There are many ways to protect yourself or your business especially when dealing with other people.
One way to actually protect yourself and your business is to actually make sure that you have the right legal structure.
For newbie entrepreneurs, one of the things you will need to do first as soon as you conceive the idea is to register the business.
The legal structure of your business is a function of the type of registration that you do.
Basically, you can structure your business as a Sole proprietorship or as a Registered company.
Very recently, there’s been a third category under the new CAMA Act and that is limited liability partnership (LLP)
But implementation of that with the CAC hasn’t started yet, so pending when it does we will stick with the first two, that is, Sole Proprietorship and Registered company.
In Nigeria, a sole proprietorship is mostly registered as a business name or as an enterprise.
Registered companies on the other hand can either be a company limited by shares or by guarantee or it may be an unlimited company.
A registered company may be private or public.
Your liability as a business owner and even as a company is dependent largely on the way your business is structured.
For example, if you register your business as an enterprise as against a Limited liability company, the implication is that your liability is personal.
What that means is that, there is no separate legal personality between you and your business.
You can only enter into contract in your personal name and not in the name of your business.
So when there are issues, you will be personally responsible and liable.
However, if you register your business as a limited liability company, the law presumes that your company is a distinct person. You are not responsible for the debts of the company.
Your registered company can enter into a contract in its own name, it can sue and be sued.
This is one major advantage that the company has over an enterprise.
So, in conclusion having the right legal structure for your business can actually protect you and your business.