There is a need for small businesses in Nigeria to register with the Corporate Affairs Commission (CAC) – the body responsible for regulating the formation and management of businesses and companies in Nigeria. Unfortunately, many small business owners in the country trivialize the significance of business registration due to their ignorance, while some others are discouraged from registering their business by the long process they believe is involved.
An enterprise can be registered as a business name or an incorporated company i.e. a Public Limited Liability Company or a Private Limited Liability Company. The business name registration is advantageous for small businesses that are owned by a single individual or a sole proprietor. An incorporated company must also have at least one member in full capacity for it to be registered. It could be more. Also, a business name can be registered after commencing operations, but a company must be incorporated before the commencement of any business operations. Another advantage of the business name is that it is cheaper and less stressful to register than an incorporated company. This ease and relatively low cost of a business name registration mean that small business owners have no reason not to register their businesses.
It is important to understand the benefits that come with registering a business with the Corporate Affairs Commission. Some of these benefits are listed below:
- Issuance of a Business Registration Certificate
Upon the registration of a business, the Corporate Affairs Commission (CAC) issues a certificate to the business owner(s) to show that the business has been duly registered. Registering your business gives you the lawful right to operate in Nigeria.
Business registration makes your business reputable and gives it a professional image. Thus, individuals and other businesses would be more confident transacting with you. Many customers will only do business with you if your business is registered, and you have invoices/receipts that show your business details. Registering your business with the CAC makes it easier for your target customers to trust you to deliver your value proposition.
- Protects you from liability
For a business that is registered with the CAC, the business owner as a person is legally separate from the business entity. Thus, the business owner gets separate legal protection. As a Private Limited Liability Company, also known as PLC, you have the advantage of not having to pay for loans with your personal property if you are unable to meet up with loan repayments.
- Accessing funds
It is easier for registered businesses to secure loans from banks. This is because a business is recognised as a legal entity that can be tracked and accounted for. With your CAC certificate, you can prove that you are a business, thus giving you credibility and helping investors and lenders to trust you. With your CAC registration, you can apply for credit facilities and grants. Investors would take you seriously, seeing that you have a structure.
Businesses are springing up daily, therefore registering a business is a necessity to protect and trademark your business name. You do not want a situation where a new brand enters the market with the same business name as yours; it can confuse your customers. Also, you wouldn’t want another business to capitalize on the marketing strategies and business structure that you built from scratch. This is another important reason to register your business so you can be unique and stand out among competitors.
- Ability to take legal actions
When the need arises, a registered business can sue (and be sued). Since the business is a legal entity on its own, it can comfortably take legal actions if it has to.
- Death doesn’t end the company
For a registered company, the death of the owner(s) doesn’t mean the death of the company. A registered company has a life of its own that is separate from the owner(s), hence operations can continue with other individuals at the helm of affairs.
In summary, the relevance of business registration in Nigeria cannot be overemphasized. There are many advantages to having a business certificate from the CAC. Please let us know in the comments if your business is registered. If not, feel free to share the things that are holding you back.