When Tunji left his banking job to start a logistics company in Abuja, he thought he had everything figured out — the business model, a borrowed delivery van, and a catchy brand name. What he didn’t see coming was the knock on his door from a regulatory officer six months later. Tunji hadn’t registered his business, and the fine he faced was enough to wipe out a month’s earnings.
Stories like Tunji’s are far too common — and avoidable.
In Nigeria’s fast-paced business environment, many ambitious entrepreneurs launch ventures with energy and vision but without a firm legal foundation. In the early days, legal setup can seem like a technicality, something to “sort out later.” Unfortunately, “later” often becomes too late — when contracts fail, taxes pile up, or partnerships turn sour.
At Kehinde & Partners, we’ve worked with countless clients who learned legal lessons the hard way. But it doesn’t have to be that way. Legal missteps aren’t just for the reckless — they happen to well-meaning, intelligent people who simply didn’t know what to watch out for.
This article is here to change that.
We’ll walk you through five of the most common legal traps new business owners fall into in Nigeria — and more importantly, how to avoid them. Whether you’re setting up a real estate agency in Lagos, a tech startup in Enugu, or a food production company in Jos, the same foundational principles apply.
Let’s begin with the most basic — and most overlooked — step of all.
Think of a business without proper registration like a house built without a land title. It may look beautiful on the outside, but legally, it stands on shaky ground.
Many entrepreneurs begin informally — selling products online, offering consultancy services, or opening physical shops — without registering their business name with the Corporate Affairs Commission (CAC). At first, this seems harmless. After all, cash is coming in, and customers are happy. But as growth begins and visibility increases, so does scrutiny.
Why It’s a Problem
Operating without registration puts your business in a legal grey area. You can’t enter formal contracts. You can’t open a corporate bank account. You can’t apply for loans or grants. Worse, regulators can shut you down, and competitors can register your business name and lock you out of your own brand.
We’ve seen it happen. One of our clients — a successful tailor in Garki — ran a fashion brand for three years using a name she never registered. When she tried to expand by applying for an SME loan, she was denied because her brand had no legal existence. To her shock, the name had already been claimed by someone else.
Legal Consequences
How to Avoid It
What You Might Ask at This Stage:
Answer (Briefly):
If you’re just starting small, a business name might suffice. But if you’re seeking investor confidence, limited liability, or planning to scale significantly, a limited company is often the better route. You’ll need valid ID, a business address, and two name options, among other basic documents.
Case in Point:
A tech founder in Yaba wanted to pitch for a major accelerator programme. He had the pitch deck, product demo, and projections. But without legal registration, his application didn’t even pass the first stage.
Visual Idea:
A step-by-step flowchart titled “Your Legal Business Setup in Nigeria,” showing:
Name search → CAC registration → TIN → Corporate Bank Account → Annual Returns
There’s a saying in the legal world: “A bad contract is worse than no contract at all.”
That may sound dramatic, but it’s a lesson many Nigerian business owners have learned the hard way.
Let me tell you about Chika — a driven interior designer in Lekki who landed her biggest client yet: a corporate office redesign worth ₦3.5 million. Wanting to “look professional,” she downloaded a contract template online and simply swapped in her client’s name. It looked fancy, with long legal phrases and signature lines, but it didn’t define deliverables, didn’t protect her payment timelines, and didn’t include any dispute resolution clause.
Two weeks before final delivery, the client backed out — refusing to pay the balance and citing “unsatisfactory work.” Chika had no legal leverage. The contract she thought would protect her was, in fact, toothless.
Why It’s a Problem
Contracts aren’t just paper — they’re your first line of defence when business relationships go south. Generic contracts are usually foreign (non-Nigerian jurisdiction), vague, or missing key clauses. And when they’re borrowed from friends or copied from the internet, they rarely reflect your unique business terms or the local legal framework.
Legal Consequences
How to Avoid It
What You Might Ask at This Stage:
Answer (Briefly):
Not every document needs to be long or expensive — but every binding agreement should be reviewed with your interests in mind. Reusing a one-size-fits-all contract is like using a key that opens too many doors — one day, it might open the wrong one. And if a client provides their own contract, have your lawyer review it before signing — their terms may not protect you.
Case in Point:
A digital marketing agency in Port Harcourt lost ₦800,000 in unpaid fees because the client’s contract gave all control to the client — including the right to terminate without cause and withhold final payment. The agency had signed without legal review, eager to land the client.
Visual Idea:
A side-by-side comparison graphic:
Left side: “Generic Contract” (vague, foreign law, no timelines)
Right side: “Custom Nigerian Contract” (clear terms, local jurisdiction, enforceable)
For many first-time business owners, taxes feel like that dusty file you’d rather not open — until someone else opens it for you, with penalties attached.
Take Mr. Ade, a small-scale importer in Kano who ran his operation for two years without registering with the Federal Inland Revenue Service (FIRS). “My business isn’t big yet,” he said when asked why. But when a distributor requested his Tax Identification Number (TIN) before signing a supply deal, Mr. Ade scrambled. He not only lost the deal, but also discovered he had already accumulated penalties for failing to file basic returns.
