Home Entrepreneurship Legal Responsibilities and Insurance Needed for Starting A Business (Nigeria As A Case Study)

Legal Responsibilities and Insurance Needed for Starting A Business (Nigeria As A Case Study)

by Olufisayo
Legal Responsibilities and Insurance Needed for Starting A Business

Whether you plan to operate a home-based business or are involved in a large commercial operation, you will need to decide on which business structure best suits your needs. Your options will range from Sole Proprietorships, Partnership, to Limited or Incorporated Companies.

Sole Proprietorship – It is a one man business. Only one man runs the business. He furnishes all the capital required to run the business along with accepting all responsibilities for everything that is involved with running the business.

Partnership – Partnership is the relationship between persons carrying on business in common with a view of making a profit.
A minimum of 2 persons and a maximum of 20 persons are allowed to form a partnership.
But in the case of Legal firm operating in partnership and Accountancy partnership, the membership capacity could be more than 20 persons.

Before entering into partnership it is advisable to draft a partnership agreement. Partnership agreement could be made orally, in writing, by deed’ or even by conduct. This partnership agreement becomes and is binding on each partner in the event of a disagreement and recourse to the court of law.

Articles in a Partnership Agreement

  • Data of the parties involved should be clearly stated.
  • Place of business to include the address for service of court processes
  • Name and style of business.
  • Nature of business should be stated with precision as it governs the extent to which each partner has implied or apparent authority to bind the firm and his co-partners as an agent.
  • Date of commencement of business
  • Duration of the business and the mode of dissolution should be clearly stated otherwise it is a partnership at Will.
  • Capital, as it relates to the proportion of contribution by partners, should be clearly stated.
  • Property bought with partnership money.
  • Bankers and signatories to a bank account.
  • Profits and drawings as it relates to the proportion in which profits are to be distributed. There should be provision to allow drawings by partners of specified amount out of the partnership profits before the annual account.
  • Salary: Unless otherwise agreed no partner is entitled to a salary.
  • Accounts: Provisions should be made as to who, where and how to keep the account.
  • Powers, Rights, and Duties of each partner should be spelled out.
  • Retirement clause should be introduced.
  • Expulsion and suspension. The power to expel and suspend should be expressly provided in the agreement.
  • Dissolution: It could be by an act of the parties by operation of law or by the court.

Incorporated Companies – Any two or more persons may form and incorporate a company upon fulfilling the statutory requirement for the particular type of company. The Company and Allied Matters Act (CAMA) vest the responsibility for the formation of companies exclusively on the Legal practitioner.

       

So, do you need help locating good insurance for your business? Get in touch with Cornhill Direct Commercial Insurance they would surely help out.

Types Of Company

There are two types of company which could either be Limited Liability Company, a company limited by guarantee or unlimited.

a. Private Company: is composed of a minimum of two and a maximum of fifty members. The authorized capital for a private company is a minimum of N10, 000.00.

b. Public Company: there is no limit to the membership strength of a public company and it authorized capital is a minimum of N500, 000.00.

Business Registration

The Legal practitioner collects all necessary information and documents as required by the Corporate Affairs Commission (CAC) from his client (the person intending to incorporate a company) for the formation and incorporation of the company.

       

Two names or alternative name is given to the lawyer to conduct a preliminary on-the- desk search using the directory of registered companies published by the CAC. If the registrar of the CAC is satisfied that all conditions have been complied with he then issues a “Certificate of Incorporation”. Private companies can commence operation with their certificate.
However, a public company may have to receive in addition a “trading certificate” before it can commence business.

The Procedure and Requirement for Registration of Business Name
A business name is a name or style under which any business is carried on. A business name will be rejected by CAC if;

  • It is identical with that by which a company in existence is already registered or so nearly resembles that as to be calculated to deceive.
  • It contains the words “chambers of commerce” unless it is a company limited by guarantee.
  • It is capable of misleading as to the true nature or extent of its activities or is undesirable, offensive or otherwise contrary to public policy.
  • It would violate any existing trademark or business name unless the consent of the owner of the trademark or business name has been sought and obtained.
  • It contains the word “national, government, municipal, state, federal or other words which imports or suggest that the business enjoys the patronage of the federal, state or local government.

Preparation of the Memorandum and Article of Association of a Company

In preparing your company’s memorandum and article of association the following not all-inclusive should be expressly stated;

  • The name of the company to end with limited, unlimited or guarantee
  • The registered office must be stated to be registered in Nigeria.
  • The object of the business.
  • The status of the company is whether it is private or public.
  • The authorized capital.
  • Meetings of the company.
  • The Directors.
  • Audits

Essentials
A partnership is defined as a relationship which subsists between persons, carrying on a business in common with a view of profit.

  • Persons Natural or Juristic.
  • Maximum number of20.
  • A business must be in existence
  • It must be carried on in common, i.e. for the benefit of all partners, who must also stand to sustain a loss from its failure.
  • For the purpose of profits, i.e., making and sharing profits.

Creation
Express agreement
Implied by sharing of profits under Section 4 Partnership Act

       

Rights and Duties of Partners

  • Right to participate in running the business.
  • Right to bind the other partners in contract.
  • Right to an equal share in the profit.
  • Right to demand dissolution.
  • Duty not to compete with the partnership business.
  • Duty not to make a secret profit.

Companies

A company is a legal entity separate from its owners it is a formal arrangement but its major advantage is that member’s liability is limited to any amount yet to be paid in respect of the shares.
Companies may either be public companies or private companies.

Related Articles

5 comments

21 Articles to Help Strengthened Your Entrepreneurial Journey January 10, 2012 - 8:13 PM

[…] Legal Responsibilities and Insurance Needed for Starting A Business (Nigeria As A Case Study) […]

Reply
Kevin Landry personal injury lawyer October 1, 2012 - 5:45 PM

This is an exceptional article because it assumes one thing – you actually want to set up a legal entity for your business. So many times we deal with legal issues relating to businesses we find most of them have no structure at all. Even if you have set up your business as a sole proprietorship, as a one man business – at least you are thinking about it. In most cases a simple LLC or S Corp are usually best for smaller business to at least protect with striking orders and separation of personal entity. If there’s one thing any business should consider is consider setting up their business in some sort of legal entity. Its vitally important to have something instead of nothing at all. Thanks, Kevin

Reply
Essential Competencies Required In Businesses November 20, 2014 - 7:44 AM

[…] and also share using the social networking icons below. In our next post, we would be examining the Legal Responsibilities and Insurance Needed for Starting A Business (Nigeria As A Case […]

Reply
Ideas for Protecting Your Business Against Legal Action March 11, 2015 - 2:46 PM

[…] of call to prevent legal issues for the business is to make sure you have insurance. You need to insure the business and its assets in the event of loss, damage or theft. But it’s also essential to have insurance to protect the […]

Reply
How To Start A Profitable Insurance Company In Nigeria October 1, 2020 - 9:10 AM

[…] expertise, it requires ruthless business experience and efficiency, and it must be approved by the necessary government agencies to ensure regulatory and compliance with government policies for the […]

Reply

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.