TAXPAYERS · BUSINESSES

Business names, enterprises and partnerships

An unincorporated business is not a separate taxpayer from the person who owns it. The profits of a business name or enterprise are the proprietor’s income, taxed under the Personal Income Tax Act — which is why a State revenue service, not the FIRS, assesses them.

How an unincorporated business is taxed

A business name registered with the Corporate Affairs Commission — "Sahel Foods Enterprises", "Tarauni Filling Station" — is not a legal person distinct from its proprietor. Its profits are the proprietor’s income and are taxed as personal income under the graduated bands, not as company income tax. The same is true of a partnership: the partnership itself is not taxed, and each partner is assessed on their share of the profit.

This matters practically. A business name with an annual profit of ₦6 million does not pay 30 per cent company income tax to the FIRS; the proprietor is assessed here on ₦6 million of income, less the Consolidated Relief Allowance and other reliefs, at the graduated rates. It also means that the proprietor’s personal tax record and the business’s record are the same record.

Alongside income tax, a business carries obligations that attach to the activity rather than to the profit: registering each premises it operates from, deducting PAYE from any employee, withholding tax on payments it makes to other individuals and enterprises, collecting consumption tax if it operates a restaurant or event centre, and holding whatever sector licence its activity requires.

What a business must do

Obligation	When	Cost	Where
Register the business for a TIN	Before commencing operations	Free	/services/tin-registration
Register each premises	Within 30 days of opening	₦10,000 urban / ₦2,000 rural	/services/business-premises
Renew premises registration	1 January each year	₦5,000 urban / ₦1,000 rural	/services/business-premises
Register as an employer if you have staff	Before the first payment of salary	Free	/services/paye-remittance
File and remit PAYE	Monthly, by the 10th	No filing fee	/services/paye-remittance
File the employer annual return (Form H1)	31 January	No filing fee	/services/paye-remittance
Deduct and remit withholding tax	Within 30 days of each payment	No filing fee	/services/withholding-tax
File the proprietor’s return of income	31 March	No filing fee	/services/direct-assessment
Obtain a tax clearance certificate	As required	₦10,000	/services/tax-clearance
Hold the sector licence for the activity	Annually	Varies — see the schedule	/revenue-heads/fees

Setting up correctly

Doing these five things in the first month avoids almost every problem a small business has with the Service.

Register the business and get a TIN

Free and same day. Everything else attaches to this number, and no bank will open a corporate account without it.

Register every premises

Per shop, office, workshop or warehouse. The certificate must be displayed at the premises, and an unregistered premises attracts a ₦50,000 penalty plus arrears.

Register as an employer if you have staff

Even one employee makes you an employer. Deduct PAYE from the first salary payment; do not wait until the business is "properly running".

Keep records from day one

Sales, purchases, bank statements and a payroll register. Six years is the retention period, and a business that cannot produce records is assessed on the Service’s best judgement.

Open a business bank account

Mixing business and personal money is the single most common cause of a disputed assessment, because the Service can only see what the bank statement shows.

Questions small businesses ask

My business made a loss. Do I still file?

Yes. A return must be filed whether or not there is a profit. A properly filed loss can be carried forward against future profits; a loss that was never declared cannot.

Do I pay both personal income tax and company income tax?

Not for an unincorporated business. Company income tax applies only to a registered limited company, and is federal. A business name pays personal income tax on its profits, here.

I have three shops. How many registrations?

Three premises registrations, one TIN. Each shop is registered and renewed separately.

How does the Service know what I earned?

From what you declare, and where that is absent or implausible, from enumeration data, bank information, premises size, staff numbers, purchase records and comparable businesses. A declared figure supported by records is always a better position than a figure the Service has to estimate.

Can I pay in instalments?

Yes, on application before the due date, normally over three to six months against a direct debit mandate. Applying before the due date is the point — an instalment request made after enforcement has started is a much weaker application.

I registered a business but never traded. What now?

File a notice of cessation or a nil return. An unclosed dormant record continues to attract best-of-judgement assessments, and those assessments become final if they are not objected to.

Register your business properly

TIN, premises and employer registration in one sitting.

Start registration Business premises