Choosing the best structure for your business– sole proprietorship or Limited Liability (LLC)?

Choosing the best structure for your business– sole proprietorship or Limited Liability (LLC)?

July 23, 2019

You probably already have a rough idea of how you want your business structure to be but may still have a little difficulty understanding whether you should set up a limited liability company or a business name/sole proprietorship. When deciding on the appropriate structure to pick, many people consider the incorporation cost the most important factor instead of the most suitable for their particular business. It is important that when making the decision on which business structure to choose you put into consideration;

  1. How many people will own the business and;
  2. What types of services or products the business will provide.

If you know that you will be the only owner of the business, then a sole proprietorship may be your best bet as opposed to a partnership or limited liability company. But if your business will engage in high risk activities, rack up large business debts and have a significant number of investors, then you will not only need to buy insurance, but may want to consider forming an entity that provides personal liability protection which can shield your personal assets from business debts and claims. If you plan to seek investors in order to raise capital or wish to give your employees stock options, then your best option is to incorporate a company.

If these issues raised are duly considered, then choosing a legal structure becomes easier to decide on.

Best regards,

Efe Ugboro

CEO, 618 Bees

The information in this blog post (“post”) is provided for general informational purposes only, no information contained in this post should be construed as legal advise, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through this post without seeking the appropriate legal or professional advise from the particular facts and circumstances at issue from a lawyer.

 This post is protected by intellectual property law and regulations. It may however be shared using appropriate sharing tools provided that our authorship is always acknowledged and this Disclaimer Notice attached.

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    To register a business in Nigeria; you would need to conduct a name search of the business. You can achieve this using your CAC-CRP account.

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  • What’s the difference between a business name and an LLC?
    • A business name is a sole proprietorship, usually owned and managed by one individual only. Legally, the sole proprietor and his business are one. It simply means an individual trading with an alias. The sole proprietor is personally liable for all business related obligations.

    • A limited liability company on the other hand is a separate business entity from the individuals that hold its shares and act as directors. Legally, it’s a separate business entity and a person on its own who can transact business, own property separate from its owners and can sue or be sued. 

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