A Sole Proprietorship business sometimes referred to as a “one-man business” is a type of business that is started and run by one person with the sole motive of serving to meet a need and making a profit. This person is the sole financier, controller, and manager of the business. He takes all the decisions and enjoys the benefits. But the person bears all the risk alone because a Sole proprietorship business is not a legal person.
The company cannot sue or be sued in its name because it is not distinct from the owner. Its sources of funds are also limited to personal savings, family and friends, and trade credit from manufacturers or suppliers of goods. Irrespective of the negatives, it is a form of business that many Nigerians like Tailors, Carpenters, Technicians, Barbers, Grocers start on a small-scale, because it is easy to establish, and registration is uncomplicated.
In this post, I will list its advantages and disadvantages and show you, documents needed to register the business, examples of a sole proprietorship, the organization that carries out the registration, and the steps to follow to register the company in Nigeria. Let us begin immediately.
Advantages of Sole Proprietorship In Nigeria
- It is easy to set up this business, as there are no formalities and legal technicalities to obey.
- The business is flexible as the sole trader can sell Grocery today and change to Ladies apparels tomorrow.
- Sole proprietorship business has complete privacy and does not report to anyone, submit an annual report, or publish audited statements for anybody like the Limited liability companies do.
- The sole business owner pays lower taxes as a person on their income and does not pay a corporate tax.
- The sole proprietor can establish the business with small capital unlike a limited liability company
- The profit the company makes belongs to the single business owner.
- It is easy to decide and act since it is a one-person “management team.”
Disadvantages of Sole Proprietorship in Nigeria
- There is no continuity, or perpetual succession like a limited liability company has. Once the owner dies, the business may close.
- The sole trader may lack the managerial skills needed to manage the business
- The Law does not know the company as a legal person; hence it cannot sue or be sued in its name.
- The growth of the business is limited because the sole trader has no access to capital or loans from banks.
- The sole trader bears the burden of the business alone and has unlimited liability in case the company fails.
Documents needed to register a sole proprietorship business in Nigeria
For ease of registration of sole proprietorship business in Nigeria, you should have these documents in place before you begin the registration process. They include:
- The statutory form for the registration of the business name
- The approved name
- Information about the promoter of the business with passport photos
- The nature of the activity or what the company will be trading or doing
- Address of the proposed place of business
- Date business will start
- Form of Identification – an ID Card issued by the government
Examples of sole proprietorship in Nigeria
Below we will list some examples of Sole proprietorship businesses that are run by sole owners.
Grocery store Owner: The local retail merchant in your area who operates a small shop selling foodstuff and household supplies, is a typical example of a one-person business set up to fill a void in the market and make a profit.
Catering service: A caterer cooks for clients who invite them to their parties. They often open small-scale restaurants to showcase their cooking skills and run it to earn income. The caterer employs staff to work with them.
Tutoring services. Involve a highly skilled Teacher teaching others what they know that the student does not know. As a tutor, you may choose to work online or teach specific students offline for a fee.
Computer Repair Technician: This technician repairs laptops and computers. This trade is suitable for people with high technical competence. It is usually a small business, though the company may hire others to work there.
Freelance writers: Freelance writers offer their expert writing skills to businesses that require their service. They also write content for sale and start blogs to share their experiences and earn income from this blog. Though they could expand it by hiring other writers, it is a typical sole enterprise.
Corporate Affairs Commission – the government agency in-charge of registering business names
The Corporate Affairs Commission is Nigeria’s Corporate Registry established by the Companies and Allied Matters Act, promulgated in 1990 to supervise the creation and administration of companies in Nigeria. It replaced the Federal Ministry of Commerce and Tourism who was the former registrar according to the provision of the Companies Act of 1968.
Registering Sole proprietorship in Nigeria
In Nigeria, the registration of a sole proprietorship business is simple. Even the Corporate affairs commission put out a notice to that effect. It informs all prospective clients that individuals and Proprietors can register business names on their own. Stating they do not require the services of a legal practitioner, chartered Accountant or Chartered Secretary.
Step by step Guide for registering sole proprietorship online
- Start the registration process by going to the Corporate Affairs Commission’s company registration portal (CAC-CRP) by visiting the services.cac.gov.ng
- Click on the ‘Create Account’ button; to fill out the form, submit the details of your account, and CAC will send a response with your login details to the email address you entered.
- Next, Log on to the portal with your username and password and conduct a name search to confirm if the business name is available (click here). ‘TIP’- Have up to two names with you and fill in the first name and the substitute “reserved” name in case the first name is not available.
- Pay N500 to reserve a new Name. To do that (click here). Also, learn more about the name reservation. After two days, visit the portal to confirm if you were successful.
- If successful, fill pre-registration form – CAC-BNo1 at the (Online Company Registration Portal)with the required information and submit.
- Also, check the Fees for CAC Services and pay the filing fee quickly. The registration of Business name costs N10,000 only.
- Follow up, organize the signed scan copy of your pre-registration documents for upload as follows: Application form, the Filing fee receipt and a method of identification of the proprietor (s).
- Finally, upload documents you have scanned for the CAC to process. (click here)
- You will get two registration certificates after processing, and the CAC approves your application.
Manual registration of Sole proprietorship in Nigeria
To register Sole proprietorship in Nigeria is not hard. Still, if you are not conversant with a computer or Smartphone, you could visit the CAC office near you to collect the registration form.
- Find out the closest CAC office to you from their website at www.cac.gov.ng to get information on their offices Nationwide,
- Pick two business names and visit the CAC office and pay N500 to collect the name search form. Fill the form for a name search and return it to CAC and go back to confirm the results in 2 weeks.
- If CAC approves the name, pay N250 to collect a registration form for the business name. Note, the filing fee for the registration of business name costs N10, 000 only.
- Fill out the form, add documents, and submit to their representative and pay the filing fees to the CAC office/ bank account and give them time to process your application.
- Once they conclude the processing, you will get an email from them, or you could go there to confirm in a few days.
- If CAC approves your application, you will receive two registrationcertificates from CAC.
Hire an Accredited Agent for registration
If you have any doubts about your ability to register your sole proprietorship business personally, hire an accredited agent authorized by the corporate affairs commission. They are person(s) or institutions who have the expert knowledge to process and submit pre-incorporation and post-incorporation filings for individuals and businesses.
Note: In both methods before this, you must go to the Corporate Affairs Commission personally to finalize the registration of your business, except you hired an accredited agent.
Certificate of Registration
Once they complete registering the business, CAC will give the following documents to the proprietor:
- The original Certificate of registration of the business name
- And the certified true copy (CTC) of the Application for the Registration of the business name.
Frequently Asked Questions (FAQs) on Sole Proprietorship in Nigeria
If you do not have an e-payment credit/debit card, how can you pay online?
If you have no debit/credit card to use for payment online, use your internet banking to pay for fees in the CAC-CRP. But, if you do not have internet banking access, create the bill from the CAC-CRP platform and take the invoice to any bank branch in Nigeria to pay.
How will you know if your Name Availability search was Approved or Declined?
After processing your name search request, you will get an email notification in the registered email address. So, log in to your Corporate Affairs Commission’s company registration portal (CAC-CRP) account to see the status of your application and to create the availability approval/disapproval form.
If you need more information?
If you need more information, go to the CAC official website at www.cac.gov.ng or visit their office to discuss with a customer support agent.
In this article, on understanding Sole Proprietorship in Nigeria, we explored the advantages and disadvantages, listed documents you need to register your business name, gave you some examples of sole proprietorship businesses and where to register, and the steps to follow to register the company in Nigeria. What more do you need? Act now.