As we are entering the promising year of 2025, entrepreneurs and business owners in Nigeria are gearing up to launch their ventures or expand their existing ones. Amidst the excitement and anticipation, it is crucial to ensure that the foundation of your business is solid, and one critical aspect of this foundation is registration.
In Nigeria, registering a business can be a daunting task, especially when it comes to choosing the right structure. Two popular options for non-profit organizations and social enterprises are registering as an Incorporated Trustee or a Company LTD by Guarantee. While both options provide a level of legitimacy and recognition, they serve distinct purposes and have different characteristics.
In this article, we will delve into the details of registering an Incorporated Trustee versus a Company LTD by Guarantee, highlighting the key differences, benefits, and implications of each option.
REGISTERING AN INCORPORATED TRUSTEE:
An Incorporated Trustee is a legal entity registered under the Companies and Allied Matters Act (CAMA) 2020, specifically designed for non-profit organizations, charities, and social clubs. The primary objective of an Incorporated Trustee is to promote a particular cause, provide a public benefit, or support a charitable purpose.
The Key characteristics of an Incorporated Trustee:
1. Incorporated Trustees are not established for profit-making purposes.
2. The primary objective is to promote a charitable cause or provide a public benefit.
3. The organization is managed by a board of trustees, who are responsible for making decisions and overseeing the organization's activities.
4. Members of the organization have limited liability, protecting their personal assets.
REGISTERING A COMPANY LTD BY GUARANTEE:
A Company LTD by Guarantee is a type of company registered under the Companies and Allied Matters Act (CAMA) 2020, designed for organizations that want to limit their liability without issuing shares. This type of company is often used for social enterprises, community organizations, and professional associations.
The Key characteristics of a Company LTD by Guarantee:
1. They can engage in profit making to in order to achieve its social goals.
Members of the company have limited liability, protecting their personal assets.
2. The company does not issue shares, and members do not have a financial stake in the organization.
3. Members provide a guarantee, which is a commitment to contribute a specified amount to the company's assets in the event of winding up.
4. Companies LTD by Guarantee have more flexibility in their governance structure and operations compared to Incorporated Trustees.
THE KEY DIFFERENCES AND IMPLICATIONS:
When deciding between registering an Incorporated Trustee and a Company LTD by Guarantee, it's essential to consider the following key differences and implications:
1. Incorporated Trustees are established for charitable or social purposes, while Companies LTD by Guarantee can be established for a wider range of purposes.
2. Company LTD by Guarantee can engage in buisness for the purpose of reinvestment into the company to help it achieve its goals, however, the directors are not entitled to salaries.
3. Incorporated Trustees are managed by a board of trustees, while Companies LTD by Guarantee have a more flexible governance structure.
4. Both options provide limited liability protection, but Companies LTD by Guarantee require members to provide a guarantee, which can be a financial commitment.
5. Incorporated Trustees are generally exempt from taxation, while Companies LTD by Guarantee are subject to taxation, although they may be eligible for tax exemptions or reliefs.
In conclusion, registering an Incorporated Trustee or a Company LTD by Guarantee requires careful consideration of your organization's purpose, structure, and objectives. Seeking the expertise of a lawyer can help ensure that you're making an informed decision and registering your business correctly.
Author: U.D Roberts