The legal responsibilities of starting a business in Nigeria

A lot of people aspire to start their own business. They dream of being a boss and earning their own money. However, making it in today’s commercial market is not easy, it requires planning to get it right. Planning could include, developing a strong business plan, making key financial decisions, and most importantly, going through the necessary legal responsibilities, which is a stage most start-up businesses overlook or are unaware of.

Companies managed by individuals who fail to carry out the necessary legal responsibilities to kick start a business – regardless of wherever they are in the world, are susceptible to failure down the line. This could be either due to forceful closure or threat of legal action. Therefore, as an entrepreneur, when you figure out the location you would like to establish your business, do your research, and comply with the necessary legal procedures. If you are looking to start your own business in Nigeria, you get to acquaint yourself with some key legal responsibilities to observe when starting business:

1. Hire a Lawyer

First thing first is to find a lawyer that can handle the legal intricacies of your sort of business. Also, this individual should be able to handle complex issues that may arise during the business.

2. Register with the Corporate Affairs Commission (CAC)

Doing this is better when you have concluded on the plan and structure of your business. Registering the name of your company enables you have sole ownership and ensures that your business name is not duplicated. The Companies and Allied Matters Act (CAMA), which is regulated by the Corporate Affairs Commission (CAC), provides several frameworks for different kind of companies and entrepreneur to register their businesses.

The CAMA requires that individuals, either locals or foreigners starting a business in Nigeria, register their business as a private limited liability company. It can be registered by just one person and with a minimum share capital of ₦100,000 (One Hundred Thousand Naira). The required documents to process this include:

  • Memorandum and Articles of Association
  • Notice of registered address of the business
  • List, particulars, and consent of the first Directors of the Company
  • Statement of compliance by legal practitioner
  • Company Secretary if desired

However, according to the CAC, the filing fee for the registration of a business name is ₦10,000 10,000 (Ten Thousand Naira Only) and the required documents to process this include:

  • Particulars of Proprietor(s)
  • Notice of Registered address
  • Nature/Type of business

Upon successful registration, your Company/Business Name will then be handed a Certificate of Incorporation.

3. Register with the Nigerian Investment Promotion Commission (NIPC)

This is a requirement from any company or business that has a foreign participation before commencing business in Nigeria. NIPC is the statutory body that is responsible for the regulation of foreign investment in Nigeria. To register with the NIPC, the documents required are those obtained from registering with the CAC. Additional requirements include the nature of the business and details of the source of capital.

4. Set Up your Tax Payment

A sensitive legal requirement when starting a business anywhere is to comply with tax laws. All new businesses in Nigeria are required to register with the Federal Inland Revenue Service (FIRS) and obtain Tax Identification Number (TIN). Failure to do this is classified as Tax Evasion and is a punishable offence. When you need to apply for a license to operate, your tax clearance certificate, tax identification, and value-added tax numbers are needed. These cannot be obtained if you do not register with the FIRS especially if your company intends to secure government contracts in the long run.

5. Obtain Required Permits

This is exclusive to businesses completely owned by foreigners. This means that businesses owned in partnership with a citizen are exempt from applying. The process of obtaining business permits can go through Department of Citizenship and Business, Ministry of Interior. The permits you can apply for include:

  • Expatriate Quota permit– for companies that need to employ foreigners in leading and/or managing positions.
  • Work permit – to be applied for separately to enable foreign companies to reside and operate in Nigeria.
  • The Combined Expatriate Residence and Aliens Card (CERPAC) permit – serves the purpose of a work permit and is issued by the Comptroller General of the Nigerian Immigration Service or a Comptroller of Immigrations Services in a state.

6. Obtain Statutory Licenses

Depending on the kind of business you want to establish, some licenses are required from the regulatory body in the sector you belong to. For example, if your business deals with pharmaceuticals, it belongs to the Medical sector. A permit must be obtained from the National Agency for Food and Drug Consumption (NAFDAC) for your products to be consumed.

7. Get Insurance

Having an insurance plan in place is essential for starting a business in Nigeria and there are several mandatory insurance policies you must obtain to operate freely. Doing this is solely for the purpose of the protection of third-party associations and the public. It is best to carry out thorough research to determine the best insurance policy that suits your type of business.

8. Compliance with Labour Laws

It is important for entrepreneurs to find out their obligations regarding procuring labour regardless. In Nigeria, the process requires that entrepreneurs comply with the Labour Act. Employers are required under the Employee’s Compensation Act to make a minimum contribution of 1% of the total monthly payroll of their employees to the Employee Compensation Fund. This is used in the case that an employee incurs injury, disability, etc. during employment.

Furthermore, entrepreneurs are mandated to make regular contributions to the pension schemes of their employees under the Pensions Reform Act. Foreign companies are required to follow the Local Content Act during the process of procuring labour. This applies generally to any sector within the economy; however, some have additional requirements.

So, before staring up a business in Nigeria, taking note of these legal responsibilities to be ticked off the list before starting a business cannot be stressed enough. This is simply the best way to ensure that your business doesn’t suffer complications and losses in the future. You can save yourself from the embarrassment of possibly having your business shut down early from today!

Tags:
Prev PostABUJA LAW FIRM NYSC PLACEMENT – NYSC place of primary assignment in a law firm in wuse, abuja
Next PostIntellectual property: A Guide to Securing your Ideas.
About Greengold Attorneys

Greengold Attorneys is a progressive, dedicated law office aspiring to be one of the leading corporate and commercial law offices in Nigeria and the World at large. It was founded in 2011 to provide effective, efficient, and creative legal services to meet the distinctive needs of various organizations, corporations, governments as well as individuals. Our philosophy is to provide advice and representation that allows entities to achieve their goals while minimizing legal risk.