Hello, i hope the day is coming on fine?

In today's newsletter, let us quickly talk about the different ways you can float your business and the various implications of your choice.

To get started, let us quickly look at the various legal options available to founders...

A. Business Name/ Enterprise

 This structure can either be a sole proprietorship or a partnership business. A sole proprietorship is a one-man business where major decisions are taken by the sole trader or partners.

B. Partnership Business.

This may be a general unregistered business or a limited liability partnership applicable only in Lagos.

C. Registered Companies.

The most common type is the limited liability company where the liability of members is either limited by Shares or by guarantee.

however, whatever the type of structure you choose there are different implications for each one.

Some reasons for choosing a particular structure may include the following.

1. Tax liability

The fear of Taxation may make a person opt for an enterprise instead of a Ltd liability company so as to avoid Company Income Tax and other applicable taxes for an LLC.

2. Legal protection against liability.

When you float your business as an enterprise, you are personally liable for any debt or other liabilities incurred by the business.

However when you register as a Ltd liability company, you are seen as a separate person from your business, so you are not personally responsible for the company's liability.

You are liable only for the number of shares that you have in the business.

This is one way to actually protect your business and the reason most people who understand this opt for an LLC.

3. Ease of Administration.

It is pretty easy to manage an enterprise or a venture, decisions are quick and do not follow any procedure.

For a Ltd liability company, decisions can only be taken by the board of directors or by members at a general meeting.

Key decisions are usually taken by votes.

4. The cost of registration.

This is a general consideration for everyone. The cost of registering the business with the CAC or the cost of hiring someone to help them register it made them settle for a business name rather than a Ltd liability company.

5. Nature of Business

The nature of the business to be entered into can also determine the type of registration structure to choose. 

Some businesses by their very nature require that they should be registered as a Ltd liability company rather than as a business name.

I hope you learned something useful from this?

Reach out, if you need any help with understanding how best to structure your Business.