Starting a business can seem like a tough task and it actually is. There are countless things to think about including the capital, budget, legalities, profits, office space, human resource etc. All these things have to be thought-about extremely carefully before taking any step. However, you have to start somewhere, right? To help you, we have outlined some steps and tips that will help you start a business in Nigeria.
Business can take many forms, and understanding this field may be crucial to your success. Starting from the ground up, acquiring a company, and rebranding are all possibilities. You have a variety of options when it comes to company frameworks. These are the four different types of market structures to choose from.
· Partnerships: This comes in two forms: general and limited. In the general form, both partners invest their capital, land, labour, and other assets in the company and are equally liable for its debts. In other words, even though you just put a small amount of money into a general partnership, you might be held liable for the entire debt. General partnerships do not need a formal agreement between the two company owners, partnerships may be implicit or even verbal.
A formal agreement between the partners is needed for limited partnerships. They must also file a relationship certificate with the authorities. Limited partnerships allow partners to restrict their personal responsibility for business debts based on their ownership or investment percentage.
· Sole Proprietorship: A sole proprietorship is the simplest and most common type of business ownership. It is a business that is owned and operated solely for the benefit of the owner. Since the company's survival is solely dependent on the owner's decisions, when the owner dies, the business dies with him.
· Corporations: Corporations are considered legal persons and distinct entities for tax purposes. This assumes, among other items, that a corporation's earnings are taxed as the corporation's "personal gain." The money paid to shareholders as dividends or gains is then taxed as the owner's personal income.
· Limited Liability Company: An LLC, like a limited partnership, limits shareholders' liability while providing some of the income benefits of a partnership. In essence, an LLC combines the benefits of partnerships and corporations, eliminating some of the drawbacks of each.
The business structure should be chosen according to your needs and requirements. The type of structure you choose will determine a lot of things such as tax, operational cost, legal liabilities etc. Before setting a final choice, we suggest you get some legal advice.
Reserve and Register a Name
You have to be careful while deciding a name for your business. This is because you cannot choose a name that an existing business already has. You should think of a unique name. This is an important aspect if you are looking to start a business in Nigeria. You can check with the Corporate Affairs Commission if the name has already been taken or not. You can register your name under the commission and get it approved. The approval of a business name or check for its availability does not take much time. However, this is an important step.
Deeds for Registration and Incorporation
When you start your business, keep in mind that you are filing a Memorandum of Associations and Articles of Association, MEMART. This deals with issues that are related to information like ownership, governing rules of the business, management, etc. You have to keep a copy with yourself and also submit one with the Corporate Affairs Commission. This deed is required as it sets the rules on the running of the business.
Share Structure of the Company
Each of the company's share classes should have a vote. A company must have at least two shareholders who are not employees of the company, but a private company should not have more than 50 shareholders who are not employees of the company. This is a crucial step in learning how to start a business in Nigeria because it will have a significant impact on the company's decisions.
The next step that one has to think about is appointing the directors. The director of the business can be any person. He or she doesn’t necessarily have to be a resident or citizen of Nigeria. You can choose the directors by giving them careful thought. This is because the directors are the centre of any business and will represent your business in various fields.
Patent and Trademark
If you have certain intellectual assets, you will have some proprietary rights. You should have a solicitor who will help you register those as patents and trademarks. It is important to protect these rights to avoid any issues or problems relating to infringement.
Register and Obtain a License
Registering your business and obtaining a license is extremely important as some businesses are supervised and monitored by different government agencies. You should find your relevant agency and register your business with it. Obtaining their license is important to avoid legal issues.
There are different agencies in Nigeria that are responsible for the collection. It is necessary for each business to be registered with the Federal Inland Revenue Service, FIRS. The business is required to obtain a Tax Identification Number (TIN) along with a Value Added Tax (VAT). You must file for your tax-related deeds within 18 months of the completion of your registration. It should be completed and filed after the Annual General Meeting within 42 days. If all this is ignored and taxes are not paid, there are criminal liabilities. If you are not clear about the procedure, get some legal aid.
This will require some legal assistance as well. A lawyer will help you prepare contracts for your employees. It is necessary to keep a formal document regarding their information and employment. You should also prepare addendums for foreign employees should you have any. You should make sure that you are following all the rules of the Labor Act so that you can avoid future legal problems.
Once you have completed all these steps, and your business has taken off, you should perform the different requirements of administration. You have to ensure that you are paying all your taxes, have completed all registrations, received all licenses, submitted all deeds, etc. These are important obligations of administration. Fulfilling these duties will help you immensely in avoiding future problems. You should contact your solicitor for the proper fulfilment of all these obligations.
Acquiring a Company in Nigeria
If you want to start a business in Nigeria, you should also be aware of the procedures if you are acquiring another business. The Securities and Exchange Commission, SEC, supervises and is responsible for the acquisition and merging of different companies in Nigeria. You will have to make a formal bid if you are seeking to acquire or merge your business with an already existing one. The bid is required to be sanctioned by the SEC and approved by the Federal High Court.
Nigerian Stock Exchange
Nigeria has a stock exchange that allows access to long-term capital. Your business should fulfil all the needs and requirements that are listed on the stock exchange rules. Rules that are required to be fulfilled require many types of information and disclosure about the business. Once you have ensured that your business fits all the requirements, you can enlist your business for a stock exchange.
Business in Nigeria
Both natives and foreigners can invest equally while building their business in Nigeria as the country allows for both local and foreign direct investment. The laws of Nigeria are the same for both the residents and foreigners regarding businesses.
These are some of the essential steps that you should follow while looking to start a business in Nigeria. You should be astute while going through the steps. One mistake can cause great losses. You have to think carefully about the different risks and techniques involved. Following all these steps will ensure that you are covered in all aspects. So, be careful and cautious as you start your business. Good luck!