REQUIREMENTS FOR STARTING A BUSINESS IN NIGERIA
WHAT YOU NEED TO START UP A BUSINESS IN NIGERIA
CORPORATE LAW PRACTICE IN NIGERIA
REQUIREMENTS FOR STARTING A BUSINESS IN NIGERIA
The first step to take for any individual or investor seeking to start a business in Nigeria is to have an idea of the kind of business he want to venture into. It must be a business which the law permits.The next step is to register the business with the Corporate Affairs Commission (CAC), the government agency authorized to register businesses in Nigeria (Conduct a search for the intended name of the business in order to have the name reserved for 60 days once approved). And also, you have to pay for the tax involved. Before you start up a business in Nigeria, it's a matter of necessity you put into consideration the structures and legal framework that governs businesses in Nigeria.
BUSINESS STRUCTURES ESTABLISHED BY THE COMPANIES AND ALLIED MATTERS ACT, 2020.
Registered Business Name
limited liability partnerships
Company Limited by Guarantee
Unlimited Company (any company may be either private or public)
WHAT IS A BUSINESS NAME?
A business name is registered, owned, and operated by an individual(s) only.There is no separate legal entity like the private company and such an individual is legally liable for all losses accrued to the business. A business name is also known as a trading name/interprise. It is registered under Part E of the Companies and Allied Matters Act, 2020. It can remain unregistered if the owner(s) use their first name(s), surname(s) and the initials of first name(s) or under full name(s). A business name can be registered as a Sole Proprietorship or as Partnership.
WHAT IS LIMITED LIABILITY PARTNERSHIP (LLP)
Limited liability partnerships allow for a partnership structure where each partner's liabilities is limited to the amount they put into the business. Therefore, having business partners means spreading liabilities in portions. Limited liability means that if the partnership fails, creditors cannot go after a partner's personal assets or income. The liability of a partner will be met out of the assets of the partnership.
A limited partnership, one partner has all the power and most of the liability. See Section 795 (3) of the Companies and Allied Matters Act, 2020. The Act also limits the number of partners in a limited partnership to a maximum of twenty (20).
COMPANY LIMITED BY GUARANTEE
A company limited by guarantee has no share capital, hence there are no shareholders the owners of the company are called guarantors. The liability of the members is limited. Generally, the aim of a company limited by guarantee is not to make profit. When it comes to issue of liability, guarantor’s financial liability is only limited to the amount that they guarantee to the company. Example includes charity organisation, community projects, societies and clubs etc. Companies limited by Guarantee require the consent of the Attorney General. Company limited by guarantee is only liable up to the amount put up by the guarantors.
UNLIMITED LIABILITY COMPANY
The liability of an unlimited company is unlimited. Since the risks in front of the investors is very high in case of the unlimited liability model, it is most likely that the investors will get a higher rate of return in the event the company performs well.
A trustee’s main objective is to promote the welfare, objectives, and aims of the NGO. Examples of incorporated trustee includes: religious institutions such as mosques, synagogues, temples, and others.
LEGAL FRAMEWORKS THAT GOVERN SOME ESTABLISHED BUSINESSES IN NIGERIA
• Expatriate Quota, Tax Laws and Levies
. Combined Expatriate Residence Permit and Alien's Card (CERPAC)
• The Business Registration Procedure
• The Nigerian Investment Promotion Commission (NIPC)
. National Office for Technology Acquisition and Promotion (NOTAP)
.Environmental Impact Assessment
. Create a Website
. Value Added Tax
.Tax Identification Number (TIN)
. Company Income Tax
. Stamp Duty
EXPATRIATE QUOTA POSITIONS
Nigeria companies that need the service of an expatriate is required by law to make an application to the Federal Ministry of Internal Affairs for Expatriate Quota positions. The company applying for an expatriate Quota must provide incontrovertible evidence to establish that no Nigerian citizen is qualified to be employed in the position. Expatriate Quota positions subject to renewal for 2-3 years or more.
