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WHAT TYPE OF BUSINESS STRUCTURE IS MOST SUITABLE FOR YOUR BUSINESS?
Starting a business means that you have to decide which of the business structures available best suits you and the purpose of your business. This choice is made necessary by the fact that each business structure has its advantages and disadvantages.
Types of Business Structures To Operate In Nigeria
Sole Proprietorship: This is a one-man business.
Decisions are quick and easy to make and the structure requires less paper works than other structures.
The owner is personally liable for the risks and losses of the business.
Partnership: It is owned and managed by at least two people who have consented to sharing profits and losses.
The financial involvement and risks are shared by all partners.
One major disadvantage is that partners are collectively liable for the act of each partner and for losses.
Limited Liability Company: This involves the creation of a legal personality that has its own existence outside that of individuals who come together to create it.
The new entity can acquire properties, enter transactions and institute legal actions in its name.
A company does not dissolve at the death if its shareholders.
What Factors Should Determine your Choice of Structure?
- Nature of Business: Some businesses, in certain industries, such as insurance, banking, etc, cannot be going concerns in other business structures other than as a company.
- Liability: The amount of liability which the business owner(s) wants to be exposed to may determine the choice of structure. Where the owner(s) does not want to be personally liable for losses and acts of the business, a company is most suitable. Where the owner is not averse to being personally liable, a sole proprietorship or partnership could be a fair option.
- Cost of Forming and Running Business: While sole proprietorships and partnerships require relatively low cost of formation and administration, the cost of formation and administration of a company is relatively expensive. A person or group of persons who have substantial capital may not be wary of the high cost of running a company.
- Number of People Involved: Where only one person or not many people want to go into business, the structure to adopt will most likely be different from when more than twenty people want to go into business together. The number of people and the extent of their liability also determine the structure of business to adopt.
- Continuity of Business: One other important factor to consider is whether a business owner wants the business to continue when they die. Where the answer is affirmative, sole proprietorship or partnership may not be most suitable.
This blog post sheds some light on the different business structures that can be adopted by business owners.
Please share your thoughts in the comment section.
WHY DO I NEED TO SEND A CEASE AND DESIST LETTER?
A cease and desist letter is a letter sent by an individual or business to another person or business requesting that the recipient refrain from conducting an act which adversely affects the right or interest of the writer of the letter.
It is usually sent to advise a supposed aggressor of the injury suffered by an injured person, or to notify an aggressor of the consequences of his actions.
This letter could be used in many instances or for several reasons. For instance, in trespass to land, a cease and desist letter may be sent to the trespasser to advise such trespasser to discontinue the act of trespass or risk being sued.
In intellectual property cases, the owner of a copyright, trademark or patent may serve a cease and desist letter on a person who infringes on their rights to desist from such infringement or be sued.
Another common form of cease and desist letters is found in cases of Landlords and Tenants, when a notice of owner’s intention to recover possession is served on a tenant.
Below are some of the reasons for serving a cease and desist letter on persons or businesses:
- Stops unlawful exercise of legal right: serving a cease and desist letter on a person who exercises your legal rights unlawfully informs them to stop such unlawful exercise of right. This will caution them on the use of the right. This is usually the case in intellectual property cases.
- Serves as a notice of existing legal right: one may serve such letter on a person to notify them of the existence of a legal right which they infringe upon. In reality, some persons may claim that they are not aware of the existence of your right. When a letter is served on them, they have no such defense.
- It sometimes serves as condition precedent: there are times that certain forms of cease and desist letter are mandated to be served before institution of action. For instance, in a suit for recovery of premises, notice of owner’s intention to recover possession in court must be served on the tenant. Serving such letter means that you have performed the condition precedent.
This blog post sheds some light on why an individual or business might consider issuing a Cease and Desist letter.
Please share your thoughts in the comment section.
5 IMPORTANT LEGAL ISSUES TO CONSIDER BEFORE STARTING A BUSINESS IN NIGERIA
If an individual or group of entrepreneurs intend to start a business in Nigeria, there are several variables to consider. Below are some of them:
1. Applicable Laws: Disobedience of laws regulating business activities in Nigeria can cost individuals a fortune in the long run. As such, before setting out, a prospective business owner should appreciate certain provisions of the laws regulating businesses in Nigeria.
The principal law regulating businesses in Nigeria is the Companies and Allied Matters Act 2004. Depending on the nature of your business, there are several other laws that you have to be familiar with.
2. Your Business Name: Another important consideration is the Identity and Name that will be used for the business.
A research should be conducted to ensure that the name is not already in use by another business. There should also be a confirmation that the name is not restricted or prohibited by law.
One way to ensure that the name is not already in use is to make a public search with the Corporate Affairs Commission.
3. Type of Business Entity: Businesses in Nigeria are primarily structured under three classifications: Sole Proprietorships, Partnerships, and Limited Liability Companies.
