Nigerian law provides for a number of business forms for investors. These include:

Limited liability company (Private or Public);
Unlimited liability company;
Company limited by guarantee;
Partnership/Firm;
Sole proprietorship; and
Foreign Business (Branch, Subsidiary, or Representative Office).

Limited Liability Company

A limited liability company (LLC, also known as a company limited by shares) is the most commonly used business form in Nigeria. An LLC is a company where the liability of a member to contribute to the company in the event of liquidation or winding up is limited to the amount unpaid on its shares. LLC can be formed as a private limited liability company or a public limited liability company.

The key aspects of a private limited liability company include:

A minimum of two shareholders and two directors are required; and
Can have a maximum of 50 shareholders.

The key aspects of a public limited liability company include:

A minimum of 50 shareholders are required; and
Can be formed by a minimum of three directors.

Other key aspects of a limited liability company (private or public) include:

Minimum share capital requirement is USD 1;
The shareholders can either be individuals or legal entities;
The shareholders and directors need not be resident in Nigeria; and
100% foreign shareholding is allowed.

Unlimited Company

An unlimited company is a company where the liability of a member to contribute to the company in the event of liquidation or winding up is unlimited.

Company Limited by Guarantee

A company limited by guarantee is a company where the liability of a member (known as guarantors) to contribute to the company in the event of liquidation or winding up is limited to the amount guaranteed to be contributed to the assets of the company, which cannot be less than NGN 100,000. Such a company shall not be incorporated with the object of making profits for distribution for its members but to promote educational, religious, sports, or charitable purposes.

Partnership/Firm

A partnership/firm in Nigeria can be formed by 2 to 20 persons (2 to 10 persons for a banking enterprise). The capital of a partnership firm is contributed by the partners. Profits in a partnership/firm are shared between the partners. The liability of a partnership/firm is unlimited and borne by the partners.

Sole Proprietorship

Sole proprietorship in Nigeria is a type of unincorporated business that is privately owned and run by one person. A sole proprietorship structure is very easy to set up and has unlimited liability.

Foreign Business (Branch or Subsidiary or Representative Office)

In order to conduct business in Nigeria, a foreign company is required to establish an entity in Nigeria and register with the Registrar General of the Corporate Affairs Commission. The exceptions to the general rule are as follows:

Foreign companies engaged by the Nigerian government for specific projects in Nigeria;
Companies undertaking approved loan projects on behalf of donor countries; and
International organizations and foreign government-owned companies engaged exclusively in export activities.

The exemptions are granted for a fixed period of time and are rarely renewed. In addition, the exemption can be revoked by the Federal Executive Council.

Foreign companies can establish a branch or subsidiary in the form of one of the company or partnership types covered above. Foreign companies can also establish a representative office, which is limited to promotional or liaison activities, and may not conduct business or enter into contracts.

Further information on the general investment, tax, and regulatory regime about the country is available at the following external references:

“Doing Business” report from World Bank – click here;
Reports and publications from OECD – click here;
Reports and publications from IMF - click here; and
Reports and news from Tax Justice Network – click here.

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