Guide to Limited Liability Partnership in Nigeria

A Comprehensive Guide to Limited Liability Partnership (LLP) in Nigeria 

As the business landscape in Nigeria continues to transform, a growing number of entrepreneurs and professionals are searching for structures that provide both flexibility and reduced personal risk. The Limited Liability Partnership (LLP) is an excellent option, offering partners liability protection along with operational independence. This blog will delve into all you need to know about LLPs in Nigeria, covering their legal foundations, the registration process, and the benefits they offer, making it a useful resource for both local and international entrepreneurs. 

Understanding the Basics of Partnerships in Nigeria 

Types of Partnerships in Nigeria 

The Companies and Allied Matters Act (CAMA) 2020 governs partnerships in Nigeria. It specifies different forms of partnerships, including general, limited, and limited liability partnerships. When selecting the appropriate partnership type, it’s important to consider factors like liability, flexibility, and your overall business goals. 

1. General Partnership: In a general partnership, all partners share equal responsibility for managing the business and are personally liable for any debts. This structure is straightforward but comes with significant personal risk since the partners’ assets can be used to settle business liabilities. 
2. Limited Partnership: Under Part D of CAMA 2020, limited partnerships allow at least one general partner to manage the business and take on liability, while other partners, known as limited partners, contribute capital without being personally liable for debts beyond their investment. 
3. Limited Liability Partnership (LLP): The LLP, a relatively new structure introduced under CAMA 2020, combines aspects of both a corporation and a partnership. Partners benefit from limited liability like a corporation but enjoy the operational flexibility of a partnership. 

What is a Limited Liability Partnership (LLP)? 

An LLP is a hybrid business structure where partners are shielded from personal liability for the business’s debts and obligations, much like shareholders in a corporation. This setup makes LLPs particularly attractive for sectors like professional services (law, consulting, accounting) and other fields that benefit from limited liability without requiring extensive corporate governance. 

Key Features of LLPs 

• Separate Legal Entity: An LLP has its own legal identity, distinct from its partners. 

• Limited Liability: Partners’ personal assets are protected from the business’s liabilities. 

• Flexible Structure: LLPs are not bound by strict corporate regulations and can function with simplified internal agreements. 

• Two Designated Partners: As provided for by CAMA, An LLP shall also have at least two designated partners with at least one of them resident in Nigeria. The role of a designated partner involves taking charge of all activities and obligations that a limited liability partnership needs to fulfill to adhere to CAMA provisions. This encompasses the filing of documents, return statements, and any other reports mandated by CAMA, as well as those specified in the partnership agreement. 

Foreign Limited Liability Partnership in Nigeria 

The LLP model in Nigeria is accessible to foreign investors, making it a compelling option for those eager to explore the Nigerian market without the burden of personal liability. For these investors, LLPs provide a flexible structure, enabling various management roles and limited liability while ensuring compliance with local laws. They are governed by rules like those for local partnerships, with necessary tweaks to adhere to international investment standards. 

LLP Registration in Nigeria 

Steps for LLP Registration 

1. Reserve a Name: To get started, log into the CAC portal using your account, which can be for either public users or accredited agents. You will need to enter two names: your preferred name and an alternative name. After you submit your application and pay the necessary fees, one of the names will be reserved for a period of 60 days. An availability code will be issued once your application is approved. 
2. Prepare Documents: After you’ve paid the necessary fees, the next step is to complete and submit the incorporation document online. The documents required for incorporation include: 
3. The CAC/LLP Form 01 is the application needed to register a Limited Liability Company. When filling out this form, you will need to provide several important details, including the approved name of the LLP, information about at least two partners, and details of at least two designated partners, one of whom must reside in Nigeria. Additionally, you should include a description of the business activities, a verifiable registered address for the head office, as well as an email and phone number. Don’t forget to include information about all partners, those with significant control, each partner’s contribution to the partnership, and the partnership agreement. 
   • Recent passport-sized photos for all partners.  
   • A copy of a valid photo ID for each partner, such as a driver’s license, national ID card, voter’s card, or birth certificate.  
   • Attach the Partnership Agreement  
   •  Proof of online payment for the filing fee. 
4.  Complete the Application: Submit the registration form, upload the necessary documents, and pay the required fees through the CAC portal. 
5. Obtain Certificate of Incorporation: Once approved, the CAC issues a Certificate of Incorporation for the LLP, making it legally recognized in Nigeria. 

Benefits of LLPs for Nigerian Businesses 

1. Reduced Liability: All partners enjoy limited liability, shielding their personal assets. 
2. Legal Entity Status: As a separate legal entity, the LLP can own property, sue, and be sued independently. 
3. Flexible Management: LLPs allow partners to structure management roles and responsibilities as desired, making them ideal for professional services. 

Compliance and Regulatory Obligations for LLPs in Nigeria 

While LLPs are more flexible than corporations, they still have regulatory requirements, including: 

• Annual Returns: LLPs must file annual returns with the CAC to remain in good standing. 

• Bookkeeping and Auditing: Though not as stringent as corporations, LLPs must maintain accurate records and may need to audit accounts, depending on the business’s nature. 

• Tax Obligations: LLPs must comply with tax requirements, including Value Added Tax (VAT) and Personal Income Tax for partners’ income. 

Challenges and Considerations for LLPs in Nigeria 

1. Understanding Legal Nuances: The LLP structure, although beneficial, requires a good understanding of Nigeria’s legal landscape. 
2. Professional Advice: Drafting a comprehensive LLP agreement with the help of legal professionals can prevent future disputes. We at eLegal Consultants are well qualified in preparing such documents, you can reach out to us to help you out. 
3. Compliance Costs: LLPs may have slightly higher compliance costs compared to general or limited partnerships. 

Conclusion 

Limited Liability Partnerships (LLPs) are a versatile and efficient business structure in Nigeria, combining liability protection and flexibility. Under CAMA 2020, LLPs are growing in popularity, offering Nigerian and foreign entrepreneurs a practical alternative to traditional partnerships.  

The process of LLP registration is straightforward and managed by the Corporate Affairs Commission, making it easier for businesses to benefit from limited liability while operating with flexibility and fewer formalities than corporations. If you need help, reach out to eLegal Consultants for advice and guidance on matters such as registration, drafting necessary documents and compliance requirements. Contact us now.