Bayo is an entrepreneur who runs a catering business. He started the business as a student selling noodles to his colleagues.
He later decided to pursue his passion in catering on a full time basis. Using the funds he saved up during his student years, he was able to buy more equipment and started catering for parties and events.
He was able to secure a few gigs from family and well wishers, but the day his big break came, it turned out he wasn’t ready.
No it’s not village people, but this is where it gets interesting.
Uncle Tunde who worked in the state ministry of works was planning a departmental party and he quickly called Bayo to send in his business CAC certificate alongside his tax clearance for the last year so he could help him get the contract.
“But… emm…” Tunde stammered, “I don’t have it sir…” and with disappointment, Uncle Tunde had to go look elsewhere for his caterer.
Bayo was really pained about this, and resolved in his heart that he would not let another opportunity like this pass him by.
He quickly called Amina, his childhood friend who is now a lawyer to help with his business registration.
“What type of business entity do you want to go for?” Amina asked.
“I don’t know, please can you explain the different types?” Bayo requested.
“Alright, Bayo.” replied Amina, and then she proceeded to educate Bayo on the different types of business entities available.
That day, Bayo learnt that there are 6 different types of business entities and each had its own set of rules that distinguishes it from the other.
They are broken down as follows:
- Business Name
- Private Limited Company (LTD)
- Limited partnerships
- Public Limited Company (PLC)
- Companies limited by Guarantee
- Unlimited Company
- Non Profit / Non Governmental Organizations
Amina further explained that the business name is used in cases where an individual wishes to start up a business with low income or less capital. It is easy to set up, having less formality. It can equally be converted to limited liability company as the business grows.
The Private limited company has the advantage of the business being a separate legal entity, having shareholders and directors who run the business.
Registering as a Limited partnership is similar to the Private limited company but differs in the liability held by the shareholders.The Limited partnership exists when two or more partners go into business together, but the limited partners are only liable up to the amount of their investment.
A company can be registered as a public limited company where the shares are traded publicly on the recognized stock exchange.
Companies limited by guarantee are mostly used in occasions where there are no shareholders. Members called Guarantor instead own the company. These guarantors are obliged to pay a certain sum of money in the case the company is being wound up.
An unlimited company is the one where its members’ financial liability in the event of it being wound up has no limit. Where the financial liability of the company exceeds its assets, the company may reach into its members’ personal property to liquidate its debt
While registering as a non profit organization or non governmental organization is a business established for the purpose of achieving a goal in the society and is not profit oriented. It is also known as in incorporated trustee.
Bayo looked through the differences and decided he would like to start out with a business name registration with the private limited company incorporation in view as the business grows.
So Amina proceeded to help Bayo register his business name and he got his CAC certificate.
Amina also advised Bayo to ensure he opens a bank account for the business and make all business transactions through that account. This would help him calculate his finances properly and pay his taxes when due.
Bayo thanked Amina cheerfully as he looked towards a brighter future where he would no longer miss out on opportunities because of a lack of not being registered.
Did you learn anything from Bayo’s story?
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