The difference between a Limited Liability Company and a Business Name….

Entrepreneurs get excited when they are about to make their idea legal. It’s great to feel the bubbles but understanding the difference between very simple yet important terms like “Business Name” and “Limited Company” can save on future headaches.  

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A Business Name is a title under which your business operates. This preferred name, is registered by the agency of government responsible for documentating and tracking officially registered businesses. In the case of Nigeria, they are called the Corparate Affairs Commission CAC. It is sometimes referred to as a trading name. Under the business name, you cannot operate more than one activity apart from the activity in relation to the description of the business. Your business must consist at the end of the business name concise description of the nature of your business activity. For instance, if you intend to operate a trade store, then you must register a business name as “Janet Trade Store” or “Janet Trading”. With that business name, you must operate activities relating to trading only like retail.

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However, a Limited Company is a separate legal entity that is also registered with a government-designated agency in your country. This is different from your business name in a seriesof ways. Under this type of registration, a company can choose to trade under a name that is different from its legally registered name.

The differences you should consider;

  1. A company can be limited by shares, guarantees, or limited partnerships. A company limited by shares has categories of shareholders, and classes of shares, there are ordinary shares and preference shares. Upon incorporation, the shares must have been fully subscribed to by members of the company.
  2.  A company said to be limited by shares must have a share capital – the unit of shares a company possesses, and carries on business with and issues to its members, who in return fully subscribe to it with money or other consideration relinquished to the company in exchange of the unit of shares.
  3. Company Secretary: In the setup of the company, it is also required that a secretary be part of the formation of a Limited Liability Company. This is not a necessary feature in the registration of a Business Name.
  4. A Business Name need not file/pay stamp duties fee before registration. This is however an integral stage in the registration of a Limited Liability Company.
  5. Another distinction between the two is in the minimum number of the company proprietor(s). The minimum number of persons who can be proprietors in terms of management of a Limited Liability Company is one person, but there must be a witness or deponent unlike in Business Name registration.
  6. Legal personality: A Limited Liability Company is distinct and separate from the directors and shareholders. This means it can sue or be sued in its name and can acquire assets in its name, unlike a Business Name.
  7. Facility/loan sourcing: A Limited Liability Company has higher chances of getting a bigger facility from the financial institutions than a Business Name because in most cases the financial institution takes shares of the company as collateral/equity. The company as a limited liability can also secure a loan through a deed of debenture (borrowing credit). These features are not found in Business Names.
  8. Subsidiaries: A Limited Liability Company, unlike a Business Name, can have subsidiaries both locally and internationally.
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Worthy of note is that a Limited Liability Company has a distinct and separate personality from the directors and shareholders, although the person with the highest shareholding is seen as the Majority stakeholder of the company.

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