Importance of Incorporation and Registration of Names.

IMPORTANCE OF REGISTRATION OF BUSINESS NAME AND INCORPORATION OF COMPANIES IN NIGERIAN COPORATE AFFAIRS COMMISSION. 

THE THINGS YOU NEED TO KNOW AND THE STEP TO TAKE TO REGISTER A BUSINESS ORGNIZATION IN NIGERIA. 

Requisition to make before entering or carrying out incorporation. 

1.What kind of business organization do you what to operate?

2.What is the size of the business organization you intend to run. 

3.What is the risk and scope of the liability of the organization? 

4.Is the business profit oriented?

5.is the profit made for the charity organization? 

6.Are there restrictions on the name intended to be used? 

7.what is object of the intended organization.

A: A business name is the name which a business trades under for commercial purposes. A business does not

actually begin by formulating a business plan or opening a bank account. It starts from choosing a name. There is more to business name than just identity. A good business name is an advertising tool. Many large companies even hire expensive consultants to help them name their businesses, products and services.

Q2: I have this business name that I love so much, and I want to start a business under that name. Can I proceed immediately?

A: No. I think the next thing after you must have done a feasibility study on the business itself is to get the business name registered at the Corporate Affairs Commission (CAC).

Q3: What do you mean by Corporate Affairs Commission?

A: Registration of business in Nigeria is the exclusive responsibility of the Corporate Affairs Commission, also known as CAC; which has its head office in Abuja, and branches in most states of the federation. The CAC is the federal government agency responsible for registration of all companies.

Q4: But I was told that the cost of registering/incorporating a company is expensive. Can’t I go on with the business then register the name later?

A: My candid advice is No! Having your business registered definitely confers some credibility on it, given that it then acquires an identity. In many important business activities or relationships you may want to get involved in, details of your business registration will be required. You do not have to wait for such occasions before getting your business into the register of companies - you may miss an important opportunity just for that omission.

Q5: Is that all?

A: No. Using a business name similar or identical to that of a registered business name can land you into problems, including legal issues. Besides, if you have succeeded in doing business for several years under a name which has not been registered, that does not confer ownership of such business name on you. The CAC has to approve the availability of such a business name before you can proceed to file an application to get the name registered.

Q6: Does that mean I may forfeit a business name that I have been trading under and has become so popular in the marketplace just because I didn’t register it at first?

A: Yes. Due to your negligence, someone somewhere might have registered that name or a similar one. This means you will lose all the goodwill that name garnered over the years. Do you see that this situation is more expensive?

Q7: I understand that the Corporate Affairs Commission rejects registration of some business names. What are the likely reasons for such actions?

A: Good question! Officials at the CAC use their discretion in approving a business name submitted for search. Business names may be disapproved if such names existed or are similar to the ones on their database. At times, business names are disapproved due to their vague nature. Consider someone who submitted LAW FIRM as a business name!? More so, objects such as INSTITUTION, FOUNDATION and MINISTRY are not likely to be approved as a business name, except when such objects are used for registration of incorporated companies/trustees.

Q8: What difference exists between a business name and incorporation of company or trustee?

A: To start a business, you need to decide on a business name. You also need to choose a business format under which to operate. You need to know the requirements relating to membership of the company, ownership, etc to enable you make decisions you will remain happy with. The routine processes of registration can then be carried out on your behalf by an accredited professional.

Q9: You mean business names, companies, and trustees are formats?

A: Yes. It may be called business structures too. You will need to talk to an expert concerning this. However, let me give you a little of what you should know.

Three major classes of registration are available under the relevant law (the Companies and Allied Matters Act of 1990):

(I) Registration of Business Names: This applies to sole proprietorships and partnerships. It is the simplest form of business structure. It is the one-man business, owned by a single person and called ‘enterprise’ in the local parlance. The partnership applies to a business where two or more persons agree to jointly own and carry on the business. Given the fairly complex nature of partnerships, it is best to seek the services of experts to assist with the details.

Q10: What about incorporation of companies and trustees?

