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Sometimes, ventures which initially registered as a Business Name want to make the switch to a Private Limited Liability Company. They may do this for several reasons, some of which we’ll discuss shortly. If you’re in this situation and seeking guidance to get it done the right way, we’ll help you with that here. But first, let’s have a look at why a Business Name would want to transition to a Private Limited Liability Company.
Why a Business Name Would want to Become a Private Limited Liability CompanyMany businesses opt for the Registered Business Name because it’s the least expensive of all the categories to register. However, there are advantages that come with being a Limited Liability Company (LLC) which do not accrue to enterprises registered as business names. These benefits are listed out below:
- If an enterprise registered as a Business Name incurs debt, its creditors can seek to recover their funds from the business owner, as the owner is liable for the debt. But shareholders of LLCs are not liable for the debt of their company. It is the company, not them, which is legally bound to meet its financial obligation to creditors.
- It is easier for LLCs to raise capital, as their shares can be used as collateral for loans or exchanged for equity. Registered Business Names, on the other hand, find it more difficult to raise capital of a substantial amount.
- An LLC is often a more suitable structure for companies to adopt as they expand. This is because it has instituted administrative and decision-making hierarchies, something that a growing business needs in order to stay organized.
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Steps to Changing Your Business Name to a Private Limited Liability CompanyIf you want to move your enterprise from a Business Name to a Private Limited Liability, here are the steps you need to take:
- First, ensure that your business has continually filed its annual returns with the Corporate Affairs Commission from the year it was registered with the commission until date. If this hasn’t been done, you can file returns for any outstanding period, and pay the required filing fees and penalty fees.
- Apply to the Registrar General of the Corporate Affairs Commission for your Business Name to be converted into an LLC. Attach your Original Business Name Certificate to the application.
- If you have completed the first step (filing annual returns with the CAC), you should submit evidence of payment for annual returns to the commission as well (i.e. receipts for payments made to date).
- Next, pay a sum of ₦5,000 to the CAC via Remita for the conversion to be processed.
- When the required documents have been submitted, they will be moved to the office of the Registrar General. If the office finds that the application meets its requirements, the office will consent to the change you are requesting for.
- Your next move will be to follow the regular steps for incorporating a Private LLC with the Corporate Affairs Commission, with the same name you used for your Business Name registration. Note that administrative charges for this process still apply.
- After completing your registration, you will receive a certificate for your LLC.
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Final WordsIf yours is a growing business, you’ll want it to assume some structure in order to maintain its efficiency. One part of making it happen is transforming it from a Registered Business Name to a Limited Liability Company. This doesn’t just put an official seal on your restructuring efforts; it also makes your business look more professional and eases its path to obtaining funding from financiers. Featured Image Source: Resolution Law Firm
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