With Nigeria’s new 2026 tax laws kicking in, many small business owners are asking one important question:
“Should I remain as a Business Name (BN), or is it time to upgrade to a Limited Liability Company (LLC)?”
If you run a hustle; SME, online shop, consulting gig, or even a small agency, this one is for you. The new tax reforms have quietly shifted the game and registering as an LLC now comes with serious benefits that weren’t as attractive before.
1. Your Personal Assets Need Protection
As a Business Name, you and the business are legally the same. If the business runs into trouble, your personal assets are at risk. An LLC shields your personal property.
As a Business Name, you and the business are technically the same person in the eyes of the law. If the business runs into trouble; debt, lawsuit, unpaid obligation , your personal assets are on the line.
However, an LLC separates your business assets from your personal assets.
Your house, car, land, and savings are protected.
In 2025/2026 Nigeria, where one bad contract or one angry customer can escalate quickly, that shield matters.
2. LLCs Now Get Huge Tax Breaks Under the New Law
Small companies are defined as companies with annual gross turnovers of NGN100million (previously NGN25million) and below and total fixed assets not exceeding NGN250million.
According to the new tax law, Nigerian companies except small companies will pay a “Development Levy” at 4% of their assessable profits (i,e. tax profits before deducting tax depreciation and losses). The Development Levy consolidates the Tertiary Education Tax (TET), Information Technology Levy (IT), the National Agency for Science and Engineering Infrastructure (NASENI) levy and the Police Trust Fund (PTF) levy.
Small companies will now enjoy:
– 0% Company Income Tax
– 0% Capital Gains Tax
– No 4% Development Levy
Business Names do not qualify for these tax reliefs.
3. Better Tax Planning
LLCs can now structure income (salary, dividends, reimbursements) and reduce overall tax legally. BNs cannot.
4. VAT Input Recovery
The VAT rate of 7.5% has been retained. Nigeria now adopts globally recognised VAT principles that allow for the claim of input VAT on all purchases including services and fixed assets. Businesses providing services which were previously unable to claim input VAT can now do so, provided that the input VAT is directly related to their supplies that are also subject to VAT.
5. Business Continuity
In Nigeria, “Limited” carries weight. As an LLC you enjoy more credibility, clients take LLCs more seriously, thereby opening bigger business opportunities
Banks are more inclined to give loans or grants
Corporate clients respond faster
Government contracts are more likely to be offered up to LLCs
Investors and partners feel safer in investing in LLCs
You can bring in new shareholders anytime
An LLC continues even if the owner changes. A BN does not have such perpetuity
6. Compliance Made Easier
With Nigeria moving to e‑invoicing, fiscalisation ,Stricter VAT tracking, Automated reporting. More tax cross-checks and digital compliance, LLCs’ structured record‑keeping is a major advantage.
LLCs are more structured, making compliance easier.
A Business Name can feel “simpler” until you’re hit with penalties because something wasn’t correctly documented.
7. Access to Loans, Grants & Investors
An LLC can ; raise money through share sales; bring in multiple owners ; qualify for more government programmes
Ultimately, LLCs qualify for more funding opportunities and can issue shares to raise capital.
