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Why A Company Is The Legal Structure Your Startup Needs – Tosin Omotosho

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Giving your business a legal structure is the first thing to do as a startup. The legal structure of a business is a category of business organisation legally recognized in every country. Your business can either be an incorporated business structure or unincorporated one.

In Nigeria for example, an unincorporated business is registered as a business name whilst an incorporated business is a company.

When a business is incorporated, a separate legal entity is born, (created /incorporated), separate from its founders. For example Mr Chidi and Mr Ebuka incorporate a company called Lexis Limited, Lexis Limited is separate from them both and has the rights of a human being at law, although it is an artificial person.  That incorporated business is called a company.

Registering a business name means you simply have a name, different from your natural name with which you do business. A single person(sole proprietor)  or a group of people( as partners)  can register a business name.

 

What advantages does a company have over a business name?

Because a business name structure is an extension of the proprietor(s), the business liabilities are unlimited. Legal protection for a business name almost doesn’t exist.

Also the lifespan of the business is tied to the lifespan of the proprietor and the death or exit of one of them (if they are partners) or the sole proprietor usually means the end of the business. This makes the business name structure unattractive to investors.

What makes a company unique is that it is a legal entity on its own, separate from the founders.  The founders can also limit their liability by incorporating a limited liability company. That way they will not be personally liable for the companies’ debts.

Also, a company  can outlive its shareholders as it is separate from its shareholders. We have companies that are  over a century old  and are still waxing stronger. I can bet that most (if not all the initial) shareholders have passed on but the company still exists.

These features make it easier for a company to attract angel investors, seed funding and venture capitalists because the investors’ funds are more protected. Companies can also raise capital by issuing shares.

In Nigeria, a limited liability company can be private or public.

A private limited liability company can only have a maximum of 50 shareholders and must have a minimum share capital of N10, 000.   The name of private limited liability company must end with Limited or LTD.

A public limited liability company can as many shareholders as it desires and must have a minimum share capital of N500, 000.   The name of every private limited liability company must end with Public Limited Liability or PLC.

Have any further questions regarding legal structure for businesses; please ask in the comment section. Thank you.

Image: BiznaKenya

 

Short Bio:

Tosin Omotosho is a real estate and business lawyer. As law is made for people and not the other way round, she believes in simplifying legal issues for everyone.  She is the principal, Charis Legal Practice (a law firm dedicated to providing legal solutions for individuals and businesses. She shares legal tips on Facebook and Instagram at @legalsolutionswithtosin and @legitpropertyng.

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1 Comment

1 Comment

  1. Dapo Fadoju

    September 25, 2018 at 8:22 pm

    This is insightful… It’s been difficult deciding on a Business name or Limited Liability.

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Business

Our Story: The Removalist Logistics Founder, Badejo Stephen Folahanmi

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Badejo Stephen Folahanmi, Founder of Removalist Logistics.

 

Removalist Logistics is Nigeria’s onetime and all round logistics company, our vision is to provide onetime and all round logistics experience for clients that comes in contact with us.

The company was founded sometimes in 2015 with the sole aim of relocation, that is a moving company helping clients to relocate from their old homes to new ones, as years go buy thinking of cross selling and up-selling we decided to make it onetime experience for Logistics solutions, by this we made a subsidiary of the exprezz delivery and sea/air freight arm which we call TRM EXPREZZ.

It was quite very challenging starting a logistics business with zero naira, all we just had was the idea of what we wanted to do. Before the launch, we sourced for grants none was forth coming, but we believed, we were consistent and persistent and focused, few years down the line we can be very grateful to God how He has helped us thus far now we have few of our own fleets worth millions of naira, I could remember days as founder when I made delivery using my back pack bags and all, just because of the vision we are not where we were yesterday but we believe we can be better.

Our vision is to be a household name when it comes to onetime and all round logistics experience in Nigeria, Africa and in diaspora maybe staying in the standard of FEDEX and UPS, and to be able to move with innovations as it grows, because in this era you either innovate or perish.

