A lot of business owners are asking the same question right now.
If your business earns below ₦5 million yearly and you’re thinking of changing from a business name to a company, you’re probably wondering —
Will this actually help me save on tax?
Here’s the truth.
When your profit is below ₦5 million, you’re considered a micro or small business.
Most people in this category work alone or with a small team — and that’s perfectly fine.
But it’s important to understand the difference between a business name and a company.
A business name is tied directly to you — legally, you and your business are the same person.
A company, on the other hand, is a separate legal body — it stands on its own.
And that makes a big difference when it comes to taxes.
Here’s how both are taxed:
• Business name: you’re taxed on your profit (after removing expenses).
• Company: tax is calculated on your total income before expenses — your turnover.
Now, here’s the interesting part:
If you run a business name and make ₦5 million profit, you’ll pay about 18% tax.
But if your company’s turnover is below ₦50 million, you pay zero tax.
That sounds like a smart move, right?
Not exactly.
Before you rush to upgrade, think about what happens when your business starts earning more.
Once your company crosses ₦50 million in turnover, the tax rules change.
• If your company earns ₦51 million and your profit is ₦25 million, you’ll pay 30% tax — that’s ₦7.5 million.
• But if the same ₦25 million profit came from a business name, your tax is about 23% — roughly ₦5.75 million.
Same profit, but a bigger tax bill for the company.
So, what’s the lesson here?
Becoming a company can help you reduce tax when you’re still small.
But as your income grows, that same decision could make you pay more.
In simple terms:
Don’t just upgrade becuase of tax benefits. Think long-term.
Your business structure should fit both where you are and where you’re going.
In summary:
Upgrading from a Business Name to a Limited Liability Company (LLC) can be a smart move — especially if you want to attract investors, protect your personal assets, and access bigger business opportunities. However, when it comes to tax, the best option depends on your business size, profit margin, and future goals.
If you’re thinking about upgrading your Business Name to a Company, Brand Growth can help you handle the process professionally and seamlessly through the CAC portal.
📧 Email: brandgrowthboom@gmail.com
📱 WhatsApp: +2348111858651
Let’s help you transition your business legally and strategically — from registration to compliance.