Procedures for Starting a Business in Nigeria

Procedures for starting a business in Nigeria
Nigeria is currently ranked 138th out of 190 countries with respect to “Starting a Business” on the World Bank Ease of Doing Business Index (DB Index) 2017. This is because starting a business in Nigeria can be difficult and usually requires twice as many procedures, and three times the amount of time, as it takes to do a similar activity in developed economies.
The number of procedures entrepreneurs expect to go through to start up and formally operate an industrial or commercial business, as well as the time and cost to complete these procedures and the paid-in minimum capital requirement as a percentage of gross national income (GNI) per capita are included in this article, using Lagos as a case study.

1. Reserve a unique company name

The Corporate Affairs Commission (CAC) online system enables online unique name reservation as well as enabling filing the incorporation forms for the entire registration process.
Time to complete: 2 days
Associated Cost: NGN 500 application form

2. Prepare the requisite incorporation documents and pay the stamp duty

Agency: Federal Inland Revenue Service
To prepare the requisite incorporation documents, the business founders must complete the statutory forms, prepare and print the memorandum and articles of association, and have them stamped by the Federal Inland Revenue Service (FIRS).
The stamp duty payable on share capital (ad valorem) is 0.75% and NGN 500 for each additional copy of Memorandum and Articles of Association stamped.

Time to complete: 7 days
Associated Cost: 0.75% stamp duty paid on share capital + NGN 500 for each additional copy of Memorandum and Articles of Association stamped (2 copies)

3. Sign the declaration of compliance (Form CAC 4) before a Commissioner for Oaths or a Notary Public

Agency: Notary Public
The declaration by the barrister or solicitor engaged in the formation of the company may be sworn to before a Notary Public for a fee of NGN 4,000 – NGN 5,000 or at any of the recognized courts in the country (Magistrate Court, the State High Court, or the Federal High Court) before a Commissioner for Oaths for a small fee of NGN 500 usually chargeable by the respective courts.
Time to Complete: 1 day
Associated Cost: NGN 500 at the court or NGN 4,000 – NGN 5,000 with a Notary Public

4. Register the company and pay fees

Agency: Corporate Affairs Commission
To register the company with the Corporate Affairs Commission (CAC), the following incorporation documents are submitted:
  • Form CAC 1: Availability Check and Reservation of Name.
  • Memorandum and articles of association, stamped by the commissioner for stamp duties (2 copies).
  • Form CAC 3: Notice of registered address.
  • Form CAC 4: Declaration of compliance.
  • Form CAC 7: Particulars of directors.
  • Form CAC 2: Statement of share capital and return of allotment of shares.
  • Form CAC 2.1: Particulars of the company secretary.
Incorporation fees are:
  • Incorporation fees for a company whose share capital exceeds NGN 1,000,000.00 are NGN 10,000.00 for the first NGN 1,000,000.00 and NGN 5,000.00 for every additional NGN 1,000,000.00 or any part thereof.
  • NGN 500 incorporation forms.
  • NGN 3,000 for certified true copy of memorandum and articles of association.
  • NGN 2,000 for certified true copy of particulars of directors.
  • NGN 2,000 for certified true copy of particulars of shareholders.
  • NGN 2,000 for certified true copy of particulars of the company secretary.
The payment of registration fees can be made at the bank desk at the CAC. The payment of statutory filing fees can now be processed online through Remita, an electronic payment platform. Upon making relevant payments online, the applicant is still required to verify these payments at the CAC in person.
Time to Complete: 10 days
Associated Cost: Summary of Fees and Forms

5. Make a company seal

Agency: Sealmaker
Section 74 of the Companies and Allied Matters Act (CAMA) requires every company to have a common seal.
Time to Complete: 1 day
Associated Cost: NGN 4,000 – NGN 6,000

6. Register for income tax and VAT

Agency: Federal Inland Revenue Service
The Federal Inland Revenue Service (FIRS) requires the applicant to complete tax registration forms for corporate income tax registration as well as VAT.
The registration process requires submitting a completed tax office–issued application (taxpayer registration input form, TRIF/2006/001 COYS) and the following documents:
  • Completed FIRS questionnaire.
  • Memorandum and articles of association (copy).
  • Certificate of incorporation (copy).
  • Directors’ names and addresses.
  • Tax advisor’s name and address.
  • Letter of appointment of a tax adviser and corresponding letter of acceptance.
  • The date the company commenced business;
  • Names, addresses and mobile numbers of major promoters and the chairman of the company, including their email addresses;
  • Other sources of income of the chairman and the promoters of the company;
  • Name and addresses of the principal officers of the company including the chairman, managing director, legal adviser and accountant;
To register, the company must submit the taxpayer registration input form in duplicate, and the original certificate of incorporation must be presented for review by the controller. Upon the completed taxpayer registration input form and all other documents being received, a tax reference number is allocated.
Time to Complete: 1 day
Associated Cost: No charge

*7. Register for personal income tax PAYE at the State Tax Office

Agency: State Tax Office
All employers shall register with the relevant state tax authority for income tax withholding.
The PAYE Regulations of 2003 made pursuant to the Personal Income Tax Act provides that all employers are to register with the Lagos State Board of Internal Revenue Tax Office nearest to the registered company address for the purpose of remitting income tax deducted from their employees. The employer must within 6 months of commencing a business deduct tax from emoluments of employees and remit the amount deducted to any of the designated collecting banks.
The registration requirements are as follows:
1. A copy of Certificate of incorporation.
2. List of staff and their annual salaries.
3. Letter of application for registration.
4. Corporate income tax and VAT tax reference number.
Upon completion of registration, an Employer’s Identification Number will be issued.
An employer who fails or refuses to register commits an offence and is liable on conviction to pay a NGN 25,000 fine in addition to the payment of arrears of the tax due.
Time to Complete: 2 days (simultaneous with previous procedure)
Associated Cost: No charge

*8. Register business premises with the Lagos State Government (if business is in Lagos) and pay the business premises levy

Agency: Bank
To register the company premises with the Lagos State Government, the entrepreneur heads to any nationalized commercial bank with some evidence of the business premises (utility bills, etc.) and pays the business premise levy to the account of the Lagos Inland Revenue Services (LIRS). The bank then issues a receipt bearing the Lagos State Government logo.
Business premises in an urban area of Nigeria are required to be registered on the payment of a NGN 10,000 registration fee in the first year of registration (NGN 5,000 per annum as renewal registration fees in the subsequent years).
For rural areas, the business premises registration fee is NGN 2,000 for the first year of registration (NGN 1,000 per annum as registration renewal fees for the subsequent years).
Time to Complete: 1 day (simultaneous with previous procedure)
Associated Cost: NGN 10,000
* Takes place simultaneously with previous procedure.

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