Business Name or Limited Liability: Which One Should You Choose?

Business Name or Limited Liability: Which One Should You Choose? 

Starting a business in Nigeria comes with many decisions, but one of the most important is choosing the right business structure. Many entrepreneurs often get stuck between two options: Should I register a Business Name or a Limited Liability Company (LLC) ?

Both options are recognized by the Corporate Affairs Commission (CAC) but each offers different benefits depending on your goals, budget and long-term plans. In this post, we will break down the differences and help you decide which one is best for your business.

What is a Business Name?

A Business Name, also known as an Enterprise, is the simplest form of business registration in Nigeria. It is when you and the business are the same. It is owned and run by you. Example, if  your name is Blessing and the name of your business is Blessing Fashion Hub, legally, it is still you running it as Blessing.

Upsides

• It is cheap and easy to register.
• You control everything.
• The name is protected and no one else can trade with it.
• It improves the status of your business and shows investors and partners that you are serious.
• You can open a corporate account.
• You can apply for loans and various forms of funding.

Downsides

• No separation between you and the business, if the business owes money, you personally owe too. If the business gets sued, you will be sued too.
• With the new tax laws you may end up paying more than you would have.
• Access to funds and types of partnerships might be limited.
• If the owner dies, the business most times dies with the person.

This is best for:

Small businesses: side hustles, online sellers, freelancers, tailors, makeup artists, food vendors, mini importers, etc. If you are just starting small or your business makes a minimum of NGN10,000,000 annually,  this is usually enough.

What is a Limited Liability Company

A Limited Liability Company on the other hand is a more formal structure. Is when the business legally becomes its own person in the eyes of the law. This separation protects owners from personal liability. Example, if the company is Jide Tech Solutions Ltd, Jide is not the business, the business stands on its own.

Upsides

• If the company owes money, you are not personally responsible. There are exceptions to this and in law, it is called lifting the veil. This is when the Court holds directors and company owners liable for the actions done through or by the company. It is a step taken to prevent injustice.
• It is  more professional.
• Bigger companies, banks and investors trust you more.
• You have access to bigger and better funding.
• There is continuity through shareholders even if the founder dies.

Downsides

• Registration is more expensive and complex compared to business name.
• You must keep proper records and do yearly filings 

This is best for:
People who want to grow big, get funding, work with companies or protect their personal assets.

Simple Advice

If you are just starting and want something easy and cheap, go with a Business Name but if you have big plans, want protection or want to look more professional, choose a Limited Liability Company.