Many entrepreneurs find themselves in a fix when it comes to registration of their businesses because they are not sure which mode of registration would work best for them. For profit making ventures, there are two main avenues of registration available at the Corporate Affairs Commission: company and business name. The option chosen by the entrepreneur depends on some key parameters which are outlined in the table below for guidance. Some organisations actually start out as a business name and later restructure to become a company. Whichever way, it is imperative that you choose the option that would maximize the potential of your business because structures matter. It is advisable to seek professional guidance from the onset.
| Parameter | Company (LLC) | Business Name (Enterprise) |
| Membership | Minimum of two persons are required to form a company | One person can register a business and be the sole proprietor |
| Succession | Since the company will be a legal person entitled to sue and be sued, own property and corporate seal, it can outlive its members as shares are transferrable though with some measure of restriction for a Limited liability company (LLC) | Business ends with the death of the owner. In other words, there is no continuity. In the case of a partnership, death of a partner would end the business except the agreement states otherwise. |
| Liability | The members’ liability is limited so that they are only liable to the extent of their unpaid shareholding because the company is a separate legal entity, thus the company itself will be liable for its debts and not the members or shareholders. | The owner of a business is not protected from the liability of the business. He will be personally liable to pay if the business is in debt. Liability is unlimited. |
| Legal Personality | A company duly incorporated has legal personality and so can sue and be sued in its own name. What this means is that the company is a person in the eye of the law distinct from its owners. | Business name has no legal personality therefore a law suit has to be in the name of the owner or proprietor |
| Tax liability | A company is required by law to remit tax from its income under the Companies Income Tax Act 2004. | A business name is not required to pay tax on its income but it is required to remit VAT for goods and services it deals in where such goods/services are not exempted from VAT. The VAT is usually borne by the consumer in the final analysis. |
| Cost of registration | Registration of a company will cost minimum of N35,000 excluding legal fees | Business name can be registered with as low as N12,000 excluding legal fees |
| Governance | A company requires a Board of directors to administer its affairs and the law requires every company to have at least two directors at all times. The law requires every company to have a secretary who will assist with the governance of the company and advise on compliance with company laws & regulations | A business can be run by a sole proprietor and he/she can do all that is required to keep the business going. There are no formalities as with the company and no company secretary is needed. Also in the case of a partnership, every partner is entitled to participate in the management of the business. |
| Restrictions | A company is required to abide by its objects in the memorandum of association and so could be restricted on the business it could carry out if such is not stated in the objects. | A business name does not need any memorandum of association and could have a wider coverage of businesses it could undertake. |
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