From Business Name To Getting Loans, Here's All You Need To Know About Registering Your Fashion Business
For any business to be recognised as a legal entity, it has to be registered. Due to the false popular belief (as seen in our post on tax) that unregistered businesses do not have to pay taxes to the government, many people have failed to register their businesses.
Registering your fashion business has multiple amazing benefits for you and your business that you do not want to miss out on.
Ms. Chioma Mgbeadichie, a corporate and company lawyer at AEC Legal, shared with us this week everything you, as a fashion designer, need to know about registering your fashion business.
What Does It Mean To Register A Fashion Business?
"What registration of a fashion business means, in a nutshell," she said, "is to give notification to the authorities that your business is in existence and in operation."
A business that is not registered is a business that does not exist in the eyes of the law.
What are the Benefits of Registering Your Fashion Business?
According to her, notifying the authorities about the existence of your business has the following benefits;
1. It gives your business a personality in law i.e. makes it a legal entity, that is, if you register as a company as opposed to registering as a business name.
2. It saves you the stress of building a brand only to discover later on that someone else has the right to use that name at the Corporate Affairs Commission (CAC).
3. It gives you the ability to operate a company bank account with your registered business certificate.
4. Loans, contracts etc will be more readily available to you by virtue of your registration.
5. It gives investors confidence as to your investment readiness.
6. Registering as a company helps you build a corporate structure that has the potential to outlive you, the proprietor. This is known as the doctrine of perpetual succession in law.
What Types of Registration Can a Fashion Business do?
Essentially, for a fashion business, there are two types of registration that can be done;
1. Business name:
A Business Name is a name and style with which the proprietor trades. Since it is just a style, it is not different from the proprietor. The business does not assume a separate legal entity i.e. it cannot sue, nor be sued and properties cannot be purchased in the name of the business. Because the business is the same as the owner, when the owner dies, it dies too.
2. Company limited by shares (Incorporated company):
A company is an artificial person. It can sue and be sued, it can purchase properties in it's own name and it has perpetual succession i.e. the company can outlive the proprietors. Since it is a separate entity from the proprietor, its assets are different from the proprietor's personal assets.
If you wish to switch from being registered as a business name to being registered as an incorporated company, you have to write a formal application to the registrar general of CAC with necessary documents, like evidence of up-to-date filing of annual returns by your business name, registration certificate etc, attached.
How Can I Ensure My Business Name is Truly Mine?
Whether you register as a business name or as an incorporated company, the name of your business is safe as the CAC does a name availability search before approving or denying your application.
If the name you want is already taken or is similar to an already existing business name, your application will be denied and you have to get another name, however, if it's available, your application will be approved.
In the event that the CAC erroneously approves an already existing name, the records of the new company will be expunged from their systems upon discovery.
You can also check if your business name is taken already or not from the CAC website.
What Type of Registration Should a Startup Fashion Business do?
As a startup fashion business, before you decide on what type of registration to do, you have to first outline the objectives of your business - Do you want the business to be different from you? Do you want to be able to get loans or contracts? Do you want to be able to pitch your business to private equity firms? Do you want the business to buy properties, etc in the near future? - on answering these questions, a lawyer can better advice on what type of registration is best suited for you.
Most structured investor organisations (private equity), however, will want to research properly before investing their money in your business. They will want to check the governance systems - Is there a board of directors? How efficient is this board? How does money move within the organization? What is the assurance that the company will continue after the main proprietor moves out of the picture? - these questions work better with incorporated companies.
A business name is best suited for fashion businesses that wish to remain as a one man business. Such businesses can still get loans and contracts from private individuals (people who know them).
How Much does it Typically Cost to Register a Fashion Business?
The cost for registering as a business name is around NGN10,000 to NGN15,000 and the cost for registering as a company is about NGN25,000. Professional fees differ from lawyer to lawyer.
N.B: For companies limited by shares, fees are calculated based on the companies share capital. For those with a share capital of NGN 1m and below, the above fee will do.
What Documents are Needed in Registering a Fashion Business?
The documents you will need to register your business are: a passport photograph, a form of identification (national ID, drivers licence, voters card, international passport), forms given to you to fill there etc. You will also need to provide your name and address.
For more information on matters involving business registration and registering your business online, visit the Corporate Affairs Commission (CAC) website.
Registering your business is very important and beneficial, consider doing it today.