Sole Proprietorship – Organization Legal Structure

A cheerful small business owner with open sign

A sole proprietorship is about the simplest business structure for starting businesses all over the world. It is also the most common kind of structure that exists, especially in third-world countries.

Here’s a simple question before we continue. How much do you know about sole proprietorships? Many of us only have a peripheral knowledge about this business structure from basic business studies in secondary school. That can’t take you very far.

We will show you what you need to know about the organization legal structure of sole proprietorships. Also, we will show you how to set up this business structure in Nigeria. Let’s go!

What is a sole proprietorship?

It is only logical for us to begin here as it sets the foundation for what we are about to learn. The first thing to know is that this kind of business isn’t a legal entity. Different schools of thought present us with different definitions of this concept.

A sole proprietorship is a business that is owned by an individual who bears the risks and pays the debts.

A sole proprietorship is also an unincorporated business that has a single owner who takes all the profits and pays the taxes. The owner is also known as a sole proprietor or sole trader.

From these definitions, it is clear that this is the easiest business structure to establish, run, and take apart. It is pretty much very popular all around the world.

Sole Proprietorship: Setting at a glance

To be honest, most sole proprietorship businesses in Nigeria are not registered with the government.

Rather than follow the status quo, let’s look at the proper way to set up a sole proprietorship. By the way, if you set it up properly, you can be sure that you’ll enjoy the benefits as well.

Decide on your business name

A business name has a significant impact on your marketing and branding, both are just as important. Most SMEs in Nigeria run by sole proprietors bear the name of their owners, while some bear other names.

Here’s something that you must understand about naming your business. It isn’t a rush so you should take some time to decide. However, make sure that it is easy for your target audience to relate to the name.

Name search

The reason for naming your business is so that you can register with the country’s “Registrar of companies.” Wondering what that is? Not to worry, that’s the Corporate Affairs Commission or CAC.

You can run a name search with this body to be sure no one else is using this name. If some other SME in Nigeria is using this name, you need to change it or tweak yours. It doesn’t cost much to run a name search with the CAC. Run a quick name search now!

Register your business name

Great! You have a unique name, now your next bidding is to register this name. This is a very important aspect of the organization legal structure of sole proprietorships. However, many business owners neglect this.

Registering your business name comes with several benefits. Some of these benefits include:

a.      Gives you a unique identity and credibility.

b.      Provides access to loans and other banking services.

c.       Helps to attract investors.

d.      Allows for business continuity.

e.      Allows the business to stand as a legal entity.

What do you need to register your sole proprietorship business?

a.      Name availability code (from your name search).

b.      Government-issued ID.

c.       Passport photographs.

d.      Business description

e.      Details of the director and secretary.

Click here to register your business today.

Obtain the necessary permits

Every business has a specific set of permits or licenses required to run. As the business owner, you must find out what permits or licenses apply to your business. Once you do, you should begin processing them.

There are so many reasons why you need to get these documents. Firstly, it gives you credibility. Some of your customers know about these documents and will request to see them before transacting with you. Secondly, it saves you from avoidable embarrassment in the future.

Seek a legal review

Very few SMEs in Nigeria that operate at the sole proprietorship level do this. It is understandable because you don’t expect any legal complications. However, it is wise to take this step to protect your business in the future.

Find an attorney that can help you set up the proper organization legal structure for your business. They’ll guide you through the process which will give you an edge in the future.

Advantages of Sole Proprietorships

Still wondering what the big deal is about sole proprietorships? Here are some reasons why you may consider starting one for yourself.

Easy to set up and run – Of all the business structures available, this is the easiest to setup. Like you have read above, it has the least legal obligations.

Speed of making decisions – The onus of making decisions lies upon the sole proprietor alone. Whatever they say stands as law in the business. You have no partners or board of directors to consult so it is easy to decide on what you want.

Enjoying profits – The plunder is yours for the taking. You only share with whom you desire. As a result, you can decide to inject profits back into the business if you desire.

Disadvantages of Sole Proprietorships

The idea must be interesting to you already but we must let you know that there are a few pitfalls.

Continuity is difficult – When the owner passes on, it is very likely that the business dies as well. The way to solve this problem is by raising someone to take your place.

Burden of risks – Enjoying the profits alone is great but you’ll also have to bear the risks alone. The latter part isn’t as fun as the former. But when you consider the joys of enjoying the profits, bearing the risks is worth it.


We believe that by now, you know how to set up the organization legal structure of a sole proprietorship. This knowledge will help you as an SME in Nigeria to thrive against the competition and establish continuity. Do you have any questions? Ask them in the comments section.

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