HOW INCORPORATING OR REGISTERING YOUR BUSINESS BENEFITS YOU AND THE BUSINESS
- January 21, 2021
- Posted by: admin
- Category: Business
As at 2018, the Acting Registrar General, Corporate Affairs Commission (CAC), Lady Azuka Azinge said that over 40 million small and medium enterprises are unregistered and in 2019, (https://www.vanguardngr.com/2018/12/over-40m-small-medium-enterprises-unregistered-cac/) the commission also reported that a total of just 3.1 million businesses are registered in Nigeria. (https://allafrica.com/stories/201903290552.html).
Why do a great number of businesses still remain unregistered, where can they register and what are the importance of registering or incorporating businesses either as a Business name, Limited Liability Company, NGO or any other form of registration.
WHY BUSINESSES DO NOT REGISTER
Most businesses in Nigeria are not registered because some of its owners do not know how to go about the registration of their business. Truthfully, registering a business is not as easy as it may sound because it might take some time to process and there might be need to think things through as to what to register your business as, that is, either as a business name or as a limited liability company.
Some refused to register because they think it would absolve them from tax issues and governmental regulations. Others delay registering because their businesses are not as big or grown as they would have wanted it.
WHERE TO REGISTER
There are federal and states bodies that are responsible for making sure businesses are properly ready to do business. In Nigeria there is a long List, but you have to know which you would need, from CAC, FIRS, State-IRS, SCUML, Trademarks and some professional bodies depending on the type of business you are venturing.
The Corporate Affairs Commission (CAC) is the autonomous body charged with the responsibility to regulate the registration and management of businesses and companies in Nigeria. Upon registration of a business, the commission issues a certificate of incorporation to the business owner(s) verifying the registration of the business or company. Therefore, proving your ownership of the business or company and it trademark, plus, giving you the legal right and recognition to run the business.
To get your business fully operational after CAC, you would need a tax Identification Number (TIN) from FIRS and also register with the state internal revenue services, in Lagos and Ogun state its LIRS and OgIRS respectively.
ADVANTAGES OF INCORPORATION OR REGISTERING YOUR BUSINESS
- There are lot of reasons why it is important to register your business, one of which is the legal right and recognition to running the business. Another importance is that a registered business is makes it easy to acquire loans and investments.
- Registering your business as a business name, either as a sole proprietor or as partners, the owners are completely responsible for the profit and loss of the business. Therefore, if the business stumbles, the owner(s) would be held personally accountable.
- However, a limited liability company is a business which is registered as a separate entity from its founders, in which the directors and the shareholders both have limited liability in the company, therefore, if the company falters, the founders are not held personally responsible as it is with business name.
- A registered business, as mentioned earlier, has the legal recognition of the government and can be easily traced and accounted for, therefore, making it easy for banks and investors to trust the business or company with their funds if other terms and conditions are fulfilled.
- Additionally, a business which is registered as a limited liability company has a separate entity from its owner, in that, when matters of debts and liability arises in the business, the business owner(s) are not held individually responsible for the debts. Consequently, if a registered limited liability company obtains a loan from a bank and is unable to pay, the properties of the company can be withheld but not the properties of the company’s owners.
- On the other hand, a business registered as a business name can as well easily access loans and investments, however, if the business is unable to pay back the loans acquired, the business owner(s) can be held personally accountable.
- Furthermore, a registered business or company is considered reliable to handle business. It would be easy for other businesses to trust your business with their deals and to trade with you in order to generate revenue. Moreover, customers feel more comfortable paying into a business’ corporate account because they know their money can be traced, thus, the need for your business’ corporate account which can only be acquired through a certificate of incorporation.
- Also, as the owner of a registered business, you can easily access permission to travel outside the country for business purposes.
- Lastly, a registered business or company with the right structure to maintain its relevance can continue even after the death of its owner(s) as long as its records are with the Corporate Affairs Commission (CAC).