ye svitorship in Nigerit ‘as a Sole Prop ations. Doing But Chapter 23 Doing Business as a Sole Proprietorship in Nigeria 1.0 INTRODUCTION Bute organizations in Nigeria can be classified into company, pee corporation limited liability partnership, limited ae ship and sole proprietorship. Different rules and procedures oeliss.co these categories and the categories attracts different legal sequences in the operation of the business. The rights of persons who promote these business organizations over the assets and liabilities of these different business organizations differ in accordance with the provisions of the Companies and Allied Matt Act! The laws regulating the formation and operation of these business organizations confer separate legal personality on some while the personality of others is the same with the personality of the person or persons promoting them. The assets and liabilities of some are different from the assets and liabilities of the business organization while the assets and liabilities of others are the same with the assets and liabilities of the individual or individuals m, This chapter is on doing business as @ sole promoting the proprietor in Nigeria. Therefore, the discussion in this chapter will be focused on sole proprietorship business. le proprietorship business in Nigeria is The law regulating sol principally the Companies and ‘Allied Matters Act®, particularly in a ee 1 2020 2 Ibid, a,‘The Law of Business Associations Doing Business as a Sole Proprietorship in Nigeri part E of the Act. Part E of the Companies and Allied Matters Act’, Tegulates the formation, requirements, procedure for registration of a sole proprietorship business. The chapter treated the nature of a sole proprietor, legal requirements for formalization of a sole Proprietorship business in Nigeria, the advantages and disadvantages of formalization of a sole proprietorship business, the tax liability of a sole Proprietor, etc, 2.0 Who is a Proprietor? A sole proprietor is a sole trader. A one-man business owner who undertakes a business in his own name and his own right. He bears the burden of providing the capital needed for the business and who bears the risk involved in the running of the business. A sole Proprietor is a single business owner who operates the business without the involvement of any other person in the ownership right over the business. The business undertaken by a sole proprietor is referred to as a sole proprietorship. The sole proprietor has no limit in his liability over the actions and in actions of the sole proprietorship business. The business is as good as the sole proprietor. There is no perpetual succession as the death of the sole proprietor leads to the death of the business. Sole proprietorship is the oldest business unit and the most common in Nigeria‘. The income and profits of the business is automatically that of the sole proprietor as the sole proprietor does not share ownership of the business with any other person. 3.0 Factors Necessitating the Choice of Sole Proprietorship Business ? The choice of sole proprietorship amongst other business structures is influenced by a number of factors. These factors will be discussed below: pee 3 Ibid i 4.0, Or0j0, Company Law and Practice in Nigeria ( me Sch edn, Lexis Nexis, Butterworths, 2008) p4Law of By usiness Associations. Doing Business as ¢ Sole Proprietorship in Nigeria Ee oui ay say of Registration: ‘ite a a CACT is simplified and can be concluded even at The ieemearatian zonal offices.* In this connection, tO simplify Sere process, section 811 of the Companies and Allied ct, 2019 provides that there shall be each State of the Fe i eas register office of business names where there shall be ister in the prescribed form 1” which shall be entered such, matters as are required by the Act or regulation to be entered in it” Furthermore, there is little paperwork to be done jn the registration of sole proprietorship unlike co ere the paperwork can be burdensome. advantages of one of the a sole proprietorship is that than other mes a sole proprietor it is easie! business Entities. A person beco simply by running business. i crip can Be establls F pecetctsl ie OT similarly, ed by one person vind ehere is no nee “of members. The jegal requirements e fe business an! completion of n, it is also faster 0 register 4 ies entities. This jis because the than othe! ia (1 Bion. Nove Publishers ein Edin, CEThe Law of Busi Jiness Associations. Doing Business as a Sole Proprietorship in Nigeria requi istratis i ‘quirements for registration are simple so that registration can be completed in a matter of weeks. 3.4 Post-Registration Co ii peseeiiee mpliances and Regulatory a Pater ee the greatest freedom from regulations. 7 e or is. generally not required to register any information regarding its operations or operations or financial affairs with any public registry.® Although section 586 of the defunct CAMA made it compulsory for an individual whose business is registered under the Act to file a yearly return in a prescribed form showing the particulars of the business carried on and the financial affairs of the business during the preceding period, it was initially doubted if the framers of the law intended business names to also file annual returns as such would be unnecessary burdensome on small businesses.” However, the requirement is a mandatory both in law and practice. The return is to be filed not later than the 30" day of June in each year except the year in which the business was registered. Section 822 of the new CAMA also reiterates the requirement and failure to comply therewith constitutes an offence.'