Limited Liability Company vs Business Name: Which One is Right for Your Business?

Legal personality and liability

A business name is not a separate legal entity. The proprietor and the business are the same person in law, so business debts and claims reach personal assets.

A limited liability company is a distinct legal person. It contracts, owns property and sues in its own name, and shareholders' exposure is limited to any unpaid amount on their shares.

Cost, speed and administration

A business name is cheaper and faster to register and carries lighter ongoing obligations. A company costs more, requires directors, shareholders and share capital of at least ₦100,000, and must maintain statutory registers, file annual returns and — unless exempt as a small company — file financial statements.

Tax treatment

A business name is taxed in the hands of the proprietor under personal income tax at graduated rates, administered by the state revenue service. A company pays companies income tax federally — 0% for small companies with turnover of ₦25 million or less, 20% for medium companies and 30% for large companies — plus tertiary education tax where applicable.

Credibility and growth

Corporate buyers, government agencies, banks and investors generally prefer to contract with limited companies. If you intend to bid for contracts, take on investors or bring in partners, incorporate from the start — restructuring later means a fresh incorporation and transfer of assets and contracts.

So which should you choose?

Choose a business name if you are a solo trader testing an idea with limited liability exposure. Choose a limited liability company if you have partners, meaningful contract risk, employees, or any intention of raising capital.