Business Name Vs Limited Liability Company — Nigeria Perspective
Recently, I have helped many people registered their companies. In the process of enquiry, the word “what is the difference between Enterprise and Limited Liability Company” is always the question of the day.
Let me quickly clear this, Enterprise is usually referred to as Business Name ( BN) while Limited Liability Company is called LLC.
LLC could be
1. Private Limited Company by Shares
2. Limited Company by Guarantee — here you see NGOs with the appointment of Trustees
Before I proceed, let’s review the benefits of registering a Business Name
Benefits of a Business Name
- Credibility
By nature, people see you as someone that they can transact business with because of the legal backing of a registered company.
2.Account Opening
You can open a current account that will avail you the opportunity to receive money in your company’s name. A reputable company will NEVER pay an individual, they will definitely prefer a company’s bank account to your personal account
3.Big Ticket Contract
With your business name, you can bid for a contract and win. No more limitation. There is no limit to the kind of contract you can secure. Do not wait till you have one.
4. The Title
Whether you accept it or not, you are now a CEO. Do not allow anyone tells you entrepreneurship is for the MOST powerful or that people fail within the first 5 years. There are people who can tell you consistent success stories; however, it doesn’t mean there won’t be challenges but they will make you stronger.
Be proud to be a CEO.
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The Difference Between Business Name and Limited Liability Company
A) Ownership
You only need yourself to register a business name. BN is formed on sole proprietorship, so it is seen as a one-man show. You need a minimum of 2 Directors and a Secretary/Deponent to register an LLC. Although, currently there is a PROPOSED review to CAMA ACT of 1990 18(2) that will allow 1 person to form LLC in line with what is obtainable in the UK.
B) Legal Entity
BN is not different from the owner. In the case of any legal issue, the owner will be directly involved in the litigation. For LLC, the directors are separate from the company. The company is treated as a human on its own. In the case of legal issue, the directors will not be involved unless the court lifts the veil of incorporation
C) Share Capital
The LLC owners are expected to contribute money inform of shares for the kick off of the company. This will be duly stated in the MEMART with each shareholder signing across his name and contributions. This share gives you the authority to earn dividend and other vital opportunity accrued to contributors.
For BN, you require no contribution even if you decide to add friends or family to form the company
D) Government Contract
For most of the contracts coming through the Bureau of Public Procurement, you may require LLC and not BN to secure such contracts.
E) Angel Investors and Venture Capitalist
If you will require major investors to fund your company, BN is a NO-NO. They want to be sure there is a legal structure, laid down rules and regulations as contained in MEMART etc before they place their funds with you — -LLC gives you this
F) Foreign or Local Partnership/ Collaboration
If you have developed an idea or Apps with your friend, let your stake in the business be clearly defined through the MEMART. In the case of dissolution or any unforeseen circumstance, you can easily sell off your stake and this can be possible through LLC.
In all, if what you could afford at this time is BN, please go ahead, however, as the business grows, you can upgrade to LLC.
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