Business Name vs Limited Company in Nigeria: Which to Pic…

You have decided to register with the CAC. Then comes the big question: should you register a business name or a limited company? Your cousin says "just do business name, it's cheaper". Your banker friend says "do Ltd". Both are partly right.

Here is the short answer to the business name vs limited company question. A business name is cheaper and simpler, and suits most one-person shops and small services. A limited company costs more to run, but it protects your personal property and looks stronger to banks and big customers. This guide explains the difference in plain words, with costs, tax rules after the 2025 reforms, and three examples to help you decide.

In short:

Business name: cheap, simple, few yearly filings. But you are personally responsible for all business debts.

Limited company (Ltd): a separate legal person. Your personal property is generally protected, but there is more paperwork and cost.

Tax: a business name's profit is taxed as your personal income. A small company can pay 0% company income tax under the new tax law, but it must still file returns.

Banks, investors and big corporate or government customers often prefer a limited company.

You can start with a business name and register a company later. For big decisions, speak to a lawyer or accountant.

What each one actually is

Both are registered with the CAC (Corporate Affairs Commission), the federal agency that registers businesses in Nigeria. The rules come from the Companies and Allied Matters Act 2020 (CAMA 2020), the main law on businesses and companies.

A business name is a registered trading name for one owner (a sole trader) or a few partners. The law sees the business and the owner as the same person. You get a BN number and a certificate. Our step-by-step guide to registering a business name with the CAC covers the full process.

A limited company (private company limited by shares, the ones ending in "Ltd") is a separate legal person. It can own property, sign contracts, borrow money and be sued in its own name. The owners are called shareholders (people who own parts of the company, called shares). The people who run it are directors. You get an RC number (the company's registration number) and a certificate of incorporation.

Since CAMA 2020, one person can form a private company and be its only shareholder and director, according to Mondaq's summary of CAMA 2020 on small and single-member companies. So you no longer need to find a second person just to register "Ltd".

Liability: who pays if things go wrong

This is the biggest difference, so let us be clear about it.

Liability means who is responsible for paying the business's debts and claims.

Business name: unlimited liability. If the business owes a supplier ₦3 million and cannot pay, the supplier can go after your personal savings, car or land.
Limited company: limited liability. The company's debts belong to the company. Your personal risk is generally "limited" to the money you put into your shares.

One honest warning. Limited liability is not a magic shield. If you personally guarantee a bank loan (which banks often ask small company owners to do), you are still personally on the hook for that loan. Directors who commit fraud can also be held personally liable.

Side-by-side comparison

	Business name	Limited company (Ltd)
Legal status	Same as the owner	Separate legal person
Liability	Unlimited: owner pays debts	Limited: generally protected
Owners	1 owner or partners	1 or more shareholders
Registration cost (as of October 2026)	Lower. Name reservation ₦1,000 plus filing fee shown on the CAC portal	Higher. Filing fee depends on share capital, plus stamp duty and charges
Minimum share capital	Not applicable	₦100,000 for a private company
Yearly CAC filing	Annual return, small fee	Annual return, plus financial statements
Tax on profit	Owner's personal income tax	Company income tax (0% if it qualifies as "small")
Accounting records	Simple records are enough	Proper accounts each year
Bank and investor view	Fine for small accounts	Usually preferred for big loans, investors and tenders (formal bids for contracts)
Can sell part of the business?	Not easily	Yes, by selling shares

How much each one costs to register

Official CAC fees were revised in 2025, with the new fees in force from 1 October 2025. As of October 2026:

Name reservation: ₦1,000 for either type, or ₦5,000 if the name uses restricted words.
Business name filing fee: the CAC revised its fees in 2025 and guides now quote different amounts, so check the exact figure on the CAC portal at the payment step.
Private company filing fee: depends on your share capital (the total value of shares the company issues). Under the revised schedule, reports say the fee is ₦10,000 for share capital up to ₦1 million, plus ₦10,000 for each extra ₦1 million, according to Mondaq's summary of the new CAC schedule of fees. You also pay stamp duty (a government tax on legal documents) on the share capital, plus small online payment charges.

CAMA 2020 sets the minimum share capital for a private company at ₦100,000, as noted in ThisDay's highlights of CAMA 2020. Many small owners keep share capital at ₦1 million or less, because that keeps the company filing fee at the lowest level.

On top of official fees, many people pay an accredited agent. Agent charges are not set by the CAC, so always ask for the official fee and the service charge separately. Fees change, so confirm the current figures on the CAC website before you budget.

Paperwork and yearly duties

A business name is light on paperwork. You file one annual return each year (a yearly update confirming your details) and keep basic records of sales and expenses.

A limited company has more to do:

File an annual return with the CAC every year. Reports of the revised schedule put the fee at ₦5,000 for companies with share capital from ₦100,000 to ₦100 million.
Prepare financial statements, a yearly summary of income, spending and what the company owns and owes.
Keep company records: register of shareholders, directors' details, minutes of decisions.
File company tax returns with the Nigeria Revenue Service (NRS), the federal tax agency that replaced FIRS from 1 January 2026.

CAMA 2020 gives small companies some relief. A small company does not need a company secretary and does not have to file audited accounts (accounts checked by an outside accountant). Small companies and one-shareholder companies also do not need to hold an annual general meeting (a yearly formal meeting of shareholders). Under CAMA, a private company is "small" if, among other tests, its turnover is not more than ₦120 million and its net assets not more than ₦60 million, according to the same Mondaq summary of CAMA 2020. Note that this CAMA definition is separate from the tax definition below.

If records feel scary, our guide on using AI for bookkeeping and invoices shows simple ways to keep tidy books on your phone.