Why It’s a Problem
Many Nigerian entrepreneurs wrongly believe that if they’re not making profit yet, taxes don’t apply. But certain obligations — like Value Added Tax (VAT), Pay-As-You-Earn (PAYE) for employees, and annual returns — kick in as soon as your business starts operations, regardless of how much you’re earning.
Legal Consequences
How to Avoid It
What You Might Ask at This Stage:
Answer (Briefly):
Not all taxes are based on profit. For instance, VAT is collected on sales, regardless of your business size. Failing to remit it—even unknowingly—can attract fines. It’s safer and smarter to start compliant and scale confidently, than to clean up avoidable messes later.
Case in Point:
A catering startup in Ibadan grew fast through Instagram orders. When she expanded to event contracts and government tenders, she was asked for her tax clearance certificate. Without one, she lost multiple deals and had to pay retroactive penalties for unfiled VAT.
Visual Idea:
Create a “Startup Tax Checklist” infographic with the following:
✔ TIN registration
✔ VAT & CIT awareness
✔ PAYE for staff
✔ Annual return dates
✔ Simple record-keeping tips
Your brand is your identity — and in business, that identity has value. Yet many Nigerian entrepreneurs treat intellectual property (IP) like an afterthought, leaving their business names, logos, and innovations open to theft or dispute.
Consider the case of Ngozi, a talented baker in Enugu who built a thriving cake brand, “Sweet Layers,” entirely through Instagram. Her designs were original, her name had traction, and she had even started selling branded merchandise. But she never trademarked the name.
Six months later, she discovered another bakery had registered “Sweet Layers Nigeria Ltd” with CAC and filed a trademark. Ngozi’s account was flagged, and she was issued a cease-and-desist notice. Everything she built — gone, or at least at risk of a court battle.
Why It’s a Problem
In Nigeria, ownership of a name or logo doesn’t come from usage — it comes from registration. If you don’t secure your brand legally, someone else can. Worse, they can stop you from using your own materials and even demand compensation.
And it’s not just names. Slogans, jingles, website content, software, product formulas — these are all part of your IP portfolio, and they can either protect your growth or expose you to costly disputes.
Legal Consequences
How to Avoid It
What You Might Ask at This Stage:
Answer (Briefly):
Yes — CAC registration only gives you the right to use the name as a corporate entity. It doesn’t protect your name, logo, or brand image from being used by others. A trademark secures exclusive rights and allows you to take legal action if anyone infringes on your brand.
Case in Point:
An app developer in Abuja launched a fintech tool called “QuickPay,” only to discover it had been trademarked by another tech firm. He had to rebrand — including domain, design, and marketing materials — all at great expense.
Visual Idea:
A simple “IP Protection Pyramid” showing:
Base: CAC Registration
Middle: Trademark (Name, Logo, Slogan)
Top: Copyright (Content, Software, Design)
Partnerships often begin with trust. Two siblings, old school friends, or business associates decide to “join hands” and start something. In the early days, excitement takes over — roles are assumed, money is invested, and things move quickly. But without a clear legal agreement, even the closest relationships can spiral into dispute.
Let’s talk about Femi and Musa, cousins from Ilorin who launched an agro-processing business together. Femi brought in the capital and handled operations. Musa managed marketing and sales. Everything ran smoothly—until the profits began to grow. Suddenly, there were disagreements about who owned what, how funds were spent, and who had the final say on decisions. With no partnership agreement in place, it turned into a word-against-word battle. Eventually, the business collapsed.
Why It’s a Problem
Verbal agreements or “we’ll sort it out later” arrangements are ticking time bombs. Without a written, signed partnership or shareholder agreement, there’s no legally binding clarity on each person’s rights, responsibilities, profit shares, or exit paths. Disagreements become personal. And worse — courts can’t enforce what was never written down.
Legal Consequences
How to Avoid It
What You Might Ask at This Stage:
Answer (Briefly):
Trust is a beautiful thing — but in business, clarity is better than memory. Relationships evolve, and money complicates everything. A written agreement protects both of you and prevents misunderstandings from destroying your work. If you’ve already started the business, it’s not too late — document the terms now and have both parties sign.
Case in Point:
A husband-and-wife duo in Jos opened a beauty spa together. All was fine until a third investor came in. Without any formal agreement between the spouses, equity was unclear — and when they separated personally, the legal chaos that followed nearly bankrupted the spa.
Visual Idea:
A two-column table:
Column 1: “Without an Agreement” → Confusion, Disputes, Legal Risk
Column 2: “With a Legal Agreement” → Defined Roles, Peace of Mind, Scalable Growth
Starting a business in Nigeria is a bold step — one that requires vision, courage, and an unwavering commitment to growth. But even the most promising venture can unravel if it’s built on legal quicksand.
From failing to register your business to signing vague contracts, neglecting taxes, overlooking intellectual property, or entering partnerships without clear terms — these legal traps aren’t just bureaucratic slip-ups. They’re real threats that can cost you time, money, and peace of mind.
But here’s the good news: every one of these traps is avoidable. With the right legal guidance, you can launch, operate, and scale your business with confidence.
At Kehinde & Partners, we’ve helped hundreds of entrepreneurs turn ideas into registered companies, turn handshake deals into enforceable contracts, and turn legal confusion into strategic protection. We’d be glad to do the same for you.
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