Before starting a business, an entrepreneur should consider the appropriate structure for the business.
The right structure is usually determined by several factors such as; number of people involved, nature of business, amount of capital, etc.
4. Required Documents: All necessary documents required for the registration must be available and submitted as required by the Corporate Affairs Commission. The type of documents to be submitted is dependent on the business structure chosen. For instance, if an individual have chosen to register a Limited Liability Company, some of the documents needed are Articles of Association, Memorandum of Association, Particulars of directors, etc.
5. Employment and Tax Laws: An individual must be conversant with employment and tax laws and implications before starting a business. He must know the tax exposures and when they are due in order to avoid being guilty of tax evasion.
An appreciation of employment laws keeps entrepreneurs informed on employment requirements, terms and conditions.
This blog post sheds some light on the important legal issues an entrepreneur must consider before starting a business in Nigeria.
Please share your thoughts in the comment section.
THE BASICS OF CONTRACTS.
As humans, and in a fast growing society, we deal in all manner of transactions. We buy phones, cars, and other variants of properties. All of these transactions are often documented via contracts. Since contract confers rights and obligations on the parties, it is important to have an effective insight into what constitutes the basics of contract law.
Meaning of A Contract
A contract is an agreement which the law recognizes, conferring rights and obligations on the parties to it. It is an agreement which is binding in law and which the law court will enforce.
This definition suggests that not all agreements qualify as contracts. For example, most domestic agreements are not binding in law and cannot be called contract.
Types of Contracts
There are different types of contracts. They might be formal contract or informal, express or implied.
A formal contract is one which is under seal. It is usually written and sealed.
Informal contract, on the other hand, is one which is not under seal. It may be written but it usually has no seal. Thus, that an agreement is not written does not mean that it is not enforceable in law.
An Express contract is one in which the rights and obligations of the parties are clearly stated. This way, it is easy to know when the contract is breached.
Implied contract is one which does not clearly state the terms (rights and obligations). In this case, the court usually infers the terms of the contract from the conduct of the parties rather than clear terms written in a legal document.
Elements of a Valid Contract
The four basic elements of a valid contract are offer, acceptance, consideration, and intention to enter into legal relations.
An offer is a promise made by one party to the other with the intention that such promise shall become binding once the contract is established. For instance, if an individual named A goes to another named B to propose to buy his piece of land for a Million Naira, that is an offer.
Acceptance is an act of compliance with the terms of the offer proposed. Where B agrees to sell his piece of land upon A’s offer for the said One Million Naira, there is an acceptance from B.
Consideration is the substance of value which accrues to the parties to the contract. In our earlier example, A promised to buy B’s piece of land for a Million Naira. The One Million Naira is known as the consideration which B gets from the land.
Finally, for the contract to be valid, the parties must have the intention to be bound by law in the contract. Where the parties do not have the intention to be bound by law, such contract is said to be invalid for absence of intention to enter into legal relations.
This blog post sheds some light on essentials of a contract.
Please share your thoughts in the comment section.
WHAT TO DO WHEN A CONTRACT IS BREACHED
When individuals or businesses document transactions by signing contracts, it is usually hinged on the understanding that the exchange of promises entrusts some obligations on either parties.
These obligations could be to do or not to do an act. For instance, when two parties enter into a contract for the supply of cement for the construction of a structure, one party is obliged to supply the bags of cement while the other party is obliged to pay for the supplied merchandise.
A breach of contract is the failure of a party to a contract to fulfill or perform his obligations in a contract.
When a party fails to perform the obligation as promised under the contract, he is said to have breached the terms of the contract.
When a contract is breached by one party, the other party is left with some options to alleviate injuries that might be suffered.
The first option is to call the attention of the erring party to the breach and to seek amicable resolution via Alternative Dispute Resolution Mechanisms. In this instance, the issue of breach is sought to be resolved without the intervention of the courts via mechanisms such as negotiation, mediation, arbitration or any other means that does not involve a complete court process.
The second option is to sue the breaching contract in order to enforce the contract. This option is called litigation.
In litigation, the non-breaching party can apply for any of the following remedies:
- Damages: this is a payment awarded to a party against whom a contract is breached. Damages could be compensatory, punitive, nominal or liquidated.
- Specific Performance: this is only granted by the court where Damages is not sufficient as remedy. In this case the court gives an order to the breaching party to perform some obligations under the contract.
- Restitution: where the non-breaching party has done or refused to do an act that gives some benefit to the breaching party, the non-breaching party may apply for restitution. Restitution means that the parties are restored in their original statuses before the congregation. This is only available where the parties can be restored to their statuses before the contract.
This blogpost seeks to shed some light on what to do when faced with situations when a party to a contract fails to fulfill promises made in a binding agreement.
Please share your thoughts in the comment section.