5 Benefits of CAC Business Name Registration

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When Oluchi started her crocheting business, she named it Luchy’s Crocheting. She was a natural at managing the business, from understanding her customers pain points to negotiating good deals with her suppliers. For years, she built her business by re-investing profits back into the business.

As her business began to grow and her clientele increased, most of her customers became uncomfortable paying to her personal account. Oluchi’s business loan application was also turned down by the bank due to the unstructured nature of her business, even though her business was cash flow positive. What was the issue?

Oluchi needed to start the business registration process. Howwever, she realized during the process that the business name she had been using for years was unavailable. 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.

Eventually, Oluchi had to come up with another name and rebrand her business, especially her social media. This is an important case that shows why you need to register your business.

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 build the right structure for their businesses. An important foundation of any small bsuiness structure is registering with the Corporate Affairs Commission (CAC).

So why do you need to register your business? This article shares some reasons why you should have your business name registered with the CAC.

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 states the following: 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 per day till they have registered their business name.

This means that by 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 most countries, especially Nigeria, it is illegal for two businesses to have the same name. Once you have your business name registered, nobody can take that away from you.

Also, if you find a person or corporation using your business name to trade, you have every right to sue them 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

When registering your business you can either register as a sole proprietorship, partnership, public limited liability or private limited liability company. Most unregistered businesses get in trouble if they cannot return business loans on time, since they get them through personal accounts. However, as a private limited liability (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.

Lets say, for example, that you get a loan from the bank to upgrade your business or engage in extra business dealings and it goes south. As a limited liability company, you only have to pay back a fixed sum, most often the amount you took without interests accrued.

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 business loans to fund unregistered businesses, unless you are recieving it in your personal account.

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.

After your CAC business name registration, you can 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.