Upgrading a business name to a Limited Liability Company (LLC) in Nigeria offers several advantages, such as limited liability protection, access to capital, and enhanced business credibility.
This guide provides a comprehensive step-by-step approach to upgrading your business, detailing the requirements and costs involved.
Why Upgrade to a Limited Liability Company (LLC)?
- Limited Liability: Shareholders are only liable for their share in the company.
- Credibility: An LLC adds a layer of professionalism, which helps attract investors and customers.
- Access to Capital: LLCs are seen as more stable entities, making it easier to secure funding.
- Business Continuity: An LLC continues to exist even if ownership changes, ensuring longevity.
Key Requirements for Upgrading a Business Name to LLC
The following are the required steps and associated costs for upgrading a business name to an LLC in Nigeria.
Step-by-Step Process
- Update Business Name with Annual Returns
The first step is ensuring your business name is up-to-date with its annual returns to the Corporate Affairs Commission (CAC). - Application for Reactivation to RG of CAC
If your business name has been inactive, you must reactivate it through an application to the Registrar General (RG) of the CAC. - Apply for Consent to Upgrade
Submit an application for consent from the Registrar General of the CAC to upgrade your business name to an LLC. - Provide Required Information
You will need to provide several documents and details, including the names and personal information of directors, shareholders, and company secretaries, as well as proposed company names and office address. - Complete Incorporation
Once consent is granted, submit all the information to the CAC for the incorporation of the LLC. You will be issued a Certificate of Incorporation once this process is completed.
Required Information for Incorporation
- Proposed Company Names: Submit at least two names to ensure one is available.
- Details of Directors, Shareholders, and Secretary:
- Full name
- Address
- Nationality
- Sex, age
- Phone and email contacts
- Shareholding Structure: Percentage breakdown of shareholders.
- Main Objects: Primary objectives or activities of the business.
- Identification: Provide ID documents (passport, driver’s license, or national ID card) for directors and shareholders.
- Proposed Office Address: The location of the company’s registered office.
Consolidated Cost Table
| Cost Item | Amount | Description |
|---|---|---|
| Incorporation Fee | ₦10,000 | For incorporating business name as LLC (up to ₦1 million share capital) |
| Additional Share Capital | ₦5,000/million | For each additional million in share capital |
| Stamp Duty (First Million) | ₦8,500 | Required stamp duty for first ₦1 million in share capital |
| Additional Stamp Duty | ₦7,500/million | For each additional million in share capital |
| Annual Returns Update | ₦8,000 | Includes penalty for late filing |
| Consent Application Fee | ₦5,000 | For application to Registrar General for upgrading consent |
Example Calculation for Incorporation Costs
Let us assume the proposed company will have a share capital of ₦5 million. The total incorporation costs would be as follows:
- Basic Incorporation Fee: ₦10,000
- Additional Share Capital Fee: ₦5,000 × 4 = ₦20,000
- Stamp Duty: ₦8,500
- Additional Stamp Duty: ₦7,500 × 4 = ₦30,000
Total Cost: ₦68,500
Frequently Asked Questions (FAQs)
What is the minimum share capital for an LLC in Nigeria?
The minimum share capital for a private LLC in Nigeria is ₦10,000, though certain industries may have higher requirements.
Can foreigners register a company in Nigeria?
Yes, foreigners can fully own an LLC in Nigeria, but foreign-owned companies are required to have a minimum share capital of ₦100 million.
How long does the process take?
It typically takes between 2-6 weeks to complete the upgrade, depending on how quickly you complete the steps and submit required documents.
What happens if my business name is inactive?
The CAC will not process your upgrade if your business name status is inactive. You must first update your annual returns and reactivate the business name.
Common Misconceptions about Registering an LLC in Nigeria
- Myth: Foreigners cannot own Nigerian companies.
- Fact: Foreigners can own 100% of a Nigerian LLC.
- Myth: The incorporation process takes too long.
- Fact: The process can be completed within a few weeks if all documents are in order.
Registering an LLC in Nigeria as a Foreigner
Foreigners looking to register a company in Nigeria must meet certain requirements, including:
- Minimum Share Capital: ₦100 million.
- Business Permit: Foreigners must obtain a business permit from the Ministry of Interior.
- Expatriate Quota: For employing foreign nationals, expatriate quota approval is required.
Conclusion
Upgrading a business name to an LLC in Nigeria is a strategic move that enhances credibility, limits personal liability, and opens doors to more business opportunities.
Understanding the step-by-step process, requirements, and costs involved will help ensure a smooth transition for your business.
