Can only one person own a company? The answer is “Yes”. In recent years, Nigeria has adopted progressive reforms in its corporate laws to encourage entrepreneurship and ease the process of business formation. One such reform is the allowance for a single individual to register a limited liability company. This provision, embedded in the Companies and Allied Matters Act (CAMA) 2020, has revolutionized the corporate landscape, making it more inclusive and accessible for small business owners and solo entrepreneurs.
This article explores the legal framework, the process for registering a single-member limited liability company, and its numerous benefits.
Legal Framework: Single-Member Companies Under CAMA 2020
The Companies and Allied Matters Act 2020 (CAMA) introduced significant changes to corporate governance in Nigeria, one of which is the recognition of a single-member company. Section 18(2) of CAMA 2020 allows an individual to incorporate a private company limited by shares with a single shareholder and director.
Prior to this amendment, incorporating a company in Nigeria required at least two individuals. This development aligns Nigeria with global practices and reflects the need for flexibility in modern business operations.
Benefits of a Single-Member Limited Liability Company
- Ease of Business Setup
Entrepreneurs no longer need to partner with others to fulfill incorporation requirements. This is particularly advantageous for solo entrepreneurs who prefer complete ownership and control over their business operations.
- Limited Liability Protection
Like other limited liability companies, a single-member company separates the owner’s personal assets from the company’s liabilities. In case of business debts or lawsuits, the owner’s personal assets remain protected.
- Operational Simplicity
A single-member company simplifies decision-making processes as there is no need to consult other shareholders or directors. This can lead to faster implementation of business strategies and reduced operational delays.
- Legal Recognition
Operating as a registered company rather than as a sole proprietorship enhances credibility. Banks, government agencies, and large corporations are often more willing to engage with incorporated entities.
- Access to Financing and Contracts
A registered company can access loans, grants, and investment opportunities that may not be available to sole proprietorships. Furthermore, many government and corporate contracts require bidders to be registered entities.
- Tax Advantages
As a single-member company, you can take advantage of corporate tax benefits while still maintaining control of the business. You can apply for Tax Clearance Certificate for the company from Federal Inland Revenue Service which is one of the pre-requisites for getting government contracts.
- Scalability
A single-member company can easily add new shareholders as the business grows, transitioning seamlessly into a multi-member company without altering its core structure.
How to Register a Single-Member Limited Liability Company in Nigeria
- Choose a Business Name
Select a unique name for your company. Conduct a name availability search on the Corporate Affairs Commission (CAC) portal to ensure it is not already in use.
- Prepare Incorporation Documents
Key documents include:
Memorandum and Articles of Association (customized to suit a single-member company).
Identification documents of the owner (e.g., National ID, passport, or driver’s license).
Proof of address.
- Register on the CAC Portal
Visit the CAC portal to complete the online registration process. Input the required details, upload the necessary documents, and pay the applicable registration fees.
- Obtain a Certificate of Incorporation
Once your application is approved, the CAC will issue a Certificate of Incorporation, signifying the legal existence of your company.
Who Should Consider a Single-Member Company?
Freelancers and Consultants: Individuals offering professional services who want to enhance their credibility.
Small-Scale Entrepreneurs: Business owners who prefer to maintain full control over their operations.
Startups and Innovators: Entrepreneurs who wish to establish their business formally without the complexities of multiple shareholders.
Conclusion
The introduction of single-member limited liability companies in Nigeria marks a significant step towards empowering individual entrepreneurs. This innovation reduces barriers to entry, enhances business flexibility, and provides a robust framework for small-scale ventures to thrive.
Whether you’re a freelancer, consultant, or budding entrepreneur, registering a single-member company offers a host of benefits, from legal protection to increased credibility. By leveraging this opportunity, you can establish a firm foundation for your business in Nigeria’s dynamic economy.
Our team will be available to handle the CAC registration of your company. You can contact us here
Adebayo Oluwole is a seasoned chartered accountant and a member of Chartered Institute of Taxation of Nigeria with over twenty years of experience. His expertise cuts across accounting, auditing and taxation. He has helped hundreds of individuals translate their dreams into reality by offering them pre and post registration services. His focus is to help SMEs grow in the marketplace.