Business Insight



A Business Entity is the exact structure of a business, which determines liabilities and how taxes will be paid. The term doesn’t describe what the business does but how it is set up.

Under Nigerian law, only the Corporate Affairs Commission (C.A.C.), a Federal Government Agency engages in business registration.

As Business entities are structures, there are different types of it. These structures determine the form of ownership.



  • SOLE PROPRIETORSHIP: One person who makes the decisions and bears all the risks involved. It is usually the cheapest and easiest structure to set up. Profits and losses are recorded and controlled by the owner who has full control.


  • PARTNERSHIP: This is owned by two or more persons bringing resources together to start a business. The risks and liabilities are equally beared, as the profits are also equally shared. There are two types:

In General partnership, profits and losses are shared equally as well as the capital.

In Limited partnership, one partner controls the operations, the other provides finance; to receive a percentage of the profit.


  • COMPANIES: A company is a legal entity that can sue or be sued, pay tax, and own properties. It offers limited liability to its investors, as the company operates its own legal personality, separate from its owners.

It could be a Private Limited Liability Company or Public Limited Liability Company (PLC)



  • Company Limited By Shares: It can be private or public. It has separate assets and isn’t connected to the owner’s assets. Members of the company are not liable for company’s liabilities. Maximum of 50 members for private, unlimited number of members for public.


  • Company By Guarantee: This type is usually called a Non-profit organization, as the purpose is not to make profit but to promote a specific goal or different goals. (Education, sports, or charity)


  1. Unlimited Company: In this case, the liability of the members are unlimited, as they are liable to the total debt of the company. (Mobil Producing Nigeria Unlimited)



The best choice is dependent on the goal you intend to achieve, do you want to be a sole proprietor or you want to run your business with a partner? You could want to start a non-profit or a limited liability company. The structure of business is determined by how the business is expected to be operated.

While private limited liability company might be the most preferred form of business; especially for foreigners seeking to start a business in Nigeria, it is also the most recognized form of Business entity in Nigeria.

Further consultation with a business consulting firm in your preferred location, can help to understand the intricacies of Business entities better.

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