Business Name vs Private Limited Company: Which CAC Structure Is Right for You

Quick verdict

• Best overall for most Nigerian SMEs: Private Limited Company. The extra ₦8,500 buys legal separation, the ability to raise investment, and an RC number large clients require.
• Best for solo founders testing an idea: Business Name. ₦10,500 all-in, registered in 1–3 days, and you can convert later if the idea works.
• Best free path to formalisation: Business Name via the CAC/SMEDAN MSME partnership, where slots remain. The 2025 scheme registered 250,000 micro and small enterprises at zero cost.

A note on editorial independence

Nigeria Business Web has no commercial relationship with the Corporate Affairs Commission, the Nigeria Revenue Service, SMEDAN, or any CAC-accredited registration agent. We don't earn referral fees from agents or law firms, and nothing in this article is sponsored. The two paths described are the same paths available to anyone with a NIN and a laptop.

How we evaluated

We compared each structure on six things that matter to a Nigerian SME in 2026:

1. Total cost in year one. CAC fees, Nigeria Revenue Service (NRS, formerly FIRS) stamp duty, and what you'd pay an accredited agent if you used one. Government figures come from the current CAC fee schedule.
2. Recurring cost and compliance burden. Annual returns, audit obligations, and what late filing costs in daily penalties.
3. Personal asset protection. Whether your house, car, and bank balance are at risk if the business is sued or fails.
4. Credibility with banks, corporate clients, and investors. What doors each structure opens or closes.
5. Tax treatment. Personal Income Tax versus Companies Income Tax under the framework leading into 2026.
6. Conversion difficulty. What it takes if you outgrow your starting choice.

Business Name

A registration that lets you trade under a name other than your personal name, without creating a separate legal entity.

Who it's best for. Freelancers, consultants, small traders, and one-person service businesses earning under ₦25 million a year, dealing mainly with individuals or other small businesses. Useful for anyone testing an idea before committing to a Ltd.

Pricing in ₦ (current CAC fee schedule):

• Name reservation: ₦500 (₦5,000 if the name contains restricted words like "Federal", "Holding", or "Group")
• Registration and CTC: ₦10,000
• DIY total: ₦10,500
• Annual returns: ₦3,000/year, due within 18 months of registration and yearly after
• Late filing penalty: ₦150/day plus a one-off ₦5,000 — roughly ₦55,000–₦60,000 if ignored for a year
• Accredited agent (optional): ₦5,000–₦40,000 on top

Pros

• Cheapest legal route to a registered business in Nigeria — under ₦11,000 DIY.
• Approval in 1–3 working days on a clean application.
• Lightest ongoing compliance — one annual return, no audit, no AGM.
• Eligible for the SMEDAN/CAC free registration scheme if slots remain at portal.smedan.gov.ng.
• Easy to wind down or let lapse if the business doesn't work out.

Cons

• No legal separation. You and the business are the same person in law. A ₦3 million supplier dispute lands on your personal assets — your salary, your car, your home.
• Cannot raise equity investment. There are no shares to sell to angels, VCs, or family members who want a stake.
• Many corporate clients and government MDAs will not onboard a vendor without an RC number. You will lose deals you didn't know you could win.
• Not available to foreigners. Only Nigerian citizens (including diaspora Nigerians with a NIN) can register a business name.

Standout feature. Cost. ₦10,500 to become a legally registered, bank-account-eligible Nigerian business with a BN number. Nothing else on the CAC menu comes close.

Private Limited Company (Ltd)

A separate legal entity registered under Part A of CAMA 2020, with shares, directors, and an RC number.

Who it's best for. Founders working with co-founders, anyone targeting corporate clients or government contracts, anyone planning to raise outside investment, and businesses in regulated sectors (fintech, insurance brokerage, oil and gas marketing, microfinance).

