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LEGAL REQUIREMENTS TO START A BUSINESS IN NIGERIA

by Ebunoluwa Owoniyi

There are various requirements needed to start a business in Nigeria. This article will provide a detailed insight into the legal requirements to start a business in Nigeria.

First, the various professional requirements needed to start a business in Nigeria will be listed.

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Professional Requirements needed to Start a Business in Nigeria.

  1. Have an idea that will thrive and blossom.

Part of the legal requirements to start a business in Nigeria is to come up with an idea; you must have studied probably your environment, a target market that needs a solution because for a business to thrive, it must either provide a solution to an already existing problem or complement an already existing solution.

  1. Write out a business plan.

When starting a business in Nigeria as an entrepreneur, it is necessary to develop a plan as a guide to follow through. A business plan is one of the most important legal requirements to start a business in Nigeria

  1. Business registration

It’s very important to register your business, especially when the business has been brought into existence, to avoid stories that touch, such as stolen business identity or name, unsupported business operation, etc. The official body responsible for business registration for entrepreneurs is the Corporate Affairs Commission (CAC). However, business registration is now made easy due to technological innovations.

Read also: Steps on How to Register your Business Name on CAC

  1. Come up with a finance strategy to run the business.

When starting a business, it is important to consider the available resources in terms of finance and those available in the long run to sustain the business. Business registration begins because investors will be more willing to invest in registered businesses, more like banks willing to give out loans to registered businesses.

  1. Create a team

When starting a business as an entrepreneur, it is important to consider having a team that is a group of people that will support the effective running of the business. As a usual saying goes, no one is an island of his own; as a business owner, it won’t be easy to carry out all the activities of the business all by one’s self, ranging from setting up to advertising to marketing, to launching, and all other activities that would be involved in running the business.

Read also: How to Grow your Business with Micro-Influencers

  1. Develop your brand identity

It is important to have a brand identity when starting a business in Nigeria as an entrepreneur, and also, developing that identity is vital. It is one of the important legal requirements to start a business in Nigeria. Most thriving businesses have one unique thing in common: a consistent brand identity that leaves a long-lasting impression in the marketplace as proof of their product branding. It helps to build trust and understanding in their customers.

  1. Advertise your business as much as you can

When starting a business in Nigeria, it is important to make full-hand publicity of your business to create awareness in the marketplace. Ensure to advertise as much as you can to reach the target audience of your choice.

Looking for a way to sell your products/service to a larger audience? Check out our Sponsored Post plan.

  1. Open a business account.

When starting a business as an entrepreneur in Nigeria, you would have to consider having a business account to differentiate the business account from one’s account in other to monitor the progression of the business, be it in financial terms, that is, a bank account or social media platform, as you would want to differentiate your personal life from that of your business.

  1. Consult professionals

Having set up the business, when challenges arise, it is advisable to consult professionals that would be of great help, be it legal professionals, business expertise in that field of business.

Now, having mentioned all of that, there are, however, legal requirements to start up a business in Nigeria.

There are many legal requirements for new businesses and startups, including financial regulations, tax obligations, and even employment ability laws. As a startup, make sure your new company complies with all its legal responsibilities to get back to focusing on growing your business.

Read also: Top Management Consulting Firms in Nigeria

Legal Requirements to Start a Business in Nigeria 

  1. Create a business structure

There are two main types of business structure; limited liability company (LLC) and corporation (C)

  • LLC: A LLC, or Limited Liability Company, protects you from personal liability under most circumstances. If your business is sued or if it declares bankruptcy, your assets, including your home and vehicle, won’t be at risk. With an LLC, you’ll be able to file your business income as part of your income taxes, but you will likely need to pay self-employment tax.
  • Corporation: A corporation, or C corps, is a company that is legally a separate entity from its owner or owners. Corporations offer the greatest personal protection from liability out of all business structures. However, they’re more expensive and complicated to form. Corporations file separate income taxes on their profits.
  1. Register Your Business Name

Creating a business structure is one of the legal requirements to start a business in Nigeria as an entrepreneur. Once you’ve decided on a business structure, you’ll need to register your business name.

Choose a name that reflects your brand and ensure it hasn’t already been claimed. You can then choose to register your business. Here are four ways to register your business;

  • An entity name: This is a legal requirement to start a business in Nigeria. An entity name legally protects your business at a state level.
  • A trademark: This legally protects your business at a federal level
  • A DBA (Doing Business As): This, however, doesn’t offer legal protection but may be required, depending on your location and business structure.
  • A domain name: This claims your business’s the web address

Read also: 5 Tips for Choosing a Great Small Business Name

  1. Federal Tax ID Number

Your federal tax identification number is an Employer Identification Number (EIN). It allows you to legally hire employees, pay federal taxes, apply for business licenses and open a business bank account. Your business will need an EIN if you plan on doing any of the following:

  • Hiring and paying employees
  • Filing employer tax returns
  • Operating as a corporation
  • Using a tax-deferred pension plan
  1. State Tax ID Number

Do some research to determine whether your startup needs a state tax ID number. You’ll only need one if the state you operate in collects taxes from businesses. Since tax obligations vary from state to state, it’s best to visit your own state’s website and check the local laws related to your income and employment tax obligations.

Read also: How to Get Tax Identification Number in Nigeria TIN

  1. Obtain Business Permits and Licenses

It is necessary to apply for business licenses and permits at the federal and state government level, but the specific licenses you need depend on your industry.

  1. Business Insurance

Business insurance can protect you in cases where the personal liability protection offered by your specific business structure isn’t enough. Business insurance can protect your assets and your business assets as well. Some types of insurance are required by law, such as unemployment and disability insurance. It’s also good to purchase business insurance to protect your startup from other potential risks.

Some Common Business Insurance Options

  • General liability insurance: Protects your business from various forms of financial loss, including property damage, injury, medical issues, lawsuit settlements, or judgments.
  • Product liability insurance: If your business sells products, this insurance protects you if one of your products is defective and injures a customer.
  • Commercial property insurance: Protects your business from loss or damage to company property due to natural disasters, accidents, or vandalism.

Need insurance for your business? Check this: Insurance for Businesses and Organizations in Nigeria

Other Legal Requirements to Start a Business in Nigeria Today

  1. Registration with the Corporate Affairs Commission.
  2. Registration with the Nigerian Investment Promotion Commission (NIPC).
  3. Registration with the Federal Inland Revenue Service (FIRS).
  4. Obtaining a Business Permit, Expatriate Quota & Work Permit.
  5. Statutory Licenses and Permits.

After the successful registration of your business, you will be required to ensure there is a proper management of the entity to avoid unexpected loss. Keep up with us on YouTube for business management tips.

About Author

Avatar of Ebunoluwa Owoniyi
Ebunoluwa Owoniyi
Ebunoluwa Owoniyi is a student studying microbiology, a prospective graphics and fashion designer, she loves to write to enrich human knowledge.

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