Differences Between Business Name and Company Registration

Differences Between Business Name and Company Registration | By Barinaada Bema Alexander

One challenge faced by most startups with respect to registration of business is deciding what type of business registration to do whether a business name registration or company registration.

It is important to know the difference between a business name and a company registration the reason is that there are legal implications for whatever type of structure you decide to do eventually.

Let’s start with what a business name entails and the legal implication if any, the pros and cons of doing a business name registration.

Business Name Registration in Nigeria

  • A business name is the most convenient way of doing business in Nigeria.
  • It is less formal and suitable for most one-man business or partnership business.
  • An already existing company wanting to venture into another line of business can also conveniently do a business name registration.
  • The main essence of registering a business name is to secure the name style.
  • It prevents a parallel registration. Once a name is registered no company or individual can make use of that name again for its own registration without the prior consent of the owner of the business.
  • A major disadvantage is that it does not confer any legal personality on the business.
  • There is no separate legal entity, unlike the company registration where the company enjoys a distinct personality.
  • In a business name, the liability of the proprietor is personal.

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If for example the business runs into debt or is sued by anyone, the owner of the business will be sued in his own name and not the name of the company.

Also in order to recover the debt, the creditor can sell off the personal properties of the business owner including his house or car.

This is so because the business name is not recognized as a person in Law. There is no special protection for the owner of a business name, unlike a company registration.

In litigation, a business name can only sue and be sued in the name of the business owner.

Company Registration

company registration in Nigeria

The most common type of company registration is the company limited by shares (Limited Liability Company)

  • A company once registered is conferred with a legal personality.
  • It can sue and be sued in its corporate name.
  • It has a common Seal and perpetual succession.
  • The death of any member of the company does not mean the death of the company.

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Two documents guide the company

1- The Memorandum of Association and the Article of Association which must be signed by the subscribers or the first directors of the company.

2- A company is registered with a Share capital which must be subscribed to by the shareholders of the company.

The reason for stating the share capital is to limit the financial liability of its members to the amount contributed by them at the point of registration in the event of winding up of the company or if the company runs into debt.

The members cannot be sued in their personal capacity unless the veil of incorporation is lifted in the case of fraud.

A registered company has all the powers of a natural person. It can buy properties in its own name and like any other individual. It can also register a business name or become a partner in a business name or buy shares in another company.

The benefits of doing a company registration cannot be exhausted.

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