The name of a business goes a long way to communicate the vision, the service and the image of a business. Generating a name for a business should be done before registration will commence.
Although a business owner decides the name for his/her business, the Corporate Affairs Commission (CAC) in Nigeria decides and controls what names will actually be accepted and registered.
Steps to Choosing a Business Name
- Be clear on the type of business you will be involved in
- Know the industry where your business falls in
- Decide on the type of company you want to register
- Understand prohibited and restricted names
- Avoid a name that’s too general and/or too narrow
Type of Business/Industry:
There are different types of business industries in Nigeria and in the world. Certain names are suitable for specific industries.
For example: a hospital would usually use a name that suggests health or healing or what people hope will bring health or the type of patients they treat e.g. mercy hospital, my children hospital etc.
Likewise, the food industry uses mouthwatering words that tend to increase appetite or show what type of dishes they serve there.
So understanding the industry of your business is the first and major step to choosing a name. But don’t copy your competitor’s.
Decide on the type of company structure based on your goals:
There are basically two types of company in Nigeria: business organization and non-business organization. A business organization is a profit-based business and a non-business organization is a not-for-profit organization. For the purpose of the article, our focus is on business organization.
They are divided into 4 groups:
- Sole Proprietorship or partnership (registered as a business name)
- Limited Liability Companies – (Private or Public)
- Unlimited Company, and
- Company limited by guarantee.
A sole proprietorship, simply put is a one man business. It is different from a sole trader because the name is registered as a business name, therefore it has attained legal status and other businesses are prevented from using the name.
A partnership, as a business name, is a business owned by two or more people in partnership. A business name is required where the individual or partners intend to use a name that is different from their individual names.
A limited liability company can either be private or public:
Private companies limited by shares (Limited or LTD) – The business becomes a separate entity, distinct from its founder. It is seen in the law as an artificial person.
It is suitable for small/medium size organizations who want to have an incorporated status, where there are between 2-50 members, for a family business, where startup capital is small and/or for those who do not intend to sell its shares to the public.
Public companies limited by shares (PLC) – This is for a large company with membership over 50, the startup capital is large and can offer its shares to the public to access public funds.
There are certain industries where it is mandatory to be a public company.
Company limited by guarantee – This is a company formed for promoting commerce, art, science, research or other objects.
The income of the company are not distributed to its members but rather applied towards the promotion of its objects except otherwise permitted by law.
The liability of the members is limited to such amount as the members respectively undertake to contribute to the assets of the company in the event of winding up.
Unlimited Company (ULTD) – This company has no limit on the liability of its members. The company has a limited status but its members’ liabilities are not.
The liability of the company is borne by its members, but the company does not bear the liability of its members.
Prohibited and Restricted names:
A prohibited name cannot be used for example; a name that is identical to an already registered name, a name that will violate an existing trademark or business name in Nigeria unless the owner of the said trademark or business name agrees or a name that CAC considers to be deceptive or unsuitable as a business name.
A restricted name can be registered but it requires the consent of CAC or only reserved for certain types of company. This includes:
A name that adds the words “federal”, “national”, “regional”, “government” etc
A name that contains the words “municipality” “municipal”, “local government”, “chartered”, “co-operative”, “Building society”, “Group”, “Holding” etc.
All the above requires that the business owner acquires the consent of CAC before it can be approved and registered.
Avoid names that are too broad/restrictive – Choose a name that conveys the meaning of what your business is about. A name that is catchy and says something positive about your business.
On the other hand, try to avoid names that are too restrictive, that would not permit you to expand in the future. Names that suggest the location of the business should be avoided.
For example; avoid names like: Effective Resources Nig. Ltd. It does not state what your business is about, what services or products you deal in. Too restrictive names like Lagos Online Tickets Enterprises. As it would prevent you from expanding to other cities without changing your corporate name.
CONCLUSION
In choosing a name for your business, you should consider the words that can truly evoke the image of the brand you desire to have whether the business activities have started or about to start. Afterwards, you should speak to a professional to advise you on the type of business that would suit your goals, aspirations and budget.