A: Incorporation of companies is the second class of registration available under this Act. Incorporation recognizes the business as a unique entity, separate from the owners, with statutory powers to own property and sue or be sued. There is thus the concept of limited liability, implying that the individual owner’s(shareholder’s) liability relating to the business is limited to the amount of his share subscription.

The third class under this Act is the Registration of Incorporated Trustee. This applies to public institutions and associations, operated by a Board of Trustees. This category includes: NGOs, churches, clubs, trade associations, political and civil groups etc.

Q11: Can an ‘enterprise’ (business name) be used to carry on all kinds of business?

A: No. The choice of which structure to adopt will depend on the nature of the business, the ownership and evaluation of the benefits, and the pitfalls of each format.

Q12: Why do some people prefer to incorporate a limited liability company?

A: Limited liability companies have grown to become so popular among business owners due to the following reasons:

(I) There is limited liability for individual shareholder.

(II) The standing of the business is enhanced before financial institutions and other parties it does business with.

(III) It has a better access to credit and on even better terms.

(IV) The business is distinct from individual owners; the death of a member does not dissolve the company.

Q13: Can I handle the registration procedures myself?

A: Yes. But the challenge here is that you may receive many queries from the officials at the CAC if you don’t comply with certain rules. Though it is cheaper to do the registration yourself, hiring the services of accredited professionals does pay in the long run. However, the CAC specifically requires that only accredited parties carry out the actual registration processing for incorporation of companies and trustees. The accredited professional you choose for the registration process should also be able to provide further advice. As a trained practitioner, he is also familiar with the registration requirements for each business format and processing procedure.

Q14: Now, how long does it take to get my business registered and receive a certificate?

A: The duration depends on the business format you are considering. Applications for registration of business names are usually processed at the zonal office where you submitted an application to be registered; though Name Availability search forms may be forwarded to their head office at Abuja. However, applications for incorporation of companies/trustees are usually forwarded to Abuja for processing. This may take more time.

In either case, the duration also depends on how soon the Name Availability result is released. These days, a name search result could take up to 1 month as against the usual 3-7 days; and the issuance of certificates is taking months to be ready instead of weeks.

Q15: How much does it cost to have my business name registered with the Corporate Affairs Commission?

A: Except you are handling the registration processes yourself, the fee depends on the professional and how he bonds with you with his professional fees, but not the filing fee. The filing fee fluctuates every now and then so you cannot put a specific price on it.

Q16: Do you mean having my business name or company registered with the CAC confers special rights or privileges or licenses to carry on my line of business?

A: No. Registration of any business name under the Companies and Allied Matters Act only confers on the proprietor or partners thereof of the right to carry on such business under a business name, that is, a name other than their own surname or surnames without any addition other than their forenames or Names or the initial of such forename or names. It does not confer any special right or privileges or any license to carry on the business itself.

Q17: Do you mean certain businesses require licenses, educational certificates or accreditation from an authorized body before venturing into them?

A: Yes. Before you register a company that requires a lot of technical and financial input, the CAC has devised new means of screening out touts and quacks from proclaiming to be ‘professionals’ in a field that requires extreme expertise. Hence, it is required that you provide educational certificates, belong to a relevant professional body, and or must have gained several years of hands-on experience.

Businesses that fall into this category may include: Advertising/Public Relations, Alternative Medical Practice, Architects/Town Planners, Chartered Secretaries, General Tax Consultants, Hospital/Clinics, Building/Civil Engineers/Contractors, Food Products/Processing, Legal Practice & Consultancy, Human Resource Management, Schools etc.

Q18: My Business registered with a trade association. Do I still need to register it with the CAC?

A: Yes. What your trade association has done is to grant you a license to carry on your line of business. Examples include: Kerosene dealers, hair stylists, tailors, and even professionals such as surveyors and accountants. If you need to engage in some financial dealings such as opening a corporate bank account or securing bank loan, a copy of your business name/company certificate shall be requested.

Q19: My school has gotten an approval from the Ministry of Education in my state. What is the essence of a CAC certificate again?