° However, the requirement is not a tedious one. In fact, according to a Jearned scholar, the requirement of disclosure of its affairs is in order to enhance the status of the sole proprietorship.” xtent of Operation: ‘a business is small or me be the best business structure to establish. This is less capital and risk; or where local market for operation; or services such as 3.5 Sphere/E dium scale, then a sole where the size of proprietorship will usually where the business involves the business requires basically a I where the business involves more of personal ‘Law in Nigeria (MIJ Professional Publishers Limited, Yaba, g J ©. Abugu. Lagos. 2014) page 1 9 Wbid, p16 : 10 _ See Section 822 (4) of the new CAMA 658‘The Law of Busine 38 Associations Doing Business a Sle Proprership Wt MEET Telovefinan Aten, Og tes ar St mee APT portantly, a sole rt business to other tailoring, hair-cutting, photography, e.t.c. More im proprietorship allows small scale business owners © stal while creating room for growth and possible conversion bigger business entities, 3.6 Easy Management ‘A sole proprietorship does not carty great personal and there is a great deal of freedom in decision ‘making provided it is done within the parameters of the law. The sole proprietor is in Gisect control of the decisions as there is no need for consulting and/or getting the approval of partners oF shareholders oF board of directors or any other person before a decision colt be made or implemented. In other words, the formal meen" ‘and resolutions attendant in companies, do not obtain in a sole proprietorship. Also, i ‘sole proprietor does not need too much ‘capital for maintenance 25 | the continuing maintenance costs liability threats dit fof the business are minimal. 3.7. Flexibility and Efficiency: Further to its easy management and less formal administration, sole on proprietorship offers a great deal of flexibility in doing business. pie ic because changes in the business can De ‘adopted at any time. For instance, the address of the business enterprise can be easily Changed without any formal procedure oF Waste ‘of time, All that is “ required of the sole proprietor in such cases notify the Registrar in writing of the change.” This flexibility generally allows the sole q proprietor to control the costs of ‘management and also promotes efficiency in the running of the business. of Profits and Pride of Ownership: ‘as the owner, the sole proprietor does not 1 over the business. He also makes all 3.8 Retention Ina sole proprietorship, only have complete contro important decisions and in exchange for assuming all this | __ TE Seton of 18 (12nd (2) of he At { a 659)ss Associations, Saran Doing Business asa Sole Proprietorship in Nigeria cee entre eerie responsibility, he gets all the income earn: retention of profits by the sole incentive to succeed, Apart from the financial Profits, a sole Proprietor also enjoys the Pride of ownership of the business and the credit of solving the day- 0 h to-day problems associated with Tunning the business, especially where the business is successful, ed by the business. This Proprietor gives him a strong 3.9 Single Taxation A sole proprietorshi it is not legal entity per se. Instead, the sole Proprietor pays only Personal Income Tax (PIT). In other words, unlike companies that are subject to double taxacion (company tax and personal income tax of shareholders), incomes arising from sole Proprietorship is only subject to a single taxation. The sole Proprietor is taxed for the total income arising from all his business endeavours. He is not subject to further tax because the income of the business is basically deemed to be inseparable from that of the owner."* 3.10 Easy Dissolution of the Business: Unlike companies which require a formal procedure for dissolution, a sole proprietorship canbe easily brought to end without necessarily going through any legal procedure.” A sole proprietorship can come to an end immediately the sole propriesor stops doing the business or where the sole proprietor dies. In this connection, all thatthe sole proprietor (or is legal representative in the case of death) needs to do is to give notice of the cessation of Be Rica rates me Gian Teen ts Yop 3 Re So St So ee M4 sing fom Icorprsted Copa an Ste Popcwship Brest ia Neco (1). Jamal owning nae (UA), (0157.30 1s BES mp parrot ee ee 660Trelaworb Doing asin ao Se Proprio ME peer: to the Registrar within three months after the business has to be carried on. The notice could be by post or delivery Generally, in making a choice of business structure, the following {questions are pertinent: + Do you want to minimize the costs of getting started? # Do you want to get the business started as fa © Do you hope to avoid complex government reporting requirements? + Do you want to enjoy the control of the business? + Do you want to take the whole responsibility for runnin business? + Do you want t0 take all the profits of the b having to share with anyone else? + Do you want to avoid special taxes? IF the answers tothe above questions are in the affirmative, then it is advisable to. choose a. sole proprietorship as the appropriate business structure he business st as possible? 1 regulations and g the yusiness. without 4.0 Legal Requirements for formalization of @ sole proprietorship business ‘the legal requirements for formalization of a sole proprietorship business under the Companies and Allied Matters Act” will be discussed under the headings listed below. 