Questions to ask
QUESTION 1: Do I really need to start this business? Is it the right time? (Cause it might simply be a hobby).
For a business it might not be your idea, you can key into a business or simply buy into a franchise, example Mr. Biggs.
QUESTION 2: Do I have a sufficient capital? Do a capital investment calculation.(Do the maths)
QUESTION 3: Will I be able to pay myself a salary?
QUESTION 4: Do I want to manage my business on my own, hire workers or a temporary staff?
QUESTION 5: What Business structure do I want to use?
Once a business is established the law has given it a ‘legal status’ it is different from you
• It can sue and be sued
• Can own land and enter into contracts
• There’s limited liability
Benefits depending on the business structure
i) Attracts investors
ii) You can transfer ownership
iii) Continuity of management
iv) You can have stakeholders (plan your estate)
v) Gives you control
Note that for a business begin with an end in mind
TYPES OF BUSINESS STRUCTURE AVAILABLE IN NIGERIA
Not all structure is appropriate for the type of business you want to have
1, Sole Proprietorship – you are the business and the business is you
2, Partnerships with other people MAX of 20 except law firms and accountancy firms
3, Limited Liability Company (either public or private)
– Public companies are regulated- make returns to the securities and exchange commission
– Private are not so regulated but there’s a cap on the total number of members you can have
They must have at least 2 for both private and public and as many as 50 for private limited liability company
4, unlimited liability company – liability is limited only to your unpaid shares
5, non-governmental organisations,
6, cooperated trustees
Most common structures in Nigeria for businesses going for profit making ventures are
– Business Names (sole and partnerships)
– Limited Liability Companies
Business name is easy and straightforward but there’s unlimited personal liability as the business is you and you are the business; the tax is less as you are simply paying tax for yourself. Also, you have complete control though there maybe issues of raising substantial capital limiting investors and succession isn’t guaranteed partnerships as an edge as the partners share the load
Limited Liability Company has a separate legal entity, has succession, attractive to third parties as the there are regulations and the structure
For a business name ten thousand naira is enough for registration of your business which can be done through a lawyer or on your own, for a Limited Liability Company it depends on the share capital if the share capital is 1 million the fee is 10,000naira every extra million incurs an extra fee of 5,000 naira there are also stamp duties on them.
Unlimited Liability Company with a share of 1million for registering is 10,500
THE LEGAL REQUIREMENTS
1, get the licences and know the regulators
2, for non-Nigerians there are other requirements to consider and it’s not open for business names.
Firstly, registration with the Nigerian investment promotion commission which simply monitors the foreign investment coming into the country and a business permit. If the foreign workers are coming to come and worker will have to obtain an expatriate quota or they are bringing in new technologies there is a need to register with National Office for technology acquisition and promotion
HOW DO YOU PAY YOUR FOREIGN INVESTORS
Through the (CCI) certificate of capital importation it enables you to access the related market and exchange at CBN rates
Once you’ve started your business you register for tax register with the federal internal revenue service and also the revenue service in the state. Income tax could be either 20% or 30%, 20% is for companies that are into manufacturing, agriculture or fully involved in exporting or turnover must be 1 million or less and only be done for the first 5 years and there is education tax 2% and also personal income tax from employee’s salary with can be up to 24% for pay as you earn scheme
value added tax on goods and services there are some exempted like dairy products basic food items academic books (5%), withholding tax which like an advanced payment on income tax it can be 5%-10%. then are taxes from local governments.
NOTE: verify all taxes with a lawyer
There are certain mandatory contributions that you’d be required to make, there’s the Contributory pension fund which only applies with total employees exceed 15 (18%-20%), industrial training fund (1%) of annual payroll, employees compensation fund (1%) of monthly payroll, 2.5% to the national housing fund that is 2.5% of the basic salary of your employees and non-payment incurs penalties
Pioneer status given to persons in industries that are considered valuable to the economy, it is a tax holiday for 5 years.
Export incentives like GTdrawback, like importation of raw materials and export of finished goods with the government refunding the import duties.
Public infrastructure and employment relief basically is when you generate and maintain employees and when you provide an infrastructure of a public nature
HOW TO PROTECT YOUR BRAND = You go to a trademark registry and have it registered.
All companies are to file annual returns to the CAC which is basically your financial statement. There’s also tax statement, there may be more filing depending on the industry you are going into.
This is simply a checklist to go through.