The first question founders usually ask me about structure is which option is cheapest to register. It is a fair question, but the registration fee is the smallest part of the decision, because the legal form you choose decides how you can raise money and whether you are personally responsible when the business owes money. Those two things matter far more over the life of the business than the cost of filing at CAC.
CAMA 2020 gives Nigerian founders several options, and each one comes with its own filings and running costs every year. I would encourage founders to make the choice before contracts and staff have built up around the wrong structure, since changing later means moving all of those across to a new entity.
A business name is the founder trading personally
Registering a business name at CAC gives you a name to trade under, but it does not create a separate legal person. If Ada trades as "Ada Designs", the business is still Ada in the eyes of the law, so the debts of the business are her own debts and the profits are taxed as her personal income.
A partnership registered as a business name works the same way for each partner. Because partners can bind one another, a bad contract signed by one partner can expose the others, so anyone going this route should at least agree in writing who contributes what, how profits are shared, who may sign for the business and what happens when a partner leaves.
The bigger limitation is that a business name cannot issue shares. If someone offers to invest "for 10% of the business", there is no share to give them, only a contractual right to part of the profits. For that reason, my advice to any founder who expects outside investment is to incorporate a company.
Limited liability partnerships and companies
CAMA 2020 introduced the limited liability partnership, which is a separate legal person whose partners are generally protected from its debts. It works well for professional firms and for partners who want to share profits flexibly, but I would not recommend it for a business that wants venture capital, because it has no shares to issue and investors cannot hold the preference rights they normally expect.
For most startups, the private company limited by shares is the right vehicle, and it is what I recommend to most founders. Each shareholder's liability is limited to what they agreed to pay for their shares. New investors can subscribe for new shares, and the company can create different classes of shares carrying different rights. A private company cannot offer its shares to the public, so fundraising has to stay within private arrangements, and the Investments and Securities Act 2025 and SEC rules decide what counts as a public offer, including offers made through crowdfunding portals.
A public company carries heavier capital and governance obligations, and I rarely see it as the right place for a startup to begin. The CAMA framework, read with the Business Facilitation Act amendments, sets out the formation and governance rules for each of these forms.
Companies limited by guarantee, and what limited liability does not cover
A company limited by guarantee is designed for charitable and similar non‑profit purposes, and it cannot distribute profits to its members. I have seen founders building social enterprises choose this form because it seems to fit their mission, only to find later that no investor can own any part of it. If you want both social impact and investment, a company limited by shares with its mission written into the articles is usually the better choice.
It is also worth being clear about what limited liability does not do. It protects shareholders from the company's debts, but it does not cover a personal guarantee you sign for a loan or a lease, and it does not protect a director from liability for their own wrongful conduct or for fraudulent trading. Keeping company money separate from personal money, and making decisions through proper board and shareholder procedures, helps keep that protection in place, and I explain personal exposure in more detail in before giving a personal guarantee.
Ownership, directors and share capital
CAMA allows a private company to have a single shareholder and a single director. That is convenient for a solo founder, but it raises the question of what happens if that one person dies or loses capacity, because someone will need to prove they can act on the shares and the bank will need to know who can operate the account. The articles should deal with this, and the relevant documents should be kept where another trusted person can find them.
Where there are several founders, the ownership agreement has to be carried out through actual share allotments. Record what each person paid for their shares, and keep any loans or promised future funding separate from the share capital, so that the accounts show clearly what each founder has contributed and on what terms. I cover the working and departure terms that sit alongside the shareholding in agreeing how you will work with your cofounder.
The general minimum issued share capital under CAMA is ₦100,000 for a private company and ₦2 million for a public company, although regulated sectors set their own higher figures and companies with foreign shareholders face separate rules. Every company also has to file details of its persons with significant control, which includes anyone who holds shares through a nominee.
Foreign shareholders and permits
A company with foreign shareholders has to register with the Nigerian Investment Promotion Commission. If it needs a business permit or expatriate quota from the Ministry of Interior, the ministry applies a minimum share capital of ₦100 million to companies with foreign participation, and some sectors either restrict foreign ownership or require a licence before the business can start trading. It makes sense to find out which permits apply before fixing a launch date.
Foreign investors should bring their money in through an authorised dealer bank and obtain a Certificate of Capital Importation, because that certificate is what allows dividends and sale proceeds to be sent out later through the official market. If you are considering a foreign holding company, I would read deciding whether your startup needs a foreign parent before incorporating in Nigeria.
Bank and payment‑provider onboarding is also worth checking early, since their document requirements for each legal form often decide how quickly the business can start collecting money from customers.
Tax, and the cost of changing later
The tax laws in force since January 2026 treat the forms differently. Profit from a business name is taxed as the owner's personal income at rates of up to 25%, while a company pays company income tax at 30% plus a 4% development levy. A small company, meaning one with turnover of ₦100 million or less and fixed assets below ₦250 million, pays 0% company income tax and no levy, although businesses providing professional services do not qualify for that exemption. Payroll and accounting costs should go into the same comparison, together with the cost of VAT compliance.
There is no simple way to convert a business name into a company. You have to incorporate a new company and move the assets, contracts, staff and licences across, getting consent where contracts require it and considering the tax on the transfer. That is a real piece of work, and it is the main reason I prefer founders who expect investment to start with a company from the beginning.
Whatever you choose, write down your reasons and keep that note with the company records. When the ownership or the business changes, you can then look back at those reasons and decide whether the form still suits what the business has become.
This article is general information and not legal advice. For guidance on your specific circumstances, speak with us directly.