Companies and Allied Matters Act (CAMA) is the legislation that improves and promotes a better business climate and provides a regulatory framework for doing business at different levels in Nigeria. The Corporate Affairs Commission (CAC) registers business ventures in Nigeria.

The Companies And Allied Matters Act, amended in 2020 and effective in 2021, made several welcoming changes to the law. It introduced the Limited Liability Partnership and limited partnership, which had hitherto not existed in Nigerian law. The choice of the company that is best for a particular business will depend on several factors, the business goals, the number of owners, and the level of liability protection desired.

The simplest form of business entity is the Sole proprietorship or a Business Name or Trade Name and may operate as a partnership. It is simply the case of an individual or set of individuals doing business through a registered trade name. In the eyes of the legal system, the business venture is the same as the people running it and cannot have over 20 members.

A company is a more complex business entity with shareholders, directors and a secretary. It is a legal person and has a distinct personality different from its owners. There are three types of companies recognized by Nigerian law they are:

• A limited liability company (LLC) is a type of business entity that limits the liability of its owners. It can have one or more owners (members) who are not personally liable for the debts and obligations of the company.
• A company in which the liabilities of its members are unlimited by share is called an Unlimited Company.
• Company Limited by Guarantee is a not-for-profit company as members do not share profit, but Plough back the profit in the business. This company is registered to promote commerce, art, science, religion, sports, culture, education, research, and charity. The income and property of the company are applied solely towards the promotion of its objectives only.

The member’s liability is limited to the Guarantee of not less than N10,000 for each member. Each of the companies above can either be private or public. 

A Private Limited company (Ltd) is a business entity that is privately owned and has limited liability for its shareholders. The private company may not have a secretary and must have at least one member who is the sole director and not over 50 members.

A public limited company is a business managed by directors and owned by shareholders and can offer shares to the public. These companies must make their financial reports public, so would-be shareholders can have all the information they need before investing. A public limited company is also quoted on the stock market and should be more open about its details than a private company.

A Limited Liability partnership is a business structure formed by two or more individuals or corporations to make a profit. One distinct feature is that the liability of the partners involved is limited. Also, a limited liability partnership must have at least two designated partners who are individual partners or nominees of corporate partners. One of the partners must be a resident of Nigeria to ensure that they comply with the Companies and Allied Matters Act. They are also the ones who would be liable for any breach or contravention of the Act. The Limited Liability Partnership company also has a distinct legal personality. Hence it can sue and be sued in its name or purchase and own landed properties in its name. A partner in a limited liability partnership is not personally liable for the contractual affairs of the Partnership.

A Limited partnership is a business structure that comprises at least two partners and not over twenty partners. A Limited partnership company must consist of at least one or more entities called general partners and one or more limited partners. General partners are liable for all debts and obligations of the partnership. Limited partners are not accountable beyond the amount they have contributed.

A franchise is a type of business where the owner (franchisor) licenses or sells the rights to use their company name, trademarks open in new windows and business model to independent operators, called ‘franchisees’ in exchange for a fee. 

A cooperative is a business entity owned by members and operated to share the profits and benefits of the business while each member gets a voice in the business operation. Services or goods provided by the co-op benefit and serve the member-owners. 

Incorporated Trustee is a Non-Governmental Organization (NGO) made up of trustees appointed by any community of persons bound by custom, religion, kinship or nationality for any religious, educational, literary, scientific, social, development, cultural, sporting or charitable purpose. They usually seek funds from specific sources and must appoint a chair and secretary to manage their affairs.