Pricing in ₦ (small company, ₦1m share capital — the default for most Nigerian-owned SMEs):

• Name reservation: ₦500 (₦5,000 for restricted words)
• Incorporation and CTC of MEMART: ₦10,000
• NRS stamp duty on share capital: ~₦8,500 
• DIY total: ~₦19,000
• Each additional ₦1m share capital above the first: ₦5,000 to CAC plus 0.75% (~₦7,500) to NRS
• Annual returns: ₦5,000/year
• Late filing penalty: ₦250/day for small companies, ₦500/day for non-small private companies, plus ₦5,000–₦10,000 one-off
• Accredited agent or lawyer (optional): ₦20,000–₦100,000 on top
• Foreign equity changes everything: any company with foreign shareholding requires ₦100 million minimum share capital, attracting roughly ₦750,000 in stamp duty alone

Pros

• Limited liability. The company is liable for its own debts; you risk what you put in.
• Required for B2B work — banks, telcos, oil majors, government MDAs, and large corporate procurement portals typically only onboard RC-numbered vendors.
• Can issue shares, take investment, and apply for equity-based grants.
• Small companies under CAMA 2020 are exempt from audit — turnover under ₦120m, total assets under ₦60m, no foreign or government shareholding.
• TIN is generated automatically at registration as of 2026 — no separate trip to NRS or the Joint Tax Board.

Cons

• Higher upfront cost (~₦19,000 versus ₦10,500 for a business name) and noticeably higher recurring cost — ₦5,000 annual returns and daily penalties that hit harder.
• More disclosure. You must maintain a register of directors, members, and Persons with Significant Control (PSCs) — anyone with 5% or more of shares or voting rights, or substantial influence.
• The "limited liability" protection is partial in Nigerian practice. Banks routinely require directors' personal guarantees on SME loans, which voids the protection for that specific debt.
• More compliance to track — annual returns, statutory filings within 14–28 days of any change, an AGM (with relaxed requirements for small companies), and audit obligations once you outgrow the small-company definition.

Standout feature. Vendor acceptance. An RC number is the cover charge for the part of the Nigerian economy that pays well and pays on time. If you want to invoice corporates and government, this is the structure.

Comparison table

Frequently asked questions

Is the Ltd really worth the extra ₦8,500? For most serious businesses, yes. The choice is rarely about ₦8,500. It is about whether you can be onboarded as a vendor by the clients you want, whether you can take investment when the opportunity comes, and whether a single bad year ends with creditors knocking on your front door. The ₦8,500 is the cheapest part of the answer.

What about a Limited Liability Partnership (LLP)? LLP is a third option worth knowing, especially for professional services partnerships (law firms, accounting firms, consultancies). Registration is ₦20,000 plus the ₦500 name reservation under the current CAC schedule, and you get limited liability without a share structure. Annual returns are ₦5,000. For most product-based or growth-oriented businesses, a Ltd is still the better default. LLP fits where two or more professionals want to share fees and liability without taking outside equity.

Can I really register a business name for free in 2026? You can if you qualify under the CAC/SMEDAN MSME registration scheme announced in September 2025, which covered 250,000 enterprises at no cost. Check portal.smedan.gov.ng for current eligibility and whether slots remain . The scheme covers business names only.

Will I pay more tax as a limited company? Not necessarily. Under the framework leading into 2026, small companies with turnover under ₦25 million were exempt from Companies Income Tax, while business name owners paid Personal Income Tax on profits regardless. For a profitable small Ltd, the effective tax bill could be lower than running the same business as a business name. The Nigeria Tax Act 2025 has adjusted thresholds and rates, and the renamed Nigeria Revenue Service is administering them.

I registered a Business Name two years ago. Should I convert to a Ltd? Convert if you are now turning down corporate clients who require an RC number, planning to raise investment, bringing on co-founders, or earning enough that personal liability is keeping you up at night. Don't convert if your business is steady, consumer-facing, low-liability, and unlikely to scale beyond you — a business name is still doing its job.