Like the financial aspect of running your business, knowledge of the legal aspect is also of utmost importance. The reason is not far-fetched, especially when dealing with the government or its agents.
There are different ways of registering your business in Nigeria, and the most important factors for each mode of operation are usually dependent on the available finance.
You can register the venture as a Business Name, a Partnership, Limited Liability Partnership or a Company. The Limited Liability Partnership was recently introduced to CAMA, and offers a new form of identity to partnerships in Nigeria. This means that partners in a limited liability partnership enjoy a distinct personality different from that of the business. It means the partnership can sue and be sued in its own name.
Business Name registration is just another name for sole proprietorship as you have probably figured out. In your certificate, you will probably see where you are told to file your annual returns as at when due. It’s really important that you do that, especially if you are planning to upgrade the business in the future. For instance, the requirements for upgrading a business name to a company include –
- An application letter must be addressed to the Registrar-General of the Corporate Affairs Commission (C.A.C.) seeking his/her consent to register the same registered business name as a private limited liability company.
The letter must be accompanied with:
a. Authorization Letter (If the upgrade is being handled by another person other than owner).
b. A copy of your Business Name Registration Certificate.
c. A copy of your Form BN1 (Application to Register Business Name).
d. Evidences of up to date payment of Annual Returns for the registered business name.
- You would then be required to make a payment of N5, 000.00 (Five Thousand Naira) through Remita to Corporate Affairs Commission (C.A.C). After that, it will be approved and you would be required to register the business name as a company in line with the usual procedure. You will still retain your business name except you choose to change it during the upgrade.
I underlined the number “d” above to show you how important it is to file the annual returns. Failure to do so is going to cost you a lot financially in penalties. And of course, you have to pay your tax as at when due as you already know.
IMPORTANCE OF FILING ANNUAL RETURNS
- It helps the company or entity give notice to the Commission of the entity’s continued existence, further to which the entity’s name is retained on the register kept by the commission. Failure to file annual returns is a signal that the company may not be in operation.
- The annual cost of the filing fee is inexpensive but if not done within the stipulated period, the company or business will not only pay the filing fee, but will incur additional fees as penalty for late filing. This penalty is higher than the filing fee and calculated progressively in accordance with the number of years of default.
- Filing of annual returns and that too promptly, saves time especially in the situation where a business or company require a post incorporation service and must obtain a document or process any other application at the CAC. The Commission will not process any application by a registered entity unless the entity’s annual returns have been filed up to date and penalties, if any, paid up.
- It is noteworthy that an up-to-date annual return filing is usually one of the requirements for most contract bids in public or private establishments and an entity desirous of meeting this requirement must ensure that its records are updated as and when due.
Becoming an Employer – Basic Obligations to your Employees
There are specific laws guiding employer-employee relations which you should be aware of. Chief among them is the Labour Act, 2004, Factories Act, and The Employee Compensation Act 2011. While the Labour Act regulates the employment terms and remuneration of employees, the Employee Compensation Act deals with work related hazards.
Duty to Take Reasonable Care of Employee in the Workplace
An employer is under a duty, at common law, to take reasonable care to ensure that his employee is not exposed to risk of injury at his work. Where, therefore, an employee suffers injury at his work as a result of the neglect or default of his employer to take reasonable care for his safety, the employer is obliged to pay damages in respect of the injury to the injured employee.
So, as an employer, it’s your duty to ensure the safety of your workers and pay them what they are due accordingly in line with the contract of employment terms offered to them. You are also expected to compensate your workers for injury sustained in the line of work and reasonable out of pocket expenses. By virtue of the two laws above, default in maintaining employment terms can be used as cause of action in a court.
Also, it’s your duty to keep records of transactions done in the name of the business. You should also endeavor to avoid verbal contracts and try as much as possible to reduce any official transaction or agreement into writing. The reason is very obvious.
Again, depending on the type of business, you may need to obtain the relevant permits and licenses from the appropriate government agency or risk being shut down. We have DPR Permits, CBN License for Fintech Companies, Freight Forwarding License, Import License, NAFDAC Permit, NSCDC Permit For Security Guard Companies, NBC License for TV, etc.
It is also important to note that if you own a shop in certain areas where certain trade practices are observed by everyone around there, you are also expected to act accordingly.