A: The CAC is responsible for registration of ALL companies, including educational institutions. What the Ministry of Education did was to give you an approval/license having met the requirements laid down for operating a school. Many school proprietors/proprietress are guilty of this. They spend a lot of money to get a government approval then come back to register their school names at the CAC. It doesn’t work that way. Two stark choices are usually left open when they finally decide to register their business names with the CAC.

(I) The name approved by the Ministry of Education in their state, and subsequently submitted for approval, are usually denied. Why? The exact or a similar name may have been registered somewhere, sometime. Take for instance, someone submitted BETTER LIFE ACADEMY for Availability search at the CAC but was denied approval. The reason: BETTER DAYS SCHOOLS had been registered for someone else! It can be as serious as this.

(II) They are forced to change the name of their schools in order to be different or, at best, avoid a law suit from the rightful owner of such business name. So, be wise and obtain a certificate from CAC before filing an application for government (Ministry of Education) approval.

Q20: Is there a way I can confirm the validity or authenticity of my business name certificate?

A: Yes. In fact, many people are skeptical about hiring a third-party to process their business name registration, due to the fear that the certificate given to them might be a fake. There are two ways by which you can verify:

(I) Obtain a Name Search Form at any CAC office and fill your registered business name. Submit the form for a search. This may take about 3-30 days for the result to be released. However, when the search result is finally out, the comment stated by the CAC will suggest to you if the certificate in your hands is genuine or not.

(II) Request for a Certified True Copy (in the case of incorporated companies/trustees). The Certified True Copy (CTC) is a copy of the memorandum of association that has been verified and stamped as an exact true copy of the memorandum of association in the CAC’s possession and file. If you were not handed a copy at the time you registered your company, and you want to obtain it after your company has been registered, you have to show your tax clearance, your annual returns, write a letter to the director-general of the CAC stating why you need it, purchase application forms and pay the filing fees for the new CTC (which is double the cost compared to when you ought to have gotten it cheap during registration and avoiding the hassles involved). This is where the CAC makes money because they know you will come back someday for it.

Q21: Why is the C.T.C so important?

A: The advantages of this is that with the CTC, you can present it to any company to inspect its objects for business, to help conduct businesses with banks, tender it for auctions, or government contracts, etc, when these big corporate institutions need them. If you don’t have a CTC, you will force the company to do a search on your company at the CAC. Which means you will be billed for that search by the corporation. So, imagine how many times you will be shelling out money for company searches?

Q22: I quite understand why it is so important to register a business name or incorporate a company/trustee. It’s in my best interest, isn’t it?

A: Certainly. Imagine your organization being recognized, favoured and approved of by your target market/audience, government agencies, international organizations, financial institutions, or even your local community - just because you are duly registered with the Corporate Affairs Commission of the Federal Republic of Nigeria! The importance of your organization’s certification with the nation’s registrar general

You must begin to file in an annual returns 15 months after you incorporate your company. For example, if you registered your company in Jan 2008, you must file an annual returns for 2009, 2010 and 2011. Because 2012 is not yet ended, you can't file in an annual returns for 2012. And
Irrespective of whether you commenced operation or not, CAC demands you file in an annual returns from date of incorporation. What happens if you fail to do this each year? You will have to pay extra fees for defaulting to pay on time. If You have duty to both CAC and FIRS after your company is registered. You pay fees to CAC, while tax and levies to Federal Inland Revenue Service (FIRS). If your company is Ltd and you have started business, you file your audited account with CAC and FIRS not later than 18 months after incorporation. Failure to do so with FIRS attracts N25,000.00 for the 1st month and N5,000.00 for each subsequent months the defaults continues. If you have not started business, you file statement of affairs certified by an auditing firm within thesame 18 months to both CAC and FIRS. Thesame fine applies if you default. Not later than 6 months after incorporation, all registered business going into VATABLE services suppose to apply and obtain TIN/VAT number from FIRS. Fine for this is N10,000.00. If you have not commence business after 18 months of incorporation, you will pay a levy of N20,000.00 (Pre-operational levy) for the 1st year and N25,000.00 for each other years to FIRS until you commence business. For all registered ltd company not yet commenced business, all this await them to resolve when they are ready to start business or have issues with FIRS.