Here in this post, we are going to show you the Steps To Start LLC In Nigeria. We hope you find this information insightful
When you talk about LLC, you talk about Limited Liability Company. In this article, I am going to show you how you can comfortably start a Limited Liability Company here in Nigeria.
It is the best and simplest way to structure your business in order to have personal liability protection. Starting your business in this note provides you with these benefits:
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- Protection against lawsuits.
- Definitely cuts down on paperwork more than other business types.
- Keeps you away from paying tax two times
- Gives your business more credibility.
- It is easy to form and maintain.
There are different business structures of which LLC is one of them; among them are:
- Sole Proprietorship
- General Partnership
LLC is the ideal for most small businesses because it offers personal protection and simplicity. It offers limited liability which sole proprietorship and general partnership could not offer.
More Advantages of LLC
Personal Asset Protection: The owners of an LLC are not accountable for the LLC’s debts or lawsuits as far as there is no crime or fraud.
It Passes Through Taxation: The owners of LLCs pay tax once. The profit goes directly to the owners and they would then report their share of profit on the tax returns. If it is C-Corporation, taxes are paid twice because profits are taxed before being sent to the owners and taxed again when owners send their share of profits on the individual tax returns.
Simplicity: It is very easy to form and maintain. It does not assign formal officer roles. It does not hold an annual meeting and it does not record company minutes and resolutions. These are some of the things that C-Corporation and S-Corporation must have to do.
Flexibility: The operation of LLC is flexible in the sense that any of its members or managers who had been appointed by the members.
Increased Credibility: It is recognized as a formal business structure, unlike sole proprietorship or partnership. When LLC is included in your business name, clients and partners take your business as serious business.
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Access to Business Loans: Once you form LLC, your business is on its way to solidifying for business loans. So you can be able to access business loans and lines of credit.
Everything that has an advantage also has disadvantages but the only major disadvantage of LLC is that your business cannot be listed on the stock market. So it will not be easy to obtain fund from venture capital firms.
When forming your LLC it is good to form it in the state where the business would be located. But in a case where you want your business to have a physical presence in other states, you would need to register as foreign LLC in multiple states.
There are basically five (5) steps you need to follow in order to start LLC in Nigeria and they are as follows:
Step One – Select a State: Choose a state where you want to start the business. You need to put the nature of the business into consideration before choosing a state. There are some states where a particular business thrives more, so you have to consider starting your business where it will thrive more.
Step Two – Name Your LLC: Choose a catchy name that will draw people’s attention and it is also related to your business. If the name you choose is related to your business, customers will not find it difficult to know what you are into. For example, Koy Electrical Ventures, as a name is enough to let people know you are into electrical materials.
Step Three – Choose a Registered Agent: The next step is to choose a registered agent. There are so many agents but it is wise to go for those that are registered and licensed. You can google online to find some reputable registered agent and make your choice.
The main duty of a registered agent is to receive and send papers on your behalf. Legal actions and state filing are part of the papers they handle on behalf of the company.
Step Four – File the Articles of Organization: These are the legal documents submitted to the state during the LLC registration.
It helps to arrange financial and working relations among business owners, members, and managers. Documents that form part of Articles of Organization are:
- LLC’s name
- LLC’s purpose and
- Name and address of the registered agent.
Step Five – Create an Operating Agreement: The last stage is to create an operating agreement. By now, you would have known the operations of the organization and how it should run. This is the time to pen it down as an agreement.
Read Also: How to register a company in Nigeria
Types of LLC
There are majorly three types of LLCs and they are Domestic LLC, Foreign LLC, and Professional LLC. It is referred to as domestic LLC when the business is being operated in the state where it was formed.
When the business is formed in another state but along the line, there was a need to open other offices in other states or to create a physical presence of that office in other states, such LLC is known as foreign LLC.
Professional LLC is a type of limited liability company that is set up to perform professional services. They handle services like medical and legal services.
Before a professional LLC is formed, some members of the LLC have to possess the state license in order to demonstrate the professional qualification. There is also a need to seek legal counsel before forming professional LLC.
Cost of Starting LLC
Before you start, there is a certain amount of money you ought to pay but this money varies from state to state. After that, you will be paying a certain amount annually to maintain it.
What It Takes To Register LLC
It takes approximately two to three weeks to process for the registration of LLC and there is no need for the board of directors like other corporations. It is managed by its members.
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