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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Frequently Asked

  • What additional documents do I require to file my Annual Returns?
  • 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. 

  • What is a testimonium clause in an agreement?

    This is the part of the agreement where the witness attests to have witnessed the execution of the agreement.

  • What are the product categories available when registering with NAFDAC?

    The product categories include: Food, Cosmetics, Drug, Medical Device, Agro-Chemicals & Pesticide, Veterinary Products, Vaccines & Biologicals, Herbal and Nutraceuticals and Water

  • What is data protection?

    Data protection is a legal process of protecting sensitive data.

  • What is the difference between licensing and assigning a patent?

    Licensing a patent means granting permission to another individual or organisation to make, use as well as sell the creation that has been protected by patent.

    A patent assignment on the other hand, is a finished exchange of patent rights starting with one individual then onto another person.

  • Is there a penalty for late renewal of registration of products with NAFDAC?

    Yes, there is a late renewal fee, which is dependent on the category of the product.

  • What is share capital?

    The share capital in a private limited company is the amount of money invested by its owners in exchange for shares of ownership.

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    Yes, it does.

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