The Distinction Between a Company and a Business: Understanding the Key Differences

There are many times when people use the words “company” and “business” like they mean the same thing. Some people even think there is no difference between both of them. But the truth is, there are clear differences between a company and a business. In this blog post, we will break it down in a way that everyone gets to understand how different the two words are.

Let’s take it slowly and explain everything you need to know so that you never confuse the two again. If you are planning to start a hustle, open a shop, create an online brand, or register a company in Nigeria, then this post is for you.

Table of Contents

What Exactly Is a Business?

A business is any activity where you offer a product or service to make money. For example, if you sell roasted corn on your street, run a small POS stand, sell hair online, or even fry akara in your compound, you are running a business. It does not matter if it is big or small, online or offline. Once money is being made from what you are doing, it is called a business.

A business can be something you do alone or with other people. And it does not always have to be registered with CAC (Corporate Affairs Commission) before it is called a business.

In Nigeria, most people are running small businesses without any official registration. They just wake up, buy and sell goods or provide services, and collect money. That’s a business. You don’t need a fancy name or office to be a business owner.

What Then Is a Company?

A company is a special type of business that is legally registered with the government. In Nigeria, this is done through CAC. A company is a legal body on its own. That means, by law, the company is treated as if it is a real person.

This is very important because when a company is registered, it can do things like open a corporate bank account, sign contracts, borrow money, and even get sued, all in its own name. The owner of the company is different from the company itself. They are not the same.

So, while all companies are businesses, not all businesses are companies.

Clear Differences Between a Business and a Company

Now that we’ve explained the basic ideas, let’s talk about the main differences. Below are some of the biggest ways a company and a business are not the same.

1. Registration Status

A business may or may not be registered. You can start selling akara tomorrow and nobody will ask you for registration. But a company must be registered. That is what makes it a company.

Once you register with CAC and get a certificate, your business becomes a company. Without that, it is just a normal business.

2. Legal Identity

A company is a legal person on its own. That means it can own property, sue people, and be sued. But a business is not seen as a separate person. If something goes wrong in your small business, it is you they will hold responsible, not your business.

This is why many big companies don’t use their personal names or accounts. Everything is done in the company name.

3. Ownership and Management

A business is often owned and run by just one person. It can also be owned by two or three people as partners. But a company can be owned by many people, including shareholders, directors, and board members.

The management of a company is usually more serious. There are rules, processes, and systems that guide how a company is managed. In a small business, the owner makes most of the decisions without any formal system.

4. Access to Funding

A company has more chances to get funding. It can collect loans from banks, get investors, raise money by selling shares, and even win government contracts. This is because banks and investors trust registered companies more than random businesses.

A business might still get loans or grants, but it is usually harder, especially if it is not registered or does not have structure.

5. Profit and Liability

When a business makes profit, all the money belongs to the owner. But in a company, the money belongs to the company first, not the owner. The owners may then pay themselves salaries or dividends.

Also, if your business fails and you owe people money, you will be held responsible. But if your company fails, the law separates you from your company. They cannot carry your personal property if the company is owing.

6. Tax Differences

Companies pay a different kind of tax. In Nigeria, companies pay something called Company Income Tax. There is also VAT and other taxes depending on the kind of business.

Small businesses may not even pay tax if they are not registered or if they don’t make enough income to be taxed. But once you register as a company, there are certain taxes you must pay every year.

7. Reputation and Trust

In Nigeria today, people trust companies more than small businesses, especially when it comes to serious contracts or partnerships. If you are a registered company, clients will take you more seriously.

You can also have more advantages like signing deals, working with banks, joining government programs, or applying for grants. Most of these are open only to registered companies.

8. Continuity

If a business owner dies, the business may stop unless someone else takes over quickly. But a company can continue existing even after the owners are gone. This is because a company is its own legal person. It does not die when the owner dies.

That’s why many big companies live for years, long after the people who started them have died.

9. Branding and Naming Rights

A company can protect its name and brand legally. Nobody else can use your company name if it is already registered. But a small business that is not registered can lose its name if someone else registers it first.

For example, if you are selling clothes under the name “Blessed Wears” and someone registers that name as a company, they can stop you from using it. But if your name is registered first, it is safe.

10. Growth and Expansion

A company can grow into many branches, build teams, and even open offices in other countries. A small business may not grow that much, especially if it lacks structure.

That’s why many small business owners later register their companies when they want to go far or get bigger opportunities.

Why This Difference Matters in Nigeria

Now let’s bring it home and talk about Nigeria. In Nigeria, we have millions of small business owners. People are hustling every day, from the guy selling phone accessories in Computer Village to the lady running a makeup business on Instagram.

Most of them are doing business without registering. And that’s fine, it’s a good way to start. But the moment you want to get serious, register your business. Make it a company.

Let’s say you want to:

• Apply for a grant
• Get a loan
• Run social media ads
• Work with a big brand
• Sell to government
• Build a trusted name

Then you need a registered company.

It doesn’t mean you must stop doing business. But when you add that company status, you open more doors. You become official.

How To Register A Company in Nigeria

Registering a company is not hard. Here’s a simple way to do it:

1. Choose a name for your company
2. Check if the name is available on the CAC website
3. Reserve the name
4. Prepare the required documents (you can use a lawyer or agent)
5. Fill in the details and submit online
6. Pay the registration fee
7. Get your certificate and start using your company name

You can register as a business name (cheaper) or as a full company (more structure). Business name is cheaper and faster. Full company has more benefits but costs more.

When Should You Move From Business To Company?

The answer depends on your goals.

If you are just testing something or starting with no capital, you can begin as a small business. Sell from your house, advertise online, and see how it goes.

But when you:

• Start making good money
• Want to attract big clients
• Want to borrow money
• Want to scale and hire people
• Want to protect your name

Then it’s time to register your company.

Registering your company is not only about CAC certificate. It is a mindset shift. It means you are now serious about your hustle. You are not just running a business, you are building an organisation.

Conclusion

A business is what you do to make money. A company is a legal version of your business that is officially recognised by the government. While both can help you earn money, a company gives you more power, more trust, and more chances to grow. Starting as a business is okay, but don’t stop there. If you are serious about growing, register your company. Make it official. Make it structured. It will help you in ways you can’t even imagine.