COMBINED EXPATRIATE RESIDENCE PERMIT AND ALIEN’S CARD (CERPAC)
A foreigner seeking to obtain CERPAC must be employed by a company duly registered in Nigeria with the required share capital. However, CERPAC is for foreigners that wish to obtain residence permit and alien card. The card may be issued upon application and satisfaction of necessary requirements as provided by Federal Ministry of Internal Affairs. The card enables foreigners to reside in Nigeria and have right of movement.
BUSINESS REGISTRATION PROCEDURE
It is a matter of mandatory requirement that every foreign company or business name that wishes to carry on business in Nigeria must be properly registered as provided by the Law. This registration is done by the Corporate Affairs Commission (CAC) in accordance with the provisions of the Companies and Allied Matters Act, 2020.
A foreign company is permitted by Nigeria law to have a representative office. But such a representative office is in fact not allowed to engage in any business, conclude any contract on behalf of the company. However, it can only be used as a promotional office and would also require registration with the Corporate Affairs Commission.
NIGERIAN INVESTMENT PROMOTION COMMISSION (NIPC)
The Nigerian Investment Promotion Commission (NIPC) encourage foreign investments and serves as a regulatory agency for foreign investors operating in Nigeria. the Nigeria Government is willing to enter into an Investment Protection Agreement with foreign enterprises wishing to invest in Nigeria. This agency encourages foreign investment in Nigeria, guarantees an unrestricted transfer of funds in freely convertible currency, through an authorised dealer (a Nigerian bank). The agency requires all foreign investors to register with it before commencing any business thereto. By registration of these businesses, the agency uses same to checkmate the activities of the foreign investment to insure they don't invest illegal business in Nigeria. The agency can register a foreign interprise if satisfied with the requirements provided by the investor. However, foreign investment is another way of promoting Nigeria economy that is one of the reasons the Nigerian Investment Promotion Commission encourage registration of foreign interprse that so wishes to invest in Nigeria.
NATIONAL OFFICE FOR TECHNOLOGY ACQUISITION AND PROMOTION (NOTAP)
The National Office for Technology Acquisition and Promotion (NOTAP) is one of the Nigeria agencies set up by the Act of 1995. NOTAP deals with the transfer of foreign technology, agreements and commercial contracts dealing with the transfer of foreign technology into Nigeria and all other related issues. By the NOTAP Act of 1995, the importation of dangerous technology in Nigeria is disallowed.
ENVIRONMENTAL IMPACT ASSESSMENT
Section 2 (1) of the Environmental Impact Assessment Act requires an assessment of public or private projects likely to have a dangerous impact on the environment. Section 2 (4) of the Act also specifies that an application shall be made in writing to the National Environmental Standards and Regulation Enforcement Agency (NESREA) before embarking on projects for their environmental assessment to determine if approval will be granted or otherwise. This is mandatory forbusinesses taking up development activities such as mining, quarries, creation of parks, agro-allied, and related industries.
CREATE A WEBSITE
Having a website makes it easy for potential clients to easily locate your business online. Here, the services of a professional web designer are required.
VALUE ADDED TAX: Value added tax is charged and payable on the supply of all taxable goods and services. It is chargeable at a flat rate of 5%.
TAX IDENTIFICATION NUMBER (TIN)
It is required that every business must register as a taxpayer and get a tax identification number. Paying taxes is a major requirement of law. The tax identification number is required for the payment of taxes.
COMPANY INCOME TAX: All companies in Nigeria are required to pay income tax on all profits brought into or received in Nigeria. All companies incorporated in Nigeria are liable to pay tax on their profits.
STAMP DUTY: Stamp duty is charged on written agreements and other relevant documents to which a company is party. The tax may be fixed or based on the value of the transaction.
PREPARED BY: CHAMAN LAW FIRM TEAM
Tel: 08065553671, 08024200080