4.1. Registrable Names for Sole Proprietorship Business ‘The Registrar may enter a business name submitted for registration provided that such name i in compliance with CAMA or the Meulations thereunder. Not all names are registrable under the law for the purposes of a sole proprietorship business, Generally, a i Semen baer et 661 amma, SSThe Law of Business Associat Doing Business as a Sole Proprietorship in ii business name for a doesnt eae ot aoe promascorship is registrable once the name Goes not consist of the sole proprietor’ tre sumame without any Eee eaten forenames or the initials thereof® or businesen caida id i not one that merely indates thatthe eee eee former owner of the business name which is generall ceptions where che IreisuanOn.er Registrar. In some of these ne ne eae possible upon the fulfilment of Aine ces diners such os obs ee Se Dreant ot ths Cautatsesan Whe i caiere fel suarion tut be eee aire , , registration must be Sera aera 2n 852 (1) ofthe Act, no busines name shall be (@) Is identical with that by which @ company or limited Habis partnership in existence is already registered, or so nearly Perembles that name as to be calculated to deceive, except Where the company or limited liability partnership in existence Ie in the course of being dissolved and signifies its consent in such manner as the Commission requires; (@) Contains the words “Chambers of Commerce” unless i i @ company limited by guarantee; (©) _ In the opinion of the Commission, to the nature or extent of its activities or is un offensive or otherwise contrary to public policy; (a)_Im the opinion of the Commission, would violate or conflict rh any existing trademark or business name registered in Nigeria or body corporate formed undet this Act unless the vievent of the owner of the tade marks pusiness name oF trustees of the body corporate has been obtained; : (© Contains any word which, i the opinion of the Commission, is likely to mislead the public as f0 the nationality, race oF is capable of misleading as desirable, (1) of the Act a ae 18 See section 814 19. Scetion 814 (2) (a) of the Act 662‘The Law of Business Associations. Teligion of the persons by whom the business is wholly oF tainly owned or controlled; (Ds, in the opinion of ‘the Commission, deceptive oF Objectionable in that it contains a reference or nee ee association with any practice, institution, personage, foreign state or government, international organization international brand or is otherwise unsuitable; or (g)_ Is capable of undermining public peace and national security. ‘Any business name which comes under the above list Z na fegistrable under the Act and it is not at the discretion of 1 : Registrar to refuse or aecept such names. The Commission cannot, however, act arbitrarily in the course of forming its opinion as to whether a name ought to be registered or not, In the case of Adekola Mustapha v. CAC the court of appeal held that in such cases, all that is required of the Commission by law is a comparative analysis of the names from the ways they look or sound in the mouth and ears of ordinary citizens on the street of Nigerian towns and cities and where in the course of such comparison, the Commission finds that the name offends the provisions of the Act, it hi responsibility to refuse to register such names.” paragraphs (a), (b) and (4) above, may be allowed if the conditions fulfilled. Interestingly, unlike sei which provides a right as a mandatory However, for it is submitted that registration attached thereto are present or ‘ction $79 (2) of the defunct CAMA Tegister a business name, sei CAMA®, i silent on the right of a ippeal. However, ‘tat the intention ofthe draftsman isto delete the applicant's right of appeal. This is mote so when the said section 852 is read ji aimetion with section 851 of the Act Which establishes an Administrative Committee and saddles it wi Bie it does not appear 2 ero srw 21 Seeaboni 2 One Cirery Is" Cis Las Ngee Che i Chis Lad Ny Seni & er 1961) ALL NL 189 a ead jtDoing Business as Sole Proprietorship in Nigeria ‘The Law of Business Associations Glen reg co ree RE RSS, inter alia to resolve disputes or grievances arising from the operation of the Act. Based on this provision, an aggrieved sole proprietor may in appropriate circumstances appeal to the Administrative Committee and the Act further envisages a right of appeal from the decision of the Committee to the Federal High Court.” Under section 852 (2) of the Act, the Registrar’ shall not register any business name which contains any of the following words, except with the consent of the Commission: (a) “Federal”, “National”, “Regional”, “State”; (b) “Government”, or any other word which, in the opinion of the Commission suggests or is calculated to suggest that it enjoys the patronage of the Government of the Federation, the Government of a State in Nigeria, any Ministry or Department of Government, or contains the word “Municipal” or “Chartered” or in the opinion of the Commission, suggests or is calculated to suggest, connection with any municipality or other local authority; “cooperative” or its equivalent in any other language or any @ abbreviation; or “Building Socie (@) “Group” or “Folding” Where a business name which is submitted for registration contains any of the above listed words, the Registrar shall not register such name except if the applicant/sole proprietor first seeks and obtains the consent of the Commission. It is only with the consent of the Commission that any business name containing any such words can L be registered under the Act. Furthermore, registration of a business name will also be refused if there is irrefutable evidence to the effect that the business name has 2B Sein 51 (13) the At REE ee Pee,‘The Law of Business Associ . ‘Doing Business usu Sole Proprietorship in Nigeria a been involved i eae isihan ren trade malpractices, either in local or sents asa is arguable that the provision does not fear arc bb ify an ex-convict of a crime relating to fraud from en proprietor. This is because emphasis of the provision is the business name that is “the name or style under which the business is carried on” and not on the sole proprietor himself. Thus, where a sole proprietor has been involved in a fraudulent trade malpractice using a particular business name, the law is that such business name cannot be registered under the Act. But the law does himself cannot register another not say that the sole proprietor business name. 4.2 Capacity to Register a Business Name Generally, any person can register @ business name under the Act provided he is carrying on @ syasiness in Nigeria. However, in the pice of an infant, section 815 (6) “of the Act requires that his signature to the statement in writing teferred to under section 815 (1) of the Act must be ‘counter-signed by a magistrate, legal practitioner or police officer of or above the rank of Assistant Superintendent of Police Under the section $79 (3) defunct CAMA, the Registrar is given the discretion to refuse to register 2 Sole proprierorship if the sole Propric'0t is below the age of 18 years. This discretion given (0 the Registrar posed some challenges gs scholars questioned the rationale for the discretion.” This is especially in view of the arguments that section 574 (6) of the defunct CAMA already contemplated that an infant may file registration of a business name provided that his signature to registration statement is ‘counter-signed by a magistrate or a legal practitioner or a police officer ‘above the rank of Assistant tice and secondly, the concen of the law Superintendent of Pol should be the protection of the infant. It is no wonder therefore that a 24 Seaton 852 (4 ofthe Act 25. See scion 574 (6) ofthe defunct CAMA 26 See Josph Abou Op p11 2“The Law of Business Associations Ding Business ava Sole Proprietorship in Nigeria ——————— the new CAMA clearly omitted to confer any such discretion on the Registrar. Thus, it appears that once the infant's statement in writing is counter-signed by any of the persons envisaged under 815 (6) of the Act, the Registrar has no discretion under the new CAMA to refuse the registration of the business simply because the sole proprietor is an infant. However, a cursory look at section 852 (3) of the Act presents a seeming challenge. The said section provides as follows: No individual or firm shall be registered under PART D or E ‘ofthis Act if the age of the individual or any individual who is a partner is stated in the statement furnished under section 796 of this Act to be less than 18 years, unless the statement shows at least two other individuals aged above 18 years. The above provision creates an ambiguity as to what the draftsman intends. On its face, the provision suggests that the draftsman seeks to out rightly prohibit the registration of a business name where the individual (in the case of a sole proprietorship) or any of the partners (in the case of a firm) is below 18 years of age. However, it is important to read the section together with section 796 of the Act in line with the noscitur a sociis rule of statutory interpretation. Section 796 of the Act provides that; An individual or body corporate may be a partner in a limited partnership provided that an individual shall not become a partner of a limited partnership, if he is (a) of unsound mind and has been so found by a court in Nigeria or elsewhere; or (b) an undischarged bankrupt Unfortunately, the above section apparently worsens the situation since the section does not talk of any statement, and_as such, the section appears to be contradictory with section 852 (3) of the Act. Itis submitted that this is a lacuna as section 796 talks of something 666Doing Business as a Sle Proprietorship in Niger dif ; en pom eee for which it was referred to in section Vanenan intend . jay then ask: which statement did the oo end to insert in section 852 (3)? Is it the statement in section 798 (2) which deals with statement for the registration of limited partnership? Or is it the statement in section 15 (1) which deals with statements for registration of a business name? Or were both sections intended by the draftsman? It may have been the intention of the draftsman to rather insert section 798 in the provisions of section 852 (3) instead of section 796. If this is (rue, it may mean that registration ofa limited partnership will be refused if the statement of registration of the limited partnership shows that ote that one of the partners is an infant. But it i interesting t0 7 section 798 of the Act also does not appear (o be the correct section fo be inserted in section 852 (3) of the ACE ‘This is because, section 852 (3) envisages a starement which mus: contain the age of the individual, but the starement referred 10 section 798 does not require particulars as to age. It i ‘apposite to underscore that ‘although section 852 (3) mentions spART D ot E”, the section comes tinder PART E of the Act which basically deals with che registration Of business names, This may SUBECS that the statement referred (0 Or geation 852 (2) of the Act should De the statement required under ection 815 (1) of the Act since the both sections are under the same BART. However, the implication will be that 852 (3) of the Act prohibits the registration of & firm or a business name, if the age of ire individual or one of the partners © less than 18 years except ‘where it is shown that there are OVO other individuals aged above ig years. It will further mean that section 852 (3) conflicts with section 815 (6) of the Act which already coftemplates that an infant gan file registration of a business name provided that his signature to the registration statement is counter-signed by a magistrate or 2 legal practitioner or a police officer above the rank of Assistant Superintendent of Police. ice. In any case i is submitted that it could not have been the intention of the draftsman to out rightly disqualify an infant from registering a sole proprietorship business a ee 667“The Law of Busines Aesocatons. Doing Business as a Sole Proprietorship in Nigeria simply because of hhis status as an infant, neither could the draftsman had intended that an infant cannot register a sole Proprietorship business except if two other persons who are above 18 years of age joins him as co-owners of the business. Therefore, it is humbly submitted that the draftsman could not have intended to insert section 815 (1) in the provisions of section 852 (3) of the Act notwithstanding that the both sections come under the same Part of the Act, and that, for the purposes of registration of a business name by an infant, section 815 (6) of the Act is the relevant section to consider, This is more so as the section is more clear and Uncinbiguous unlike section 852 (3) of the Act whose meaning is apparently ambiguous. Finally, there is no express provision under PART E of the Act which isqualifies persons of unsound mind or an undischarged bankrupt from registering a business name as a sole proprietor but it is not azarding to guess that in practice, applications for registration of business name by such persons will be refused by the Registrar. 43 Time Within Which to Register a Sole Proprietorship Business The extant Companies and Allied Matters Act,” recognizes the imperativeness of registering a sole proprietorship business in line with the law and further provides a time-limit within which such business must be registered. Under section 815 QQ) of the Act®*, Grery individual (that is, a sole proprietorship) required under thie Act to be registered shall,, within 28 days after the individual commences the business in respect of which registration is required, furnish to the Registrar at the registry in the State in which the Principal place of business of the individual is situated, a statement in writing in the prescribed form, signed as required by this section by and containing inter alia: the business name; the general nature of eee 27 Companies and Aid Mates Act, op, section 870 ofthe Ac 28 tht — 668| ——S>S a ‘The Law oF 8 usiness Associations, Doing Busines asa Sate Proprietrship a Nigerit the business; business; Are postal address of the principal place of press the fl postal adres of exey othe place of business; the surnames, the nati and sumame, any former forenames | hadsraliat aie a ead nationality is not the nationality of origin the nationality of gn, he 28 the sex, the (ievdare ae nce ang any other business occupation of the individual; oil the date of commencement ofthe busines whether before or after ing into operation of this Act, etc.” The cime-limit of 28 (twenty eighit) days as envisaged under the new CAMA is the same with the defunct Companies and Allied Matters ‘Act. The operative a expression in relation to the mandatory time for the registration is “within 28 days after the individual commences the business.” The . “not exceeding” 28 days after 3 This means that once A hat is required to be word “within” in this context means the individual has commenced the business an individual commences a business, 1 registered under CAMA, he/she has 28 days to register the said peainess, so that ifthe 28 days expires without the business having been registered of without the sole proprietor having commenced registration of the business, then the statutory provision above as regards registration of business names will be deemed fo have been y a learned scholar, the violated. Thus, as rightly pointed out b import of the provision is that a business name co® start business ‘without registration but must register within 28 days of the Kommencement of the business.” It is imeresting co note that, Jt Tike its predecessor, the Companies and Allied Matters Act, 5 however contains a seeming lacuna on how to determine when an t f z rrejividual has commenced business required to be registered for the purposes of computing time. Section 615 of the new CAMA™ sheds J i, we eetion 615 (1)2~ hand Be eo Aled Mavs it op C2, LIN 208 ton 54 oe Coop Diary Ex Large (Typboon Press 4 See "Te New lens Tcemainal, Florida, 2008p. 1447 NCS, Oebunnyasop ip. 8 Op. Ci Section 74 of the old CAMA SS 669 31hip in Nigeria asa Sole Proprietorship Doing Business ‘Te Law of Business Associations. tne _ bates business mn mmence the i individual fo oo * becomes No light on what it means for an A required.* This Hae be me in respect of which registration i 15 (1) (h) of the e More ambiguous when, in section 8 duty of determining when Craftsman appears to have relegated the dut foe The iamplieziion (3 a business was commenced to the sole peer eraalc seis ostdaye’ i in 4 riety who is practically Registrar to sae eeeremney ate supply a ene ae en each is the avoid being penalized. Section 868 Oo Giies “baainese” plteladé ‘lefinition section of the Act) however de! u ener ee i i id any occupation carried o1 tade, industry and profession an a eee Ree profit.” The Black’s Law Dictionary further de ines a ; with include commercial transactions. When this is read together the word “commence” (which means to begin, initiate, originate or Start) it may be said that the expression in issue, that is, “t commence business” simply means “to start or begin a commercial censaction, trade, industry and profession and any occupation pared on for profit.” Unfortunately, this literal approach is not helpful in the circumstance. There i also a dearth. of case law or scholarly analysis on the point in issue, The case of Day Distributing Co. v, Nantucket Allser me Inc., though not decided in relation t Sorresponding statutory provision above, is j ‘O Start a_ busine; court noted orities on what it m = le leans “to s Ss” but that the lefinition of the xPression as 35. See for insance, a r 6 heres OF Aeris Lear Bln 2 2 Re Popes th oa Hor amoUn to Feary tes By a 2 Sceatse secon ; 8B a ot edn e ‘arner, Black's Law Dictione, ee 3 (2008) u. S Dist. Las 5; if (8c. ea NO My SECO A 5 ay 670Sa Theta zona oprietrship in Nigeria 88 Associations Doing Business as a Soe Proprietorship in Nie Terenas imei Proposed by Tefused to 2c Plaintiffs was too broad. The court in this case 50 wit <©,249pt a broad approach to the expression because doing 4 statues MOUNt to aiding the plaintiffs take undue advantage of a i platy loophole. The court instead took the position that the al See already in business and that the mere addition of @ at the bduct does not amount to starting a new business. In arriving conte oe anen that the plaintiffs were already in business, the lane Considered the facilities and places of business already put in ce by the plaintiffs. One point from this case is that to determine whether or when an individual is doing business, it is important to | Consider facilities already put in place for the running of the business including the existence of a geographical location for the | business. A learned writer, Guglielmo Maisto, has suggested that factors such as ownership, frequency of transactions, surrounding + Circumstances, etc. are also important in deciding when isolated transactions can be said to amount to a. business pursuit™. In the ecent case of Citec Intl Estates Ltd v. Edicomisa Inc. and Associates", on the Nigerian Supreme Court defined the expression “carrying on business” as meaning: my .to conduct, prosecute or continue a particular vocation or business as a continuous operation or permanent occupation. The repetition of acts may be sufficient. It also means to hold oneself out to others as engaged in the -" selling of goods or services.” If one ignores the issue of semantics, the above definition of the apex court can also be applied to “commencing business” so that once a sole proprietor initiates a particular vocation or business as a | continuous operation or permanent occupation such act will amount to commencing business. In any case, the 28 days’ time frame (four ’ weeks) stipulated under law appears to be reasonable in that it @ Cs Wo Gagictmo Maisio, The mening f Ener “Bsines ond “Busines Prot Under the Tax Treats StEU Tox Law (IBED Publications, Netherlands, 2011) p. 135 “ax @18) 3 NWLR (Px, 166) 32 per Fk JSC at page 353, jragzaph GH ee 671aw of Busines As Business os a Sole Proprietorship in Nigeria ro Doing Business as. sociation ie sole proprietor Shsages a timeous commitment on the Pa a nie earch and also gives them enough time to put tog iecaree ee anor Teduired for the registration of the business itis imp: F hich easels that the above discuss for time limit written ai Niess Proprietorship must register under the Act applies only undertaken by a sole proprietor under a business name. - i ir ith [? ether words, where a sole proprietor carries on a business wit his true names and true surname without any addition, or Sui tment of any other prefix or sufice to his true name and true Ru hume registration will not be required and the 28 days’ time limit comes non- sequitur, The requirement fo, r the registration of a sole proprietorship business under the new Companies and Allied Matters Act®, can be Seaned from the provisions of section 814 (1) and (2) of the Act which retains the provisions “of section 573 of the defunct Companies and Allied Matters Ace® + Section 814 (1).and (2) of the new CAMA provides as follows: Of such forenames; ©) in the case of an individual, the name does Rot consist of his true surname without any addition other than his true forenames or the initials thereof; 2 200 4B. Opie 672Tre baw, vera °F Business Asociations Doing Business as Soe Proprietorship Nis (©) in the case of a corporation, whether or not registered under this, Act, the name does not consist of its corporate name without any addition. () Notwithstanding subsection (1) of this section where- (a) the addition merely indicates that the business is carried on in succession to a former owner of the business, that addition shall not of itself render registration necessary; (6) two or more individual partners have the same surname, the addition of an 's" at the end of that surname shall not of itself render registration necessary; and (© the business is carried on by a receiver or manager appointed by any court, registration shall not be necessary.” It apposite to note from the foregoing provision, that apart from an individual, companies and firms can also register a sole ] Proprietorship business. From a cursory reading of the introductory “4 part of the above section, it appears that the two major qualifications for the registration of a sole proprietorship are (a) in! “having a place of business in Nigeria” and (b) “carrying on business under a business name.” Section 868 (1) of the Act defines business name to mean “the name or style under which all any business is carried on whether in partnership or otherwise.” However, it is not every name under which a business is carried on that requires registration. By a careful perusal of section 814 (1) of the Act, a business name that requires registration is that which consists more than the individual's (or partners’) surname; or "| surname and forename; or surname and initials of his/her forename. In the case of a company, any business name that consists if more than its corporate name must be registered. Therefore, where the business name consists of only the individual's (or partners’) surname; or his surname and forename; or his surname and initials of his forename, or its corporate name in the case of a company, — 673ship in Nigeria. ess asa Sole Proprio 4 Section t a essary. 7 fistraton ofthe basness nae not ness istration of ) of the Act aso lists out circumstances when sens anes "ame will not be mandatory. These at individual's Sunt the business name consists of more than as ta of hig ees, OF Sumame and forename; or surname aN ate mae forename, the additional details to the name oe mect€s that the business is caried on in succession to a form f Ober of the business, for example, Igwe Innoson (formerly Chie! kewuemeka Innoson and Go); (b) in the case ofa frm, where the Porters have the same surname and intend to indicat that te firm ete bY more than one person by adding “sto their surname (for example, “Chulewumas”); and (c) where the business is caried $n bs a receiver or manager appointed by any court. It is however EEPoHAInE to note that in all the above cases where registration is Dot mandatory, the Act does not stricto sensu prohibit registration, S0 that the sole proprietor may still validly request that the said ame be registered, especially in view of the attendant benefits of ‘egistration and such requests cannot be refused by the registrar on the grounds that the registration of the name is not mandatory under the Act. 44 Procedure for Registration of Sole Proprietorship Business ‘The requirements for the registration of a business name by a sole Proprietor are quite simple and can be gleaned from the provisions of section 815 of the Act, The requirement is simply the submission of statement in writing signed by the sole proprietor to the Registrar at the registry in the State in which the principal place of business of the sole proprietor is situated. This is usually after the business name has been approved for registration. The statement referred to in section 815 must be personally signed by the sole proprietor and “HPht eo res sao in sch a manda bt buses 0 tat desl propito sil re wept the sd me he ose hen whoo np. statutory idence —— omBeneral nature, lowing panculars: the business names the Principal place ert the business; the full postal address of the usiness; the saps siness: the postal address of any other place egrets ee and surname; the origin, aoe os former forenames or sumames the nationals of of the ia mil wesidence and anyother busines oeexpatiog The said vidual and the date of commencement of the sins days ai Statement isto be submitted to the Register within raaler the sole proprietor eommences the business for which eeitation is sought, n practice, ll hat the sole propre needs dois to collect and fill the frm for Application to register PY lame (CAC/BN/O1). The said forin practically contains columns where the particulars required under section 815 (1) can be supplied. In addition to the statement in writing containing the aforementioned particulars in section 815 (1), the sole proprietor is also required to submit to the Registrar, copies of his passport photographs which are to be certified in a manner required by the Registrar. The purpose of the requirement of passport photographs {is to guard against the experience in practice where several persons whose registered business names cannot be traced or identified, especially in the event of fraud.” In summary, article 54 of the Companies Regulations 2012,* sums up the following requirements for the registration of a business name by a sole proprietor: (i) Form for approval of name; (i) duly completed business name application form; (ii) two passportsized photographs of the sole proprietor; (iv) payment of filing fees; and (v) payment of fees for CTC of certificate for display at each disclosed branch office. Once the sole proprietor complies withthe above requirements, the Registrar shall ee See generally, section 815 (1) (3) ~@) and (ofthe At 446 Section 815 (2) ofthe Act 47 J-0.Orajo, pci p58 $F icapposte to noc thar hoe i eurremly a Dale Corpses Regulations 2020 whichis yee o be released by the Commision Oe 675 ining Business a Soe Proptetorship in Niet ed in the register and a cause the busi to be enter eee he business name tne sole proprietor. Certificate of registration shall be issued t s a Sole Proprietor 5.0 ing Business a ji ffects of Doing Bt the Companies and Without Registration Under Allied Matters Act, 2020 5.1 Non-Compliance with the Registration Requirement Defeats the Purpose of the Act: Doing business as a sole proprietor in Nigeria without registration as required under the law arguably violates and defeats of the raison detre of the Companies and Allied Matters Act. The Act establishes the Corporate Affairs Commission and saddles it with the responsibility of administering its provisions, including inter alia the registration, regulation and supervision of business names, management and removal of names from the register and to ensure compliance by business names with the provisions of the Act and other regulations made by the commission.” The regulatory and supervisory function of the commission over a business name is arguably overreached where such business name has not been registered with the commission. For instance, the compliance with the statutory requirement of filing of annual returns cannot be effectively monitored by the commission in respect of unregistered business names. 5.2 The Business Name Becomes an Illegal Enterprise in the Eye of the Law: Section 863 (1) of the Act expressly prohibits and illegalizes carrying on business in Nigeria under a business name without the business name having been registered. When this provision is read in conjunction with section 814 (1) of the ‘Act under which a 28 days’ time frame is allowed for the registration of business names, it follows that upon the elapse of the 28 days’ window without registration having been made or 49. Sections 816and 817 ofthe Act 130, Scesctions 1 and 8 (10 (a (i) and () ofthe new CAMA — 676‘The Law of Busine Doing Business asa Sole Pr 88 Asotiations, ropritorship in Nigeria east the business automatically becomes an unlawful Liability for Criminal Prosecution: Under section 863 (2) of the Act, non-compliance with the requirement of registration under the Act is enough ground for the criminal prosecution of the individual (or company or partners of the firm) who continues to do business in defiance of the statutory requirement of registration. 5-4 Payment of Fine: Section 863 (2) of the Act envisages a fine of N200 (two hundred naira) as punishment for an individual (or Company or partners of the firm) who has been convicted for the offence of carrying on business without registration and the fine sum is to be computed by multiplying the N200 by the number of days during which the default continues. The N200 fine under the new CAMA, though arguably paltry, is comparatively better than the NSO (fifty naira) fine sum prescribed by the defunct CAMA.” 5.5 Status of an Ex-convict: Although the N200 fine envisaged under the new CAMA is arguably paltry, a major effect of a conviction for the offence of non-compliance with the Act is that the individual (or company or partners of the firm) acquires the status of an ex-convict. This carries with it a heavy stigma and other collateral consequences (legal disabilities) that may negatively affect the important aspects of the individual's social life such as future employment prospects, immigration, higher education, etc. 5.6 Forced/Compelled Registration of the Business Name: One of the major effects of a finding of guilt under section 863 (2) of the Act is that the court shall make an order mandating the BL See Gite v Eicon (pee) 152 See section 584 (1) thereof pdiet S20) Se ae 677le Proprietorship in Nigeria The Law oF Busines Ass Doing Business as 0S compulsory registration of the business name. In this connection, the individual shall in addition to the payment of fine, be required to submit the particulars required under the Act for the registration of the business name, and the time : within which to comply this requirement is at the discretion of the court, 5.7 No Protection Against the Adverse Use of the Business Name by Others: Failure to register a business name implies that the sole | Proprietorship cannot take advantage of the legal protection | envisaged under. section 852 (1) of the Act against use or registration of an existing business name by strangers. Thus, the Jaw cannot intervene to save the individual from strangers who steal the business name for their own selfish business operations. This is more so because the law presumes that the unregistered sole proprietorship does not exist in the absence of registration. | 5.8 Unenforceability of the Individual’s Contractual Rights Arising from the Unregistered Business: Another major effect of doing business without registration is that agreements/contracts entered into by the individual in respect of the business cannot be enforced by action or other legal proceedings." This is a major blow on the individual as he/she is disabled from enforcing his contractual rights in court or in other legal proceedings notwithstanding that he may be sued by others on the same contract in. respect of the unregistered business. In the case of Citec v. Edicomisa,* the Nigerian Supreme Court refused to enforce a contract entered into by-the respondent because the latter had failed to register its business in Nigeria in 53. Section 821 of dhe new CAMA (section 583 of the defunct CAMA) 54 Sce Scetion 821 (b): However, where the action in relation tothe enforcement of the contract was iniited by another party (and not che detaultng individual, the individual i allowed to rely on sunter-laim oF other rights in respect ofthe contract. the contract to plead sc 58° Sapo _ 678