Why you need to register a business name
It has been observed in Nigeria that many starters of small businesses pay little attention to having their entities registered but experts and other experienced entrepreneurs say they may have a lot to lose than gain for the inaction.
Tomorrow, it will be exactly five years when Godwin Afam set up his barbing salon in Lugbe , a satellite town in Abuja. Written boldly on his mini shop is Goddys Barbing Salon but this name has not been registered with the Corporate Affairs Commission (CAC).
“Everybody in this neighborhood knows me and calls me barber. Some even call me for home services. So, why do I need to go and register my business name with CAC?,” Afam asked.
Afam like many Small and Medium Enterprises (SMEs) think alike but experts say they have so much to lose by this action.
The first thing that qualifies you to be an entrepreneur is to own a business that legally exists, one business analyst, Mr. John Iwuoha said.
He said some persons may just be ignorant of what it means to have a registered business why others are concerned about the cost of doing it.
“For some of these people, it’s just plain ignorance; they don’t know or understand the importance of getting a business registered. The others, who aren’t totally ignorant, just choose to avoid the cost of registration when they start their business,” Iwuoha disclosed.
One of the key losses of not registering a brand in time is the loss of identity. You must have toiled hard to gain recognition but if such business is not registered, someone else could just register and claim your identity.
In complete terms, a registered business is one that legally exists and is recognized by law. Such firm enjoys certain rights, benefits and privileges that an unregistered business cannot enjoy.
Mr. Gabriel Anyebe ventured into an aluminium supply business three years ago. He told Daily Trust that although the business is not registered, he makes quiet a fortune. However, he has his limitations as he can only submit quotations to establishments or persons he is acquainted with or through referrals. ‘Qualitech’ as he calls it cannot enter for any bid as it is not registered!
“When we try to submit bids, the criteria listed are usually too much: three years evidence of tax payment, demonstration of capacity on similar job, registration certificate and tax identification number… it goes on,” Mr. Anyebe said.
On why he has not registered it, he said he was told the procedures at the Corporate Affairs Commission (CAC) is cumbersome and has huge cost. However, after speaking with one of our reporters, the young entrepreneur vowed to walk to the CAC and do it no matter what.
The issue of cost and the bottlenecks in having a business registered is the major problems of starters. Sadly, most of them have not taken time to enquire what it actually costs to get a registration.
A lawyer, Abraham O.Paul Esq. Principal Partner, Petra Partners explains the procedure for registration of a business name.
“If you want to start a company, one of the things you need is a business name. Lawyers will recommend that you give them two or three names. The reason is that the name you choose may have been registered by another person at the Corporate Affairs Commission (CAC). If it is already registered, they will pick the second or third one.”
According to him, to register a business name, you will require about 20,000 to 25,000 and four passports and within 1428 days, the name will be incorporated with the CAC.
He states the advantages of having a business name.
“If you have a business name, you can open an account with it because it gives you a unique identity and allows your clients to pay money into the account. Having a business name registered is a major criteria to access loans from the government, a cooperative or any other institution, ” Paul said.
An awardee of the erstwhile Youth With Innovation in Nigeria (YOUWIN), Femi Akin said on scaling through the first stage of the federal government intervention scheme in 2012, he was mandated to register his firm with the CAC before he will be given business grants in tranches.
Akin who has set up his food processing business in Kaduna said the decision has now empowered his business to go for soft loans from financial entities including the Small and Medium Scale Enterprises Development Agency of Nigeria (SMEDAN) and at the Bank of Agriculture.
A survey conducted by SMEDAN shows that out of the 37 million Micro Small and Medium Enterprises (MSMEs) in Nigeria, less than five million are registered with the Corporate Affairs Commission. 95 % of them are still informal.
The Acting Director-General of the Bank of Industry (BOI), Mr Waheed Olagunju said for MSMEs to access loan, they must be registered. “If MSMEs are not registered with the CAC, they cannot talk of access to finance. You must be registered before you will talk about access to finance,” Olagunju said.