1 Can a business be registered as a Limited Liability Partnership in Nigeria?
Yes. The introduction of Limited Partnership (“LP”) and Limited Liability Partnership (“LLP”) is one of the fundamental watersheds that the Companies and Allied Matters Act 2020 (“CAMA”) has afforded the investors community as far as corporate business structure in Nigeria is concerned. On 31st August 2021, the Corporate Affairs Commission (“CAC”) announced that investors and business persons can now register LLPs and LPs using the CAC Online Portal.
Before now, individuals or businesses that desired to form a partnership could only register themselves as a Business Name (which does not enjoy the separate corporate legal personality that a limited liability company enjoys). Although the old approach was cheaper in terms of the cost of registration and attendant tax liability; the individual partners and their respective personal assets (under a Business Name structure) were/are unprotected from liability and litigation unlike the protection afforded by an LLP.
2 What are the differences between an LP and an LLP?
An LLP is a partnership but one with a body corporate and perpetual succession, just like a limited liability company. An LLP is a business structure or arrangement with its own separate legal personality, distinct from the partners. Two or more companies can form an LLP. Also, individual persons and companies can form an LLP. In an LLP, the liabilities of the partners are limited to the amount agreed to be contributed by the individual partners; or what is outstanding (from that agreed amount) in the event of winding up.
However, an LP is a partnership arrangement with at least two (2) partners (i.e. at least one general partner and one limited partner) in which the liabilities of a General Partner are unlimited while the liabilities of a Limited Partner are limited to his or her undertaking in the partnership (unless he has very huge investment and takes part in the management of the partnership).
An LP is usually recommended where any of the partner(s) is or are mere sponsors of a joint business and are not or will not be partaking in the daily affairs or management of the partnership business.
An LLP shall consist of a minimum of two (2) partners (called “designated partners”) with no maximum number of partners but an LP shall have a minimum of two (2) partners (one General Partner and one Limited Partner) and maximum of twenty (20) partners. The designated partners of an LLP or General Partner of an LP are responsible for compliance with CAMA, including filing of document, returns, statement and other reports under CAMA or under the limited liability agreement.
Please note that by section 749 of CAMA, any partner may become or cease to become a designated partner in accordance with the limited liability partnership agreement.
The registered name of an LP and LLP must end with the words “Limited Partnership” or the abbreviation “LP” and “Limited Liability Partnership” or the abbreviation “LLP”, as the case may be.
Below are the fundamental differences between LLP and LP in tabular form:
| S/N | LLP | LP |
| 1 | The liabilities for all partners are limited to the amount undertaken to contribute or outstanding contribution. | Liabilities of some of the partners (that is the general partners) are unlimited limited. |
| 2 | LLP shall be liable for all debts and obligation as an entity, just like a limited liability company. There is corporate responsibility in respect of LLP’s business. Assets of individual partners cannot be used to settle the LLP’s debts or other liabilities unless in cases of fraud or personal guarantee. | LP consists of one or more persons called general partners, who shall be liable for all debts and obligations of the firm. Individual partners are liable for the business of the partnership. Where LP cannot meet its liabilities, the assets of the partners can be applied to settle those liabilities. |
| 3 | LLP has unlimited number of members as partners. | In LP, partners shall not be more than twenty (20). |
| 4 | One of the partners of an LLP must be resident in Nigeria and will be responsible for regulatory compliance. | One of the partners must be a General Partner with unlimited liability and another as Limited Partner with limited liability. |
| 5 | Suitable for joint ventures in which all the partners are involved in the day-to-day running of the partnership business. | Suitable for business ventures in which some of the partners (that is the limited partners) are NOT involved in the day-to-day running of the partnership business |
| 6 | Any change in the partners of an LLP does not affect the existence, rights or liabilities of the LLP. | Resignation of a partner in an LP does not excuse him from liability. |
| 7 | LLP can sue and be sued in its corporate name. | LP cannot sue or be sued in its corporate name alone without adding the names of partners trading under the name. |
| 8 | LLP is more expensive to set up and requires more stringent compliance obligations. | LP is cheaper and easier to set up and has minimal regulatory filings. |
| 9 | LLP can have significant money invested in the business including power to enter into contractual relations, acquire and dispose immovable property. | A Limited Partner in an LP cannot invest significant money in or hold major decision-making power in the LP’s business otherwise he or she will become exposed to unlimited liability like the General Partner. |
| 10 | LLP may be exposed to both corporate tax and personal income tax as well as withholding tax amongst others (although the Federal Inland Revenue Service is expected to take a definite position on this). | LP is not exposed to corporate tax or withholding tax except only personal income tax payable by the partners. |
3 What are the requirements for registration of an LLP and LP?
The requirements for registering LLP and LP are provided for under Part C, Sections 746-788 of CAMA. Two or more individuals (including a corporation) are eligible to register an LLP and LP.
The general requirements for incorporation of LLP and LPs are:
- Applicants are to submit two (2) Proposed names of the LLP;
- Submission of the proposed business(es) of the LLP;
- The proposed address of the registered address of the LLP;
- Names and address of each partners of the LLP;
- Names, phone number, email and contact addresses of the persons who are to be designated partners of the LLP
- Details, phone number, email and contact of Person with Significant Control (that is person or partner holding at least 5% of the stake in the business);
- Signature specimen of the partners and persons with significant control
- The amount of contribution of each member to the partnership;
- A copy of the Partnership Agreement; and
- Any other information concerning the proposed LLP as may be required by CAC from time to time.
4 What is the Procedure for Registration of an LLP or LP?
i Conduct an availability check with two (2) proposed names on the CAC Portal;
ii Reserve the approved name;
iii Make payment of the required fee;
iv Fill the relevant form CAC/LLP 01 with the requirements provided above.
5 What is the cost of incorporating an LLP?
i. Application Fee is N500,000 (Five Hundred Thousand Naira);
ii Incorporation cost and certified true copies of incorporation documents is about N20,000.00 (Twenty Thousand Naira)
6 What are the advantages of registering a business as LLP?
LLP registration presents the partnership the following opportunities:
- A separate legal entity that can sue and be sued in its name;
- Acquire, own, hold, develop and dispose-off immovable or movable property;
- May have a common seal;
- Perform any other acts a body corporate may engage in lawfully;
7 Can a foreign LLP register in Nigeria?
Just like a foreign limited liability company, a foreign LLP that intends to carry on business in Nigeria must be incorporated in Nigeria as a separate entity. However, the Minister has the power by regulation to grant an exemption to foreign LLP from the requirement of incorporation. For example, by Regulation 22 of the Companies Registration, 2020, a foreign LLP may apply to the Minister for exemption if it is:
- An LLP invited to Nigeria by or with the approval of the Federal Government to execute any specified individual project;
- An LLP in Nigeria for the execution of specific individual loan projects on behalf of a donor country or international organization;
- LLP owned by a foreign government and engaged solely in export promotion activities; or
- An engineering and technical expert engaged on any individual specialist project under contract with any of the governments in the Federation or any of their agencies or with any other body or person, where such contract has been approved by the Federal Government.
8 What is the estimated timeline for registering an LLP?
The process of registration of an LLP should be completed in Fourteen (14) days.
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About KORIAT & CO.
We are a commercial law firm in Nigeria with network of lawyers and consultants in Ghana, Kenya and Rwanda.
We assist local and foreign clients to process company registration and business licences in Nigeria, Ghana, Kenya and Rwanda. We also provide legal advisory and support services to promoters and registered businesses.
The above article is not legal advice and does not automatically make its readers our clients unless they have engaged our services to represent them in any way.
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