Venturing into Logistics business is quite capital intensive but despite that our beginning motivates us to do more, take more risk and challenges, then we can hope for a better future and partnerships too.

Our major services includes: relocation, haulage, despatch delivery, agrologistics, sea and air freight.

 

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Stakeholders chart path to building, construction sector’s growth

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[FILE PHOTO] President of Nigeria Institute of Building (NIOB), Nduka N Kenneth; Project Coordinator Elan Expo, Jude Chime; Representative of the Egyptian Ambassador to Nigeria, Ugochukwu Nzurumuike; National Chairman NiMechE (Nigeria Institute of Mechanical Engineers), Felicia Agatuba of the Association of Professional Women Engineers in Nigeria (APWEN); and General Manager, Elan Expo, Suer Nihat at the ongoing BuildExpo exhibition at landmark Event Centre, Victoria Island, Lagos… November 2017

 

Experts have stressed the need for government to stimulate the economy through the building and construction sector stating that the industry is crucial to every nation’s socio-economic development.

Apart from the potential embedded with respect to employment generation, the various activities undertaken in the sector are germane to fostering effective sectorial linkages and enhancing, as well as sustaining economic development, they opined.

Speaking at the third edition of BuildExpo exhibition organized by Elan Expo in Lagos at the weekend, Past president, Nigerian Institute of Structure Engineers, Kunle Adebajo, said efforts at ensuring sound and sustainable national and economic development cannot be ignored, considering the importance of infrastructural and industrial development as well as provision of accommodation.

According to him, these are areas where the building and construction sector is indispensable.

Adebajo said the construction industry in the country due to the issues of the economy is still in its infancy stage despite the age of the country.

According to him, there is a lot to be done, an event like this is an opportunity to expand, explore what is happening in the industry looking at technology with improvement that can be made.

“We really need to get the country off the ground and what is clear is that technology and engineering and construction industry is basically the bedrock of the development that must take place,” he said.

President of Council for the Regulation of Engineering in Nigeria (COREN), Kashim Ali, noted that there has been growth in each successive year of the expo, which shows people appreciate what is going on and some markets have been created which industries have taking advantage of.

Ali said the expo gives opportunity for local manufacturer to improve on whatever content they are producing.

In his remarks, Project Coordinator, Elan Expo Nigeria/West Africa, Jude Chime, said exhibition is coming at a time when the government is trying to also promote investment.

-GuardianNG

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Olaniwun Ajayi LP Offering Free Legal Advice

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Olaniwun Ajayi LP will be offering confidential pro-bono advice from a Nigerian law perspective over the phone to interested members of the public on the first & last Tuesday of every month starting on 2nd of October, 2018 between 11am – 12pm.‬

-Oyetade Gbajumo

About us

With nearly 60 years’ experience in helping organisations and individuals achieve their goals, Olaniwun Ajayi LP has a track record of involvement in some of the largest and most complex transactions in dynamic sectors of the Nigerian economy. Our unparalleled capacity to handle intricate legal issues is the bedrock of our practice, and our clients depend on us to help translate their opportunity into reality.

The firm has consistently provided legal advisory services to private entrepreneurs, key sector operators, financial institutions, governments and governmental agencies as well as multinational corporations in an array of complex transactions. Olaniwun Ajayi has a strong dispute resolution department that handles litigation, arbitration and negotiation.

The other areas in which Olaniwun Ajayi renders legal advisory services are Energy and Natural Resource law, Intellectual Property law and policy, Engineering and Construction law, Insurance, Taxation, Shipping and Telecommunications law.

As a firm that is interested in providing qualitative services to its clientele, Olaniwun Ajayi is consistently evolving cost minimising techniques to meet client expectations. In tandem with this objective, Olaniwun Ajayi has developed close professional relationships with several leading international law firms, resulting in extensive access to law and practice in different jurisdictions.

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