilities of members (owners) of a Company may either be unlimited or limited by shares or guarantee.

A Company may be public or private. Public companies can easily raise capital by publicly trading their securities, while there are restrictions on the public transfer of securities with respect to private companies.

Where a Company’s liability is unlimited, the name must end with the suffix” Unlimited” or “Unltd”. If the liability is limited by shares, the name must end with “Limited” or “Ltd or PLC”.  The name of a Company limited by guarantee must end with the words “Limited by Guarantee” or “Ltd/Gte”.

You may click HERE to read more on the registration of Company Limited by Shares and click HERE to learn more on the registration of Company Limited by Guarantee in Nigeria.

INCORPORATED TRUSTEES

Incorporated Trustees refers to a corporate entity that does not engage in business or make a profit. It emerges when two or more people are appointed and registered with the Corporate Affairs Commission (CAC) as Trustees of a non-profit organisation, thereby enabling the trustees to hold movable and immovable properties, sue and be sued, and have perpetual succession on behalf of the organisation.

Usually, Incorporated Trustees are used for the registration of organisations that have the objects of promoting charity, education, culture, Art, Religion, etc., as listed in Section 823 (1) of the CAMA 2020.

You may click HERE to read more on the registration of Incorporated Trustees in Nigeria.

LIMITED PARTNERSHIP (LP)

A Limited Partnership (LP) is a partnership arrangement with at least one general partner and at least one limited partner. While the liability of the general partner is unlimited, that of the limited partner is limited except in the circumstances that the limited partner takes part in the management of the partnership. The Partners of a Limited Partnership cannot exceed 20 persons.

The name of the entity must end with “Limited Partnership” or “LP”.

LIMITED LIABILITY PARTNERSHIP (LLP)

A Limited Liability Partnership (LLP) is a partnership arrangement with the liabilities of the partners limited to the amount agreed to be contributed or what is outstanding in the event of winding up. An LLP has a legal personality separate from the partners.  The Partnership must have at least two (2) “Designated Partners” (one of whom must be resident in Nigeria) who will be responsible for ensuring the entity complies with the requirements of the Companies and Allied Matters Act.

The name of a Limited Liability Partnership must end with “Limited Liability Partnership” or “LLP”.

 

When making a decision on the most suitable and appropriate business or non-business corporate structure to adopt, it is important to consider factors such as liability protection, potential size, regulatory compliance, taxation and the nature of the objects or objectives. Although applicants can make the decision themselves and proceed to register any of the entities with the Corporate Affairs Commission, it is however advisable to engage the services of an accredited agent to ensure a seamless process.

By the Company Secretarial and Regulatory Compliance Department of Aekley Solicitors, Nigeria.