Differences Between A Business Name And A Limited Liability Company
In Nigeria, you can either register your business as a business name or as a limited liability company. While you can carry on business and open business bank account with both registrations, there are some differences between the two.
Below are some of the key differences between a business name and a limited liability company.
1. Naming
By law, it is required that a Limited Liability Company’s name ends with either “Limited” or “LTD”. Example of such is Blooms Universal Ltd. On the other hand, a business name does has no requirement, hence names such as BusinessPrints Nigeria, Bosset Cakes And Confectionery
2. Liability of Owner(s)
Owners of a Limited Liability Company are only liable to the extent of the shares they have in a company, meaning they can not be liable for the company’s liabilities. For example, if the company has a debt which it fails to repay, the creditor can not seize the owner’s assets. For a business name, as the owner you are liable for all the liabilities of your business, meaning if your business takes a loan and fails to pay back, the creditor can take over your properties.
3. Shares Issuance
A Limited Liability Company can issue shares, either to the owners, employees or to investors. By issuing shares, you can raise funding from investors who will receive a certain number of the company’s stock in return for money. An ordinary business name registration does not have shares, therefore when you only register a business name, you can not raise equity funding from investors.
4. Legal Status
Under the Companies And Allied Matters Act (CAMA 2020), a Limited Liability Company is recognized as a legal entity. This means your Limited Liability Company can sue and can be sued. For a business name, it can not sue and it can not be sued. Instead, the business owner could be sued.
5. Governance/Management
A limited liability company is required to have at least one director who is responsible for the governance of the company. A business name can not have a director or board of directors. A business name has at least one proprietor who owns and is responsible for the management of the business.
6. Ownership
A limited liability company can have up to fifty (50) shareholers. A business name can have a maximum of 20 proprietors (partners), except for accounting and law firms.
7. Annual General Meeting
A limited liability company is required to hold an annual general meeting where shareholders vote on key decisions. A business name is not requied to hold any meeting and is not required to vote before making any decisions.
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