28/10/2025
Why You Should Consider Upgrading Your Business Name to a Limited Liability Company (LTD)
Most people don’t realize this... your Business Name and you are the same entity in the eyes of the law.
That means any profit your business makes is seen as your personal income, and you’ll pay Personal Income Tax (PIT) on it.
If your business is registered as a Business Name, you’re only exempted from tax if your annual turnover is below ₦800,000.
Once your annual turnover goes above ₦800,000, you’ll start paying Personal Income Tax (PIT).
But for a Limited Liability Company (LTD), it’s a different story...
If your annual turnover is below ₦50 million, you won’t pay Company Income Tax, you’ll just file nil returns.
But, once your turnover exceeds ₦50 million, your company becomes taxable.
Let’s break it down 👇
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Example 1: Business Name
You make ₦76 million in sales.
After removing allowable expenses, your profit is ₦26 million.
When you file your self-assessment, you’ll maybe record:
“Trade Income: ₦26 million”
And you’ll get just ₦800,000 in personal relief. Personal relief means, you’re not paying tax on just the first 800k.
That’s it.
No matter how you calculate it, you’ll be taxed heavily, because it’s treated as your personal income, not a company’s profit.
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Example 2: Limited Liability Company (LTD)
Now imagine that same ₦76 million in sales under an LTD.
Yes, because your turnover is above ₦50 million, you’re liable for Company Income Tax, but not on the ₦76 million.
You’ll first remove all allowable expenses.
What counts as allowable?
1. You can prove it with receipts or documentation.
2. It must be an accepted business expense (some things may be disallowed and added back).
After proper accounting, let’s say your taxable profit is still ₦26 million.
But here’s where it gets interesting...
If you bought a car in the company’s name, you can claim capital allowance, which reduces your taxable income.
You can even pay yourself a salary, declare directors’ remuneration, and record more deductible expenses.
At the end of the day, your taxable income might drop to ₦10M, ₦12M, or even ₦5M.
And you’ll only pay 30% on that, not on the full amount.
Can you see the advantage of Limited liability companies onver business names??
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No tedious requirements anymore, the Finance Act 2019 and CAMA 2020 made it easier.
A Limited Liability Company can now have just one director and one shareholder.
If your LTD makes less than ₦50 million in sales, you pay zero company income tax.
You’ll just file for VAT and income tax returns monthly on the FIRS portal.
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A Business Name may look simpler,
but in the long run, an LTD saves you money, protects you legally, and builds your credibility.
So if you’re serious about growth and tax reduction, upgrade to a Limited Liability Company.
It’s one of the smartest financial moves you can make for your business before 2026.
Your CAC Consultant
08161899697