Tax after the 2025 reforms

The Nigeria Tax Act 2025 took effect on 1 January 2026 and changed the rules for both options. Here is the plain version, as of October 2026.

Business name: personal income tax

A business name is not taxed separately. Its profit is added to the owner's income and taxed under personal income tax, which is paid to your state tax office (for example, LIRS in Lagos). Under the new law, the first ₦800,000 of yearly taxable income is taxed at 0%, and higher income is taxed in bands from 15% up to 25%, according to PwC's Nigeria individual tax summary.

Limited company: company income tax

A company pays company income tax (CIT) on its profit to the NRS. Under the new law, a small company pays 0% company income tax. The published (gazetted) Nigeria Tax Act defines a small company as one with yearly gross turnover (total sales) of ₦50 million or less and total fixed assets of no more than ₦250 million, as this Mondaq overview of the tax reform Acts notes. Some official announcements and summaries, including PwC's Nigeria corporate tax summary, quote ₦100 million instead, so confirm the current limit with an accountant. The new law also leaves out companies that provide professional services (such as law, accounting and consulting firms), whatever their size, so check this with an accountant. Larger companies pay the standard rate of 30%, according to the same PwC summary.

Two warnings:

0% tax does not mean no filing. A small company must still register for tax, keep records and file returns every year.
Money you take out is taxed separately. If you pay yourself a salary from the company, that salary is subject to personal income tax.

Tax rules are new and details are still being clarified. Before you choose a structure for tax reasons, speak to a chartered accountant or tax adviser.

How banks, lenders and customers see each one

Both can open a business bank account. For bigger loans, many lenders prefer a limited company because it has its own accounts; for small loans they look more at your transaction history. Many government tenders and big companies ask for a limited company. And an investor cannot buy "part" of a business name, but can buy shares in a company.

Converting later: can you start small and upgrade?

Yes, and many Nigerian businesses do exactly this. There is no automatic button that "turns" a business name into a company. In practice you:

Register a new limited company, often with a similar name.
Move the business's assets, contracts and bank account to the company.
File to cease (formally close) the business name with the CAC, or keep it if you want to protect the name.

If you already know you need a company soon, starting as one saves you doing the work twice.

Decision guide: three illustrative examples

These are illustrative businesses, not real people, to show how the choice plays out.

Example 1: Aisha's small chops business in Kano

Aisha sells small chops and cakes for parties from her home. She works alone and has no big debts or contracts.

Best fit: business name. It is cheap, gives her a business account and keeps paperwork light. She can upgrade later if she grows.

Example 2: Emeka's phone accessories distribution in Onitsha

Emeka supplies phone accessories to retailers across the South East. He buys stock on credit from importers, owes suppliers millions at a time, and wants a bank loan to expand.

Best fit: limited company. The debts are large, so limited liability matters. A company with proper accounts is also stronger for a loan application. He should still expect the bank to ask for a personal guarantee.

Example 3: Ngozi's tailoring studio in Port Harcourt

Ngozi runs a tailoring studio with two staff. She wants to bid for school uniform contracts and may bring in an investor.

Best fit: limited company. Tenders and an investor both point to a company. If the contracts are months away, she could start with a business name and convert later.

A simple rule of thumb:

Choose a business name if you work alone or with a family member, your risks and debts are small, and you mainly sell to individuals.
Choose a limited company if you borrow or owe large sums, want investors or partners with shares, chase big contracts, or your work carries real risk of being sued.

Mistakes to avoid

Choosing "Ltd" only because it sounds big. If you cannot keep up with yearly filings, penalties pile up and the company can be struck off.
Thinking a company protects you from everything. Personal guarantees and fraud still reach you personally.
Assuming 0% tax means no tax work. Small companies must still file returns with the NRS.
Mixing personal and business money. In a company, it weakens the very separation that protects you.
Using an agent who registers you as a shareholder with someone you do not know. Since one person can form a company, you do not need a "nominee" second shareholder.

Frequently asked questions

Which is better for a small business in Nigeria, business name or limited company?

For most one-person shops and small services, a business name is enough to start. Choose a limited company if you carry big debts or risks, want investors, or need to bid for large contracts.

Can one person register a limited company in Nigeria?

Yes. Under CAMA 2020, one person can form a private company and be its only shareholder and director.

Does a small company pay tax in Nigeria?

Under the Nigeria Tax Act 2025, a qualifying small company pays 0% company income tax, but it must still file tax returns. Professional services firms do not qualify for the small company rate. Check your position with an accountant.

Can I convert my business name to a limited company?

Yes, but not automatically. You register a new company, move the business into it, then cease or keep the business name. An accredited agent or lawyer can help with the steps.

Words to know

Liability: who is responsible for paying the business's debts.
Limited liability: the company pays its own debts; the owners' personal property is generally protected.
Shareholder: a person who owns part of a company through shares.
Share capital: the total value of shares a company issues to its owners.
Financial statements: a yearly summary of a company's income, spending, assets and debts.
Turnover: all the money that comes into the business from sales before expenses.

Next step

Write down your answers to three questions: How much do you owe or plan to borrow? Do you want partners or investors? Will you bid for big contracts? If all three answers are "small" or "no", start with a business name using our guide on how to register a business name in Nigeria. If not, book a short session with an accredited agent, lawyer or accountant to set up a company.

You can also ask an AI assistant to help you prepare your questions before that meeting. Our guide on how to use ChatGPT for your business shows how, and our government and compliance section has more guides on registration and tax.

This article is general information, not legal or tax advice.

Business Name vs Limited Company in Nigeria: Which to Pick?