Many who want to register their business with CAC in Nigeria have one major question on the difference between registering a business name and a company name. We proffer keynote differences between a Business Name and a Company in Nigeria. The points stated below are not exhaustive, but they constitute some of the basic differences between a company and a business name under Nigerian Law:
The two words; ‘company’ and ‘business’ are used interchangeably. To most people, a company name and a business name refer to the same information, but in fact, there are fundamental differences that we will now consider.
A business name (Enterprise) is generally a Business Name (BN) registered, owned, and headed by one individual only. The person and his business are “one” legally. One has to keep a careful record if one is self-employed. A business name has no shareholders, directors, or secretaries, and many of the legal responsibilities that apply to companies do not apply to business names.
If the business falters, is personally liable as he and the business are one and the same item. Such a person is legally liable for all the losses and profits in the business. Whoever owns the business name is still responsible for the obligations taken on under that name. No legal entity is formed and there is no limitation on liability. On the bright side, the sole proprietor has complete control over his business and does not have to share his profits with anybody.
In Nigeria, a company name is a complete legal name of an entity. When a company is incorporated, it is a separate legal entity and therefore, is separate and distinct from those who run it. A limited company can be set up with a minimum of two shareholders and the limit of their liability is as per the value of shares they own.
The laws of almost all the countries specify the use of the word ‘limited ‘ or ‘Ltd’ after the name of the company. The directors and the shareholders have limited liability in the business. When such a company is created, it has an Authorized shareholding which defines the limit of the shareholder liability. This is the most viable option if the capital is being invested into the business by anyone who does not wish to be involved in running it.
A partnership is registered and run by two or more people together. A written agreement is at times necessary, stating the terms and conditions of conducting the partnership business without harming the interest of either party. Profits are shared either equally or as per the terms given in the written agreement. The partners in a partnership just like in a sole proprietorship are personally liable for acts of the partnership
Contrary to popular belief, there are fundamental differences between business names & company names and they provide very different levels of protection. In summary, a company name is selected upon incorporation and creates a separate legal entity, distinct from its owners. Whereas a business name is selected when carrying on a business under a name other than the true owner’s name, no legal entity is created and there is no limitation on liability.
ADVANTAGES OR DISADVANTAGES OF LIMITED OVER A BUSINESS NAME
A Business name is a registration of a trading name for purposes of business whereas a Company of the incorporation of a separate legal entity to conduct business.
- Registration: A BN is generally simpler to register and costs less and can have one person as a proprietor or two or more as partners, whereas a Limited company has a minimum of two shareholders, but can appoint directors and managers to operate the company.
- In BN’s, the proprietor is personally liable for acts and omissions of the registration. Companies are generally separate entities from their shareholders and hence separately liable. For the acts and omissions, unless the court goes behind the company shawl.
- Control. In a partnership, the proprietor /s have full control of the affairs of the BN, in a Company control is via board decisions or as per shareholdings held by the shareholders.
Theoretically, at least, a partnership is less stable than a private company. Upon the death or exit of a proprietor, the BN ceases to exist, whereas a company can live forever in perpetuity, outliving the directors.
HOW TO GET STARTED
Contact Ideas Digital Media to register your business name today.