When Oluchi started her crocheting business, she named it Luchy’s Crocheting. She was just a natural at managing the business, from talking to customers to understand their pains to negotiating good deals with her suppliers. For years, she was aggressive at building the business and re-investing her profits into the business.
After several years, as her business began to grow and her clientele increased. She was advised to do a CAC business name registration, to enable her open a bank account. Most of her customers were no longer comfortable paying to her personal account.
Some year’s back Oluchi had decided to get extra funds to expand the business. Her loan offer was turned down by the bank due to the unstructured nature of her business even though the business was cash flow positive.
What We Covered In This Article
Oluchi decides do a CAC business registration
As a result of these she started the business registration process. Only to discover that the business name she had been using for years was not available. The name was rejected by the Corporate Affairs Commission of Nigeria (CAC) because a company with a similar name had been registered by another business owner.
She was in ‘Sifia pains’ and had to come up with another name. It was a difficult moment for her, she had to also rebrand her social media handles and other aspects of the business that where already in the previous name.
Why you need to register your business
This experience is not new to many small and medium business enterprises in Nigeria. Unfortunately, many start out small and neglect to put the right structure for their business. One of those structure every business needs is registering their business with the Corporate Affairs Commission (CAC).
Have you been hesitant and wondering why you need to register your business? I’ll be sharing with you some reasons you should have your CAC business name registration.
1. Obeying the Country’s Law
In 2020, the President of Nigeria, Muhammad Buhari vetoed the signing of the Company and Allied Matters Act (CAMA 2020) into law. A section of this law criminalizes operating an unregistered business in the country.
Section 863 of CAMA 2020 specifically provides as follows: (1) A person or association of persons shall not carry on business in Nigeria as a company, limited liability partnership, limited partnership or under a business name without being registered under this Act.
Also, such an individual is liable to being convicted under the law for a fine of 200.00 per day till they have duly gotten their CAC business name registration.
This means that in running an unregistered small medium business, you take the risk of defaulting the law. The consequences might be more than you bargained for.
2. Provides You with a Unique Identity
By registering your business, you have successfully given your business a unique identity which no other person or corporation can make use of within the borders of Nigeria.
In Nigeria and most countries, it is illegal for two businesses to have the same name, and once you are the first to beat the gun, no one else can take that away from you.
Suppose you find a person or corporation using your business name to trade. In that case, you have every right and power to sue such persons to court for damages. In almost all cases, such individuals are usually unregistered and, in essence, defaulting of the law.
Getting your CAC business name registration is also the first step in establishing your business presence. You can then go ahead to trademark your business with other identities such as business logos, slogans or business symbols.
This effectively serves to differentiate your business from thousands of other businesses out there. Remember it all starts with your CAC business name registration.
3. Protects You from Liability
Did you know that if your business is registered as a private liability company, you do not have to pay with your personal properties if you can’t meet up with the loans?
For example, you get a loan from the bank to upgrade your business or engage in extra business dealings, and it goes south. However, under a limited liability company, you only have to pay back a fixed sum. Most often, the amount you took without interests accrued.
When registering your business you can either register as a sole proprietorship, partnership, public limited liability or private limited liability company. As a private limited liability also known as PLC, you have the advantage of not having to pay for loans with your personal property if you are not able to meet up as at when due.
Most unregistered businesses and business name registration can get you in trouble if they cannot return the loan on time since they have to get it on their personal accounts.
4. Access to Financial Opportunities
There are numerous opportunities for businesses to get funding in terms of grants or loans. To access these kind of opportunities you need a registered business. Banks do not give out loans to fund unregistered businesses except you are taking a loan on your personal account. There are two types of loans you can get from a bank: Personal loan and Business loan.
Also, investors will be able to trust your business when they know you are registered with the government. It gives them a sign that you are a professional.
With your CAC business name registration, you get access to apply for financial assistance/grants when you need it and get prospective investors to trust your business enough to invest their money.
5. Gives a Professional Image
In a society like ours, thousands of small and medium businesses are jostling to sell their products to the same set of people. Registering your business helps you carve a niche for yourself.
Your CAC business name registration gives you an air of professionalism. As a result, it is easier for your audience to trust you enough to deal with your business. It also helps you perpetuate continuity. Your business might be small today, but every entrepreneur’s dream is for his business to outlast him.
And you definitely would not want to hand over an unregistered business to your heirs.