In the dynamic landscape of Nigerian business, choosing the right legal structure is one of the most critical decisions an entrepreneur can make. The Companies and Allied Matters Act (CAMA) 2020, enacted to replace the outdated 1990 version, introduced significant reforms aimed at enhancing the ease of doing business, particularly for small and medium-sized enterprises (SMEs). These changes have made it simpler and more cost-effective to start and operate a business in Nigeria, aligning the country more closely with global best practices.
Whether you are a start-up founder, a family business owner, or an established entrepreneur looking to restructure, understanding the distinctions between small companies, larger (medium or big) companies, and business name registrations is essential. This article provides a comprehensive overview, drawing directly from the provisions of CAMA 2020, to help you navigate these options effectively.
What Constitutes a Small Company under CAMA 2020?
One of the standout innovations in CAMA 2020 is the formal definition and preferential treatment of small companies, outlined in Section 394. A small company is defined as a private company that satisfies all of the following criteria in the preceding financial year:
- Annual turnover of not more than ₦120 million (or such other amount as may be prescribed by the Corporate Affairs Commission – CAC);
- Net assets value of not more than ₦60 million;
- No foreign shareholders or government/public entity involvement;
- Directors (collectively) hold at least 51% of the company’s shares.
These thresholds, unchanged as of late 2025, provide a clear benchmark for qualification. Importantly, CAMA 2020 also permits single-shareholder private companies (Section 18(2)), many of which naturally fall into the small company category.
Key Benefits for Small Companies
Small companies enjoy substantial regulatory relief to reduce administrative burdens and foster growth:
- Exemption from mandatory statutory audits (except in regulated sectors like banking or insurance);
- No requirement to appoint a company secretary;
- Exemption from holding Annual General Meetings (AGMs), including for single-shareholder companies;
- Simplified financial reporting and filing requirements.
These exemptions make small companies an attractive option for start-up, family-run businesses, and emerging enterprises seeking to minimize compliance costs while benefiting from limited liability protection.
Medium and Large (Big) Companies: What Happens When You Outgrow Small Status?
CAMA 2020 does not explicitly define “medium” or “large” companies in the same detailed manner as small ones. Instead, it focuses exemptions on small companies. Any private company that fails to meet all the small company criteria—due to exceeding turnover/assets thresholds, foreign ownership, or other factors— is subject to the full suite of compliance obligations applicable to regular private companies.
Public companies (those offering shares to the public) are inherently treated as larger entities with heightened governance requirements, including:
- Mandatory audits;
- Appointment of a qualified company secretary;
- Compulsory AGMs held in Nigeria;
- Stricter disclosure and reporting standards.
It’s worth noting that tax classifications differ from CAMA’s. Recent tax reforms in 2025 have simplified company categories for income tax purposes (small companies now exempt up to ₦50 million turnover), but for CAMA compliance benefits, the ₦120 million threshold remains the key determinant.
As businesses scale, transitioning from small to larger status requires proactive planning to manage increased regulatory demands.
Business Name Registration: The Simplest Option for Sole Operators
For those not ready or needing the full protections of a company, CAMA 2020 retains the option of registering a business name (also known as an enterprise or sole proprietorship/partnership) under Part E.
This structure is ideal for:
- Freelancers;
- Petty traders;
- Very small-scale operations.
Registration is straightforward and inexpensive through the CAC, often completed quickly online. However, a business name is not a separate legal entity—the owner(s) bear unlimited personal liability for all debts and obligations.
In contrast, incorporating as a limited liability company (even a single-member small company) shields personal assets from business risks, offering perpetual succession and greater credibility with banks, investors, and partners.
CAMA 2020’s allowance for one-person companies has made limited liability more accessible than ever, reducing the appeal of business names for those seeking long-term protection.
Comparing the Options: Which Structure Suits Your Business?
| Aspect | Business Name | Small Company (Private Ltd) | Larger Private/Public Company |
|---|---|---|---|
| Legal Entity | No (personal liability) | Yes (limited liability) | Yes (limited liability) |
| Ownership | Individual or partnership | 1+ shareholders (Nigerian-owned for small) | Multiple, possibly foreign/public |
| Compliance Burden | Low (basic registration) | Low (exemptions from audits, AGMs, etc.) | High (full audits, AGMs, secretary) |
| Best For | Tiny operations, freelancers | Start-ups, family businesses, SMEs | Scaling or public-facing enterprises |
| Liability Protection | Unlimited | Limited to shares | Limited to shares |
| Credibility/Access to Funding | Limited | High | Highest |
Choosing wisely can save significant time and resources while mitigating risks.
Why Act Now? The Evolving Business Landscape in Nigeria
With Nigeria’s economy rebounding and digital entrepreneurship on the rise, CAMA 2020 continues to empower businesses five years after its enactment. However, misclassifying your entity or delaying proper registration can lead to penalties, lost opportunities, or personal financial exposure.
At Edelweiss Partners, we specialize in corporate law and have assisted countless clients in navigating CAMA compliance, from initial registration to restructuring as businesses grow. Our experienced team can provide tailored advice to ensure your structure aligns with your goals—whether qualifying for small company benefits or preparing for expansion.
Ready to secure your business future? Contact us today for a complimentary consultation on company incorporation, compliance reviews, or choosing between a business name and limited company. Visit our website at www.edelweisslawfrm.com or email info@edelweisslawfirm.com to schedule an appointment.
Protect your venture with expert guidance—because the right foundation today builds lasting success tomorrow.
This article is for general information purposes and does not constitute legal advice. Always consult a qualified professional for your specific circumstances.
Oki Achika Esq. Managing Partner