The benefits of CAC business registrations are numerous. First of all, congratulations for taking a step within the entrepreneurship route. the idea you’ve got is what we elect to call a stellar one. Ideas rule the planet, so, if you’ve come up with a particular business idea, or an improvement to an existing business concept, there is likelihood that you simply will succeed.
Below are some reasons registering a company or a Business Name in Nigeria may be a smarter legal and business decision than simply operating without a registration.
One of the explanations to the choice of people registering a business is in order that they will acquire corporate legal personality. Under Nigerian law (and the laws of just about every country in the world), there’s a legal fiction where a corporation is deemed to be a separate legal entity from the individual(s) that operate it. Therefore the company has powers to enter into contracts, buy property, sue or be sued in its name etc.
The implication of this is if the company is indebted to a bank as an example , it’s the company that owes the bank and not the Directors/members of the company, therefore the bank cannot sue the administrators in their personal capacities to recover the debt, save during a situation where the Director(s) gave personal guarantees for the loan facility.
This benefit is more pronounced with companies as against Enterprises/Business Name.
Starting a business in Nigeria is in some cases, an adventure in the sense that you simply put in your personal finances and may even need to borrow from your friends and family, and in some instances, you trade a secure and doubtless lucrative job. you would like to be rest assured that your risk is restricted to what you’ve already put in to start out the business in the unfortunate event that the business fails. This way, you’re ready to protect your property and private assets from getting used to pay the business debts incurred by you through your company. Registering a company will keep you safe from this embarrassing scenario.
PROFESSIONALISM AND PUBLIC CONFIDENCE.
Registering your business tends to project a professional image. It shows that you simply are focused on the business and also committed to abide by the professional ethics governing the industry you play in. It also signals that you simply are likely to attend to corporate governance directives which the regulatory body in Nigeria (Corporate Affairs Commission) has put in place.
Having your business registered suggests to your clients/customers that the business has permanence and is committed to effective and responsible management. It also engenders public confidence in your brand by customers/clients and suppliers.
SUBMISSION OF TENDERS AND BIDDING FOR CONTRACTS.
In Nigeria, most Government ministries, departments, agencies and multinational firms have rules that for you to bid for contracts and be awarded same, you’d need to be a registered business in Nigeria. Hence, failure to submit your tender as a registered business could potentially reduce your chances of success when bidding for contracts.
It is no secret that state governments, federal government and multi-nationals have bias for companies over unregistered businesses.
Under Nigerian Tax laws , registered businesses names don’t pay company tax, rather, they pay income Tax. The implication of this in a Federal State like Nigeria is that if you are a Director of a company, you pay your company tax to the Federal Inland Revenue Service (FIRS), while you pay your income tax to the relevant State Inland Revenue Service.
If you’re a sole proprietor of a registered business, you’re only mandated to pay income tax to the relevant State Inland Revenue Service. While on the face of it, handling two different tax bodies might sound tiring, there are benefits thereto . However, there’s need for you to plan your taxes by consulting with a tax professional.
For example, in an incorporated company, the shareholder director will receive a salary that’s subject to non-public tax at one rate, then dividends that’s taxable at another rate. What a savvy person will do therefore is elect to receive the foremost tax efficient mixture of salary and dividends.
It is also worthy of note that the majority benefits and expenses are taxable, however, if you are a registered company in Nigeria, you’ll legally offset certain costs that are taxable as benefits in a similar way under income tax.
One of the benefits of CAC business registrations is continuity of business. As already discussed, a registered company has its own legal identity, therefore when third parties contract with the ‘company’, they are doing so with a separate legal entity and not the individual directors and shareholders of the corporate . This suggests that companies survive the death or incapacitation of the owners and it’s possible for the administrators and shareholders involved in the company to change over time.
For those conversant with the concept of risk management, one of the key things in understanding the danger profile of a business is business continuity. This is often important not only from a day-to-day running of the business perspective, but also from a legal perspective.
Suffice to mention that business continuity of a registered business is extremely risk-prone and thus third parties are wary about over-commitment to such businesses. aside from third parties, this is often also important to employees.
However, if it’s a registered company, its existence will only cease if it’s formally wound up , liquidated or by an order of the Nigerian courts or Registrar of Companies. Amongst other benefits, this will provide more perceived security for workers and third parties than other business structures.
In general and simplified terms, there are two broad ways to boost funding – debt and equity. Debt is essentially , give me X for my business and i can pay you back at a future date with X% interest; equity is give me X for my business and that i will offer you X number of shares within the business also.
For debt, both business structures – registered business and registered company, can raise funding this manner, however in the case of a registered business name, the proprietors are responsible personally for the debt until it’s discharged, except for the registered company, as discussed earlier the company is the debtor and not the shareholders.
For equity, registered businesses generally need to raise new capital from their own resources or from family and friends. However, registered companies in Nigeria are ready to raise capital at any time by issuing new shares. The new shares are often offered to existing shareholders or new investors, although only public limited companies offers shares to the general public. The ease of securing business loan is one of the benefits of CAC business registrations.
If you’ve got a registered business, upon retirement, it’s very likely that the business will retire with you. However, registering a business as a Ltd. can aid the likelihood of selling it in the future. The first shareholder/owner of the corporate are going to be ready to achieve a totally clean break and obtain a disburse for the business.
One of the good benefits of business registration is just bank account opening.
This means that the bank account will bear your BUSINESS NAME and not your personal name.
For instance, your business name is FIGO Ventures, and you would like to open a bank account which will bear the name intrinsically . This would be FIGO ventures as your bank account name and not your personal name.
And having a bank account together with your BUSINESS NAME causes you to look professional, and build trust in your customers, bank and your product supplier.
FEDERAL GOVERNMENT SMALL BUSINESS INCENTIVES
When you register your business name, you stand an opportunity of growing your business through the various business incentives extended to Micro, Small and Medium Enterprises (MSMEs) by the Federal Government. This is often one benefit business registration enjoys.