When it comes to sole proprietorship, the complete authority of running the business lies with a single owner. Sole proprietorship in Nigeria is one of the simplest business forms, as one person controls all business operations. Self-employed people, like freelancers, are also included in the sole proprietorship category. 

Setting up a sole proprietorship in Nigeria is a straightforward process. However, you must be aware of the required steps and documentation.

Navigating the Process: How to Successfully register a Sole Proprietorship in Nigeria

Learn about sole proprietorships and step-by-step guide on how to start one.

What Is a Sole Proprietorship?

A sole proprietorship is a business owned by an individual, known as a sole proprietor, who operates the business alone and typically in their own legal name.

It is the most straightforward business structure, with complete control in the hands of the owner. For this reason, the business and the owner are considered a single entity, without separation for tax and legal purposes.

When a freelancer strikes out on their own—whether they’re a graphic designer, a business consultant, a writer, etc.—the default designation for income tax is as a sole proprietorship. A sole proprietor also can make and sell products, though usually when a business scales up it chooses to operate as a limited company.

Who Can Be a Sole Proprietor in Nigeria?

Certain conditions must be fulfilled before becoming a sole proprietor in Nigeria, which include:

  • The minimum age to establish a sole proprietorship in Nigeria is 18 years
  • A sole proprietor can be a Nigerian resident or a foreign national
  • The individual must not be blacklisted or banned from the industry chosen to operate in.
  • The sole proprietor must be of a sound mind

Business Name Registration

You need to register a business name for your sole proprietorship business activity. Upon doing so, you will receive a business name registration certificate, which you will need to open a bank account or obtain a tax clearance for your business. The Corporate Affairs Commission (CAC) is the authority in charge of business name registration. 

Before registering, check if someone else is already using the business name you planned on. To search, follow the CAC guidelines for searching and registering your business name. If you prefer to take these steps face to face, you can walk into any of the CAC offices and obtain the Reservation of name form.

See also  Understanding CAC’s 'Nature of Business'

Requirements for Sole Proprietorship Registration

To register a sole proprietorship in Nigeria, the following are typically required:

  1. Proposed Business Name: A unique name that isn't already registered.
  2. Business Address: The physical location of the business.
  3. Owner's Full Name and Personal Details: Including contact information and valid means of identification (e.g., passport, national ID card).
  4. Passport Photograph: A recent passport-sized photo of the business owner.
  5. Nature of Business: A brief description of the business activities.
  6. Registration Fee: Payment of applicable registration fees to the Corporate Affairs Commission (CAC).

Step-by-Step Process for Setting Up a Sole Proprietorship

Registering a sole proprietorship is relatively straightforward. Below are the key steps to follow:

Step 1: Choose and Reserve Your Business Name

  • Brainstorm a unique business name that represents your business.
  • Use the CAC’s online name check tool to verify that your chosen name is available.
  • If the name is available, reserve it for up to 60 days to prevent other businesses from registering it.

Step 2: Register Your Business Name with the CAC

  • Visit the CAC’s website to submit your business registration application.
  • Provide details like your personal information, nature of business, and contact information.
  • Submit the necessary registration fees as outlined by the CAC.

Step 3: Obtain Your Business Registration Certificate

  • Once your application is processed and approved, you will receive a Certificate of Business Name Registration and Status Report. The certificate officially establishes your business as a registered entity in Nigeria.

Step 4: Get a Tax Identification Number (TIN)

  • In case your TIN is not issued alongside your Business Name certificate, head to the FIRS website or one of their offices to apply for your TIN.
  • Your TIN is essential for paying taxes and conducting formal business transactions.

Step 5: Open a Business Bank Account

  • Take your business registration certificate and TIN to a bank of your choice.
  • Open a dedicated business bank account in your business’s name to handle all business transactions separately from your personal finances.
See also  What is a General Partnership Business?

How Long does it take for Sole Proprietorship Registration in Nigeria?

In Nigeria, the registration of a sole proprietorship typically takes between 2 to 7 working days. The process involves several key steps:

  1. Name Reservation: Initially, you need to reserve your business name with the Corporate Affairs Commission (CAC), which can be done online. This usually takes about 1-2 days.
  2. Filing Application: Once your name is reserved, you can file your application for registration. This step includes submitting the required documents and forms, which can typically be processed within 2-7 working days.
  3. Certificate Issuance: After your application is approved, you will receive your Certificate of Registration, which officially recognizes your business as a sole proprietorship.

Factors that might influence the timeline include the efficiency of document submission and any additional requirements specific to your business type. It’s advisable to ensure that all documents are prepared accurately to avoid delays in the registration process.

Characteristics of a Sole Proprietorship

Here are some key characteristics of a sole proprietorship business: 

  1. Single Ownership: Owned and managed by one individual who provides the capital and bears all the risks.
  2. No Separate Legal Identity: The owner and the business are legally the same, with no distinction between personal and business assets.
  3. Unlimited Liability: The owner is personally liable for all business debts, and personal assets can be used to cover them.
  4. Complete Control: The owner makes all business decisions and manages operations independently without consulting others.
  5. Profit and Loss: The sole proprietor keeps all profits and bears all losses.
  6. Simple Setup: Minimal legal formalities are required to establish and run the business, with no special legislation governing sole proprietorships.
  7. Flexible Operations: The business can easily adapt, grow, or dissolve based on the owner's discretion.

Benefits of Registering Your Sole Proprietorship

Here are some of the key advantages of this business structure:

  1. Easy to Start and Run: Minimal paperwork and simple registration make it easy to set up and operate.
  2. Low Startup Costs: Requires less capital, making it ideal for small businesses and artisans.
  3. Full Control: The owner has complete decision-making authority without needing approval from others.
  4. All Profits to Owner: The sole proprietor keeps all profits after covering expenses.
  5. Simplified Taxation: Business income is reported as personal income, avoiding corporate tax.
  6. Unique Identity: Registration gives the business a distinct name, protecting it from duplication.
  7. Government Incentives: Sole proprietors can access various incentives provided to small businesses.
  8. Easy Bank Setup: The business can open a formal bank account in its registered name.
  9. No Corporate Formalities: No need for board meetings or complex governance structures.
  10. Business Travel: Registered business owners can obtain visas for international business trips more easily.
See also  CAC Annual Returns for Registered Corporate Entities

Conclusion

Setting up a sole proprietorship in Nigeria is an excellent way for aspiring entrepreneurs to start their business journey with minimal cost and complexity.

By following the steps outlined in this guide and ensuring compliance with CAC requirements, you can establish a legally recognized and functional sole proprietorship that sets the foundation for future business success.

Register Sole Proprietorship Business Name in Nigeria

Here's how SplashDict's team of CAC-accredited Chartered Secretaries can help:

  • Business Name Registration: Nigerian Sole Proprietorship Business Name Registration with the CAC.

  • Documentation Preparation: We handle all required registration documents.

  • Business Name Search and Reservation: We check availability and secure your desired business name.

  • CAC Filing Fee Included: No hidden costs; package price covers all fees.

  • Submission and Processing: We manage the entire process for swift approval.

  • TIN Assistance: Tax Identification Number issued upon registration.

  • Documents Delivery: Receive your Certificate of Registration and Status Report.

  • Ongoing Secretarial Support for statutory filings and compliance.