From Market Stall to Holding Company — Where the Brand Should Sit

This sub-cluster has used the word seller in every essay as though it named something definite. It does not. It has been standing in for a legal question that was deferred eleven times and cannot be deferred again, because every asset the previous essays worked to secure — the mark, the formulation, the registration, the design, the record — has to be held by somebody, and the somebody is a choice.

A brand is not owned by a business. It is owned by a legal person, and the question is which one.

Ask a Nigerian founder whether her business is registered and she will almost always say yes, and she will almost always be telling the truth. Ask what it is registered as, and a large proportion of the answers describe a business name — the registration that lets a person trade under something other than her own name, keeps a public record of who stands behind it, and is, for most small enterprises, the entirely sensible first step.

What it is not is a separate legal person. A business name is a registered trading style attached to the individual or individuals behind it. It does not own things. It cannot sue or be sued in its own right, it has no assets distinct from its proprietor's, and it does not survive its proprietor as an entity because it never was one. A trade mark held "in the business name" is held by the human being whose name appears on that registration, in exactly the same way as her house.

This is not a technicality and it is not a criticism of anyone's arrangements. It is the single most consequential misunderstanding in this whole sub-cluster, because every protective step the previous eleven essays recommend — filing the mark, holding the registration, owning the tooling, taking the assignment — lands in the same place. The steps are correct. The question this essay asks is where they land, and whether that place has a future.

The other half of the picture has changed in a way that matters. It was once genuinely awkward for a very small business to run more than one company, because a company needed a plurality of members and directors and each additional vehicle meant finding people to occupy those roles. Current Nigerian company law permits a private company with a single member who is also its sole director. The structural options described below stopped being the preserve of large groups at that moment, and a good deal of received advice has not caught up.

Each seat below is a real and defensible answer for some business. They are set out in ascending order of cost and of durability, and the test that separates them is the same one throughout: what happens to the name when something happens to the person or the vehicle holding it.

A holding structure is not created by incorporating a second company. It is created by the licence between the two, and that licence is a real instrument with real requirements — the same requirements the companion sub-cluster on licensing a name you own sets out at length, applied inward to a group the founder controls on both sides.

Three of those requirements are routinely neglected precisely because both parties are the same person in practice.

The licence must exist as a document, with a term, a scope, a territory and a stated consideration. A group that cannot produce the licence on request has two companies and no structure, and the tax authority, a liquidator or a purchaser's adviser will each ask for it at the worst possible moment.

The consideration must be defensible. Payments between connected companies are not left to preference: Nigerian transfer-pricing rules expect related-party dealings to reflect what unconnected parties would have agreed, and a royalty set at a figure chosen for its convenience is a position that has to be defended rather than a decision that has been made.

And the control must be genuinely exercised. The essay on the quality-control clause argues that a licensor who does not supervise the use of its mark can find the mark itself weakened — and nothing about that argument softens because the licensee is a company the licensor owns. A holding company that has never once inspected, approved or recorded anything is a licensor in name, and the risk is not that the group is embarrassed but that the register position it was built to protect is the thing put in question.

Two companies and an unperformed licence is not a structure. It is a filing obligation with a story attached.

Most businesses reading this should not build a holding structure, and an essay that ended without saying so would be selling something.

The costs are ongoing rather than one-off: two sets of statutory filings, two sets of accounts, two tax positions, a licence that must be operated and recorded, and a professional relationship that has to be maintained rather than visited. For a business whose brand is worth less than the annual cost of protecting it in this way, the structure is a net loss dressed as prudence, and the sound answer is a single limited company holding its own mark — the second seat above, properly executed.

Moving later is possible and is not free. A registered mark is transferred by assignment, the assignment is recorded at the registry, and a transfer of a valuable asset between connected parties is a transaction with tax consