HOW TO SELECT THE MOST APPROPRIATE BUSINESS STRUCTURE TO REGISTER WITH THE CORPORATE AFFAIRS COMMISSION (CAC)

The following are guidelines on which business structure will be suitable to register your business with.

(A) PROFIT MAKING STRUCTURES

  1. Business Name Registration as Sole Proprietorship

  • Participant is one and is called Sole Proprietor;
  • Liability of participant is unlimited (This means Decision Maker will avoid taking risk and thereby limit it’s commitments and business growth);
  • Decision Maker = One Participant (The Sole Proprietor);
  • Not useful for SEC listing (Shares is not involved, therefore no trading on stock exchange);
  • The Business is not a separate entity from Participants (This means its not legal for the business to enter into a contract with third parties);
  • Tax of the business are treated along side taxes of individual participants. That is, The income of the business is not taxable;
  • Fund contribution (in-kind or in-cash) by participants is not mandatory;
  • Number of participants involved: Minimum = 1, Maximum= 1;
  • Constitution is not involved and not mandatory for registration.

2. Business Name Registration as Partnership (General Partnership)

  • Participants are called Partners or Proprietors;
  • Liability of participants are unlimited (This means Decision Makers will avoid taking risk and thereby limit their commitments and business growth);
  • Decision Maker = Collective Participants (Partners/Proprietors). All Participants are involved in Decision Making process;
  • Not useful for SEC listing (shares is not involve, thus no trading on stock exchange);
  • The Business is not a separate entity from Participants (This means its not legal for the business to enter into a contract with third parties);
  • Tax of the business are treated along side taxes of individual participants. That is, The income of the partnership as a business is not taxable;
  • Fund contribution (in-ind or in-cash) by Participants is not mandatory;
  • Number of participants involved: Minimum =2, Maximum= 20;
  • Constitution is not involved and not mandatory for registration.

3. Limited Partnership (LP)

  • Participants are called Partners;
  • Liability of participants is a Mix of limited liability (participants to provide fund but no technical know-how) and unlimited liability participants (participants with technical know-how but has no fund);
  • Decision Maker = Collective Participants (Board of Partners). It can be few selected Participants or All participants depending on what is included in the constitution;
  • Not useful for SEC listing (No shares for trading on stock exchange);
  • The Business is not a separate entity from it’s participants (This means its not legal for the business to enter into a contract with third parties);
  • Tax of the business are treated along side the taxes of individual participants. That is, The income of the partnership as a business is not taxable;
  • Fund contribution (in-kind or in-cash) by few participants is mandatory;
  • Number of participants involved: Minimum =2, Maximum= 20;
  • Constitution is involved in the form of Partnership Agreement and mandatory for business registration.

4. Limited Liability Partnership (LLP)

  • Participants are called Partners;
  • Liability of participants are limited;
  • Decision Maker = Collective Participants (Board of Partners). It can be few selected Participants or All participants depending on what is included in the constitution;
  • Not useful for SEC listing (No shares for trading on stock exchange);
  • The Business is a separate entity from Participants (This means it can enter into contract with third parties);
  • Tax of the business are treated along side taxes of individual participants. That is, The income of the partnership as a business is not taxable;
  • Fund contribution (in-kind or in-cash) by participants is not mandatory;
  • Number of participants involved: Minimum =2, Maximum= Unlimited;
  • Constitution is involved in the form of Partnership Agreement and mandatory requirement for business registration.

5. Private Limited Liability Company (Ltd or Limited)

  • Participants are called Shareholders;
  • Liability of participants are limited (This means Decision Makers will always thrive to take calculated business risk needed for business growth);
  • Decision Maker = Usually Collective Participants (Board of Directors). However, One Participant Decision Maker (One Man Business) is possible;
  • Not useful for SEC listing (No shares for trading on stock exchange, however second tier market on the stock exchange might be available as option);
  • Business is regulated beyond CAMA. and ISA (Investment & Security Act) Laws are to be complied with
  • The Business is a separate entity from Participants (This means it can enter into contract with third parties);
  • Tax of the business are treated separate from taxes of individual participants. That is, The income of the company is taxable;
  • Fund contribution (in-kind or in-cash) by participants is mandatory in the form of shares;
  • Number of participants involved: Minimum =2, Maximum= 50;
  • Constitution is involved in the form of Memorandum and Article of Association and mandatory requirement for business registration.
  • Private limited liability companies are not mandated to publish their financial information for public consumption but are obligated to present to Tax authorities and related regulators.

6. Public Limited Liability Company (PLC)

  • Participants are called Shareholders;
  • Liability of participants are limited (This means Decision Makers will always thrive to take calculated business risk needed for business growth);
  • Decision Maker = Collective Participants (Board of Directors);
  • Useful for SEC listing (shares are involved and can be traded on the floor of the stock exchange);
  • The Business is a separate entity from participants (This means it can enter into contract with third parties);
  • Tax of the business are treated separate from taxes of individual participants. That is, The income of the company is taxable;
  • Fund contribution (in-kind or in-cash) by participants is mandatory in the form of shares;
  • Number of participants involved: Minimum =2, Maximum= Unlimited;
  • Constitution is involved in the form of Memorandum and Article of Association and mandatory requirements for Business registration.
  • Public limited liability companies are mandated to publish their financial information for public consumption, Tax authorities consumption and other related regulators.

7. Unlimited Liability Company (ULC)

  • Participants are called Shareholders;
  • Liability of participants are unlimited (This means Decision Makers will avoid taking risk and there by limit their commitments and business growth);
  • Decision Maker = Usually Collective Participants (Board of Directors). However, One Participant Decision Maker (One Man Business) is possible;
  • Not useful for SEC listing (No shares for trading on stock exchange, however second tier market on the stock exchange might be available as option);
  • The Business is a separate entity from Participants (this means it can enter into contract with third party);
  • Tax of the business are treated along side the taxes of individual participants. That is, The income of the company is not taxable.
  • Fund contribution (in-kind or in-cash) by participants is not mandatory;
  • Number of participants involved: Minimum =1, Maximum= 50
  • Constitution is involved in the form of Memorandum Only. Article of Association is not mandatory for registration.
  • Unlimited liability companies are not mandated to publish their financial information for public consumption and Tax authorities consumption
  • Unlimited liability companies are usually use as against Private limited company because the owners wish to keep information that could be valuable to competitors, such as turnover and the amounts paid in dividends, out of the public eye. Also, Amounts contributed by shareholders can be refunded to them.
  • Unlimited liability company is like a company version of Business Name Registration (either as Sole Proprietor or as Partnership). They can be registered with or without shares capital. They can also be registered as private or public company.

(B) NOT FOR PROFIT

  1. Incorporated Trustees
  2. Company Limited by Guarantee

1. Incorporated Trustees

  • Participants are called Trustees
  • Decision Maker = Collective Participants (Board of Trustees)
  • Minimum participants = 2, Maximum = Unlimited
  • Constitution is involved in the form of By-Laws and mandatory requirement for registration purpose

2. Company Limited by Guarantee (Ltd/Gte)

  • Participants are called Guarantor or simply put, Members
  • Decision Maker = Collective Participants (Board of Directors)
  • Minimum participant = 1, Maximum Participant = Unlimited
  • There is no Shareholders
  • Constitution is involved in the form of Memorandum and Article of Association and mandatory requirement for registration purpose

TEN (10) CRITERIA TO USE IN DETERMINING A SUITABLE BUSINESS STRUCTURE FOR YOUR BUSINESS

(a) is the business for Profit motive?

  • If the answer is YES, then it’s for Profit motives, then only business structures listed under category A above will be suitable for your business
  • If the answer is NO, it’s mean the business is not for Profit Motives, then either Incorporated Trustees or Company limited by Guarantee will be considered for use

What will then determine which one to use between incorporated Trustees and Company Limited by Guarantee will depend on the following understanding:

  • (i) A company limited by guarantee is allowed to venture into business or profit making agenda but cannot share the profit among members; but Incorporated Trustees are not allowed to venture into profit making business.
  • (ii) Willingness to make publication in newspapers before registration? Company by Limited by Guarantee does not require public awareness before registration while it is a requirement for incorporated trustees to carry the public along.

*IF THE ANSWERS TO THE ABOVE IS “NO” (THAT IS, NOT FOR PROFIT MOTIVE), THERE IS NO NEED TO CONSIDER OTHER CRITERIA BELOW. THE REMAINING CRITERIA BELOW FROM (b) to (j) ARE RESERVED FOR BUSINESSES WITH PROFIT MOTIVES

(b) Liability of participants to be limited?

  • If YES, it means, participants will sell their property to settle any debt that the business cannot be settled.

(c) Needed for listing on Stock Exchange?

  • If YES, it means more compliance burden as more professional will be employed to keep to the rules of SEC. This will make cost of running expensive.

(d) Business is a separate entity from individual participants?

  • If YES, It means the Business can do any PUBLIC BID. They can tender for any Government Bid. Other business structure can only do Professional Service related public bids.

(e) Tax of business is treated separately from that of individual participants?

  • If YES, it means more tax obligations. Engagement of Tax consultant, Auditors is a must and their fees will make cost of running the business to more expensive

(f) Fund contribution by Participants is mandatory?

  • If YES, it means, financial commitments determine your rights to some benefits in the business. In also implies that Investors can be attracted. NOTE: If share capital will be involved, it simply means fund raising is involved and therefore YES will be an answer.

(g) Want decision making process to be fast?

  • If YES, it means a business structure with ONE participant will be appropriate. Two Participants too can make fast decisions but not as fast with ONE participant.
  • If NO, it means business structures with Collective Body Decision Maker will be suitable.

(h) Any requirement of the Law, CAC, Professional and regulatory bodies on the appropriate structure penciled down to carry on a trade or profession?

  • For example, Corporate Affairs Commission (CAC) has mandated that all Schools are to be registered as Limited Liability Companies, Accounting and Legal practice are not to be carried out as Limited liability Companies, Banks, Insurance companies and other related financial institutions are to be carried out as Limited Liability Company.
  • In some cases with Limited Liability Company , it is regulated with Minimum Share Capital to be in issued and be fully paid otherwise no business operations.

(i) Will there be need for a constitution that will guide business operations?

  • If YES, it means a lot of paperwork and timing will be involved in the registration process thereby making it a complex process as against simplicity
  • If NO, it means lesser timing and paperwork and more simple to register.
NOTE: Constitutions takes the form of Bye-laws, Partnership Agreement, Shareholders Agreement and Memorandum and Article of Association (MEMART)

(j) Which of the following will be the numbers of participants that will be involved (To Achieve Perpetual Succession) ?

1 (one)
Greater than 1 (one) but limited
Unlimited
NOTE: Perpetual Succession cannot be achieved with single participant
  • If the answer is Greater than 1 (one) but limited, it means Business name registered as Sole Proprietor, Business name registered as Partnership (General Partnership), Private Limited Liability Company, Public limited Liability Company, Limited Liability Partnership, Limited Partnership are all available for use.
  • If the answer is 1, it means Public Limited Liability Company and Limited Liability Partnership ( LLP) cannot be used
  • If the answer is Unlimited, it means only Public Limited Liability Company and Limited Liability Partnership can be used.

Feel free to ask us anything about Corporate Affairs Commission and your business formation in Nigeria.

FIRS Director nabbed and arrested over N5 million tax fraud

[plulz_social_like width="350" send="false" font="arial" action="like" layout="standard" faces="false" ]

Untitled-1

On January 29, 2016, The Economic and Financial Crimes Commission, EFCC, arrested Abumere Joseph Osagie, The Deputy Director, Regional Tax Office, Federal Inland Revenue Service, FIRS, in a case of abuse of office and bribery.

The suspect was picked following a complaint about his attempt to extort a university proprietor N5 million.

Osagie and Jamila Ojora had on January 27, 2016 allegedly approached Senator Ahmed Datti, the Chancellor of Baze University, Abuja and gave him a tax assessment of N20,029,496 through a letter of intent, which he paid.

However when he requested for the assessment certificate, they refused to oblige him. Instead they allegedly demanded for N5 million gratification.

All pleas by him fell on deaf ears. Consequently, the Chancellor of the University then petitioned the EFCC, and was advised to play along (Just like in Farouk Lawan and Femi Otedola case).

Consequently, a  bribed of N5 Million was arranged and marked (to serve a evidence) and was delivered to the director (Osagie) through Ojora in a sting operation (some of you will call this a set-up).

Ojora was arrested after she collected the N5m. His confession later led to the arrest of Osagie.

The houses of the suspects were searched by operatives of the EFCC, and documents were recovered.

MY OPINION

As a Tax Consultant, this menace has been in Tax Practice for long and I must commend the effort of the Chancellor for taking up this matter. I enjoin all Tax Payer to emulate him and join in the battle of fighting corruption. I keep-on educating Tax Payer that having additional Tax Liability as a result of Tax Audit or investigation conducted is not a crime and does not mean heaven will fall. There are laid down procedures to address excessive Tax Liabilities. Tax Liability given by tax officer who conduct Tax Audit is not FINAL and CONCLUSIVE. The process can be taken away from them and handled with another bodies for intervention (just like you have hierarchy of court, to further your case if not satisfied with decision of lower court).

But because TaxPayers in Nigeria does not know their right, overzealous Tax Officials, while sitting at his desk can use the Letter Head of his office and send out harrassment letters to Tax Payers with the sole aim of scaring them with tax issues and at the end of the story the case will be settled via bribe. This is gross abuse of office. No matter how you present documentations to defend your position, the corrupt tax officers will still use the MIGHT of their office to insist that their findings is FINAL and CONCLUSIVE. The experience in Lagos state is more of concern. Lagos state will go to the back-door to obtain Ex-Parte order to lock down your office with the intention to force you to come to their office and do a gentleman’s negotiation (Bribe).

Over the years, Tax Officers has been in total control of Tax Practice, you find them acting also as Tax Consultant and/or Tax Practitioners while still in the employment of FIRS. Some even act as Auditor by preparing Audited Account right in their office. They do this by picking a copy of Audited Accounts already filed with them by a Chartered Accountants and merely change the Name of the Company and other unwanted information. The consequence of this is that the Chartered Accountants are left with no jobs to do and if they have at all, they will be at the mercy of Tax Officers who controls every aspect of Tax Practice.

The former FIRS Chairperson, Mrs Ifueko Omogui-Okauru introduce some reforms to address this issue and equally increase the salaries of the Tax Officers and other work conditions. During her tenure, I as a Tax Consultant experience huge sanity in the system. Collection of TAX CLEARANCE CERTIFICATE was never an herculean task. The closest FIRS chairman that emulated Omogui philosophy was Samual Ogungbesan who merely acted in Acting capacity before handing over to the present FIRS Chairman Tunde Fowler.

My conclusion is that, all Tax Payers should stand up for their right, they should ensure they pay legitimate taxes and ready to to fight the CORRUPTION aspect of the system (just like the Chancellor did in the case above). Together, we can help the present administration in the fight against corruption by doing our part such as saying NO to paying bribes and accept to do the RIGHT THING at all times.

Tax system is never meant to be used as a weapon to oppress and enrich the few, it is meant to manage the income inequality and source of revenue to Government, therefore Tax System should wear HUMAN FACE. In this era of relying on taxes to fund Government’s budget amidst corrupt tax officers, Tax Payer should expect though times and be ready to do what the Chancellor has done per above in order to survive the corruption in the Tax System.

Thank you

 

 

91 Companies Bid for NNPC Coastal, Bunkering Vessels Service Contract

download (1)

The Nigerian National Petroleum Corporation has begun the public opening of technical bids submitted by 91 companies to secure contract for the provision of Coastal and Bunkering Vessel Services. The coastal and bunkering services were for the operations of the Pipelines and Products Marketing Company, (PPMC), a subsidiary of the NNPC.

The Nigerian National Petroleum Corporation, NNPC on Thursday 22nd of October, 2015 embarked on the public harvesting of technical bids submitted by a total of 91 companies consisting largely of indigenous vessel owners vying to secure contract for the provision of Coastal and Bunkering Vessel Services for the operations of the Pipelines and Products Marketing Company, PPMC, a subsidiary of the NNPC.

The bid exercise, according to the corporation, seeks to engage the services of reputable organisations with essentially three ranges of deadweight tonnage – 5,000 to 8,000DWT; 10,000 to 20,000DWT; and 25,000 to 50,000DWT.

The exercise which was conducted at the Corporate Headquarters of the NNPC in Abuja in the full glare of representatives of the bidding companies also had officials of the Bureau of Public Procurement, BPP and the Nigerian Extractive Industry Transparency Initiative, NEITI as independent assessors.

The coastal vessel was designed to evacuate petroleum products from NNPC coastal refineries to various discharge ports in Nigeria or outside Nigeria as may be designated by PPMC and undertake the delivery of petroleum products to water fed depots with restricted draft jetties of 6 to 11 metres. The vessels would also conduct ship-to-ship transfer of cargo from import tankers and discharge same at waters depots among other functions.

The desired bunkering vessel services would also entail the loading of Automated Gas Oil Ago and low Pour Fuel Oil (LPFO) from water-fed refineries for bunkering purposes. The vessel would also supply bunkers to NNPC owned and chartered vessels as required on a monthly basis.

Other responsibilities of the vessel included the keeping of accurate accounts for AGO and LPFO loaded and supplied to NNPC Vessels as well as forwarding records of the bunkering activities to marine transport department of the PPMC on a monthly basis[plulz_social_like width="350" send="false" font="arial" action="like" layout="standard" faces="false" ]

Nigeria plans $25bn investment fund to stave off recession and the underlying opportunities to Nigerians.

images images2

CBN’s EARLIER WARNING ON IMPENDING RECESSION IN 2016

The Central Bank of Nigeria (CBN) on September 22, 2015 at a Monetary Policy Committee (MPC) meeting in Abuja present a warning on the economy: with “two consecutive quarters of slow growth, the economy could slip into recession in 2016 if proactive steps are not taken to revive growth in key sectors of the economy.”

In the face of the prevailing circumstances, the MPC advocated that a “synergy between monetary and fiscal policies remains the most potent option to sustainable growth.”

FEDERAL GOVERNMENT RECENT REACTION TO THE CBN’S WARNING

The federal government is planning to create a $25 billion fund through public and private sector financing with the aim of tackling infrastructure decay and to avoiding a recession. The special fund will be an intervention fund to fall back on during economic recession

“We think that the way out of this, what some have described as an impending recession, is actually to spend rather than to cut back in any way,”  – VP Yemi Osibajo In an interview with Bloomberg on Tuesday 20 October, 2015.

The investment fund will be targeted toward improving power supply, roads, rail and agriculture.

Osinbajo said that the federal government plans to create jobs and conserve foreign exchange by making Nigeria self-sufficient in rice production in 24 months.

“A lot of those projects will be bankable projects, because we’re looking at projects that will interest private sector investors as well, but they are strategic for us,” Osinbajo said

Osinbajo said he understands that portfolio investors aren’t pleased about the trading restrictions on the currency, which have led to a slowdown in capital market inflows and on the other side, the government is “mindful that we maintain foreign-exchange reserves so at least that we are able to keep investor confidence high, especially direct investment,” he said.

OPPORTUNITIES FROM THE PLAN $25b  SPECIAL FUND

Clearly from the federal government reaction to the CBN warning per above, the federal government rejected the SYNERGY call between the fiscal and monetary policy as the Federal Government is set to spend heavily rather than cutting back. The projection therefore is that in the coming year 2016, Adesanya & Partners (Chartered Accountants) expect business boom in the following areas:

  1. Agriculture (second GDP generator to the foreign reserve)
  2. Construction business vis-à-vis Railway construction and improvement
  3. Power supply
  4. Suppliers of raw materials and inputs to the 3 above businesses.

Therefore entrepreneur are expected to commence preparation of their budget towards such opportunities

[plulz_social_like width="350" send="false" font="arial" action="like" layout="standard" faces="false" ]