The clamour for the registration of businesses in Nigeria is high enough to deafen healthy ears. From webpages to social media and WhatsApp statuses, there has been a beckon on traders, sole proprietors, partners and entities to register their business with the appropriate authority (the Corporate Affairs Commission – “CAC”).
For some reasons, however, registration of business has been a bane for certain persons, which amplifies the question: Can I do business in Nigeria without registering it? This is the essence of this post and so I will proceed to answer the question.
Whether One Can Carry out Business in Nigeria Without Registering It
Yes, you can validly carry out and run business in Nigeria without having the need to ever register it. Notice the word “ever”. This is possible in the presence of two factors.
- When the essence of the business is to operate as a business name. A business is registered or purported to be registered as a business name where it is a sole proprietorship or partnership and therefore has no succession, cannot sue or be sued in its name, is not required to have meetings nor required to have directors or trustees, etc.
- When the name of the business consists only of the true name of the proprietor or partners and nothing more. “True name” here only includes the surname, forename or initials or the forename of the person or people involved. Examples will suffice. If the sole proprietor’s full name is John Kennedy Doe, for instance, any of “Doe”, “John kennedy Doe”, “J. K. Doe” will suffice to be used as the business name. If a partnership, and the names of the partners are John Kennedy Doe and Mary Apple Doe, for instance, any of “Doe & Doe”, “J. K. Doe & M. A. Doe”, “John Kennedy Doe & Mary Apple Doe”, “Does”, “J. K. & M. A. Does”, can be used without registration.1
Three things must be stated at this point:
- a partnership consists of two to twenty people;
- businesses with names that are permitted to stay unregistered can always exercise the option of registering same as there exists no preclusion from such registration;
- one or more existing companies can also register as a business name or operate business without registering the business name.
Even though one or more persons can carry out business in Nigeria without the need to register same, the undesirability and disadvantages of non-registration outweigh the desirability. Some salient undesirability are summarily discussed in the preceding sub-head.
The Effects of Operating a Business in Nigeria Without Registration
Operating a business without registration in Nigeria may allow one save the money for registration and evade compliance with certain legal requirements, and that is all for the seeming advantages. Let me outline some of the numerous disadvantages.
- There is no monopoly of name as anyone can subsequently register and use the name at any time without recourse of its previous use or existence. As it is known, no one person bears a name.
- The business is not recognized in the country and will not enjoy the benefits recognized businesses will enjoy, including the ones they may enjoy when certain policies are made.
- It is impossible to own a bank account in the name of the business. Providing actual or potential clients and customers with personal bank details may birth scepticism in their minds and which will chase them away.
- Capital and investments for the business will be far-fetched due to the negative uncertainty associated with unregistered businesses. No one wants to plunge his money into what is unrecognised.
- Loans and grants will be inaccessible for the business. Evidence of registration of business has become a condition to accessing grants. The Tony Elumelu Foundation’s grant to startups and small businesses leaves us with a real example.
- The individual or partners cannot sue or be sued in the name of the business. This leaves the owner or owners of the business with unquantifiable liabilities.
- If the object of the business is to produce or carryout activities that require further approval for validity, such approval cannot be obtained and the object of the business will fail. Take for instance, a business that produces snacks or sachet water for consumption. Such a business would require the approval of NAFDAC to run, and NAFDAC cannot give the approval where the business is not registered with the CAC.
- The business dies with the owning individual or partners making succession and longevity a day dream.
- Running ads on Facebook becomes frustrating. Verification of business registration number (BN) is a now a requirement for a hassle-free ad running on a Facebook business page.
Why it is Allowed to Operate an Unregistered Business
At this point, the question on the lips of most persons is “why then is it allowed to operate an unregistered business in the first place knowing that it provides no real advantage?” The answer to this question is provided in the next two paragraphs.
Every business operating or purporting to operate in Nigeria is required to be registered with the CAC. Businesses who are required to be registered as business names, are by law, required to so register, at most, twenty-eight (28) days from the time they begin to operate as business in Nigeria.2 Failure to comply with this is an offence that occasions either imprisonment or a fine of N150 for each day the offence lasts. (A ridiculous and laughable monetary penalty, isn’t it?). The compliance or non-compliance with this law ought to be revealed upon registration of the business as a business name. But that has never been the case and here is the reason: CAC has no way of ascertaining how long a business has been operating other than the information provided by the business owner(s) upon registration, which is merely the answers to the questions in the registration form (CAC/BN/1).
So, the essence of allowing unregistered business to operate as business names is to exempt them from these penalties in the event that the business owner or owners decide to register the business.
A person whose only reason for not registering a business is to boost savings and limit expenditure with a view at the cost of registration with the CAC (which ironically is cheap compared to the colossal and innumerable benefits it occasions) is only playing victim of “penny wise, pound foolish”. Why leave a business name unregistered when it births no intermediate, short or long-term advantage?
- Section 814 of the Companies and Allied Matters Act (CAMA), 2020
- Section 815 of the CAMA
About the Author
Ujong Okpa is a Corporate, Intellectual Property and Technology Lawyer who delights in turning complex legal issues and provisions into simple, toilet tissues. He is the Founder of IP & Tech and is a constant writer on trends in the commercial world, as it largely borders on intellectual property and technology.
I look forward to more posts on this subject matter.
Wow! Wow!! Wow!!!
This is amazing, really enlightening.
More ink ✍️
I came here to justify actions but I stand corrected and enlightened. Thank you for this Barrister.
There is a lot of context and nuance that is missing.
What is “business name registration”? Registration of a Business Name or Incorporation of a company?
See “4. The individual or partners cannot sue or be sued in the name of the business. This leaves the owner or owners of the business with unquantifiable liabilities.” A Business name registration does not limit the liabilities of the proprietor or partners,
* For the first question (What Is Business Name Registration), the definition was directly left out of the Article, even though its features are stated and explained in the Article (under the sub-head “Whether One Can Carryout Business in Nigeria Without Registering It).
For the purpose of clarity, a business name registration is the registration of a business as a sole proprietorship or partnership, with no requirement for shares nor the need for meetings, directors, trustees or secretaries.
* For the seeming second vagueness, I never intended to mean that a business name registration limits the liabilities of the proprietor or partners, because it does not. Registration as a business name only allows the registrant to sue in the name of the business.
All that was to be passed is this: non-registration of a business under the category of “Business Name” or under any other category exposes the owner(s) to all legal and financial vices with no cloak, whatsoever, above him/them.
Thank you for reading and for pointing out these vagueness.
I’ll sure have them in perspective in my next works.
Once more, many thanks.
Thanks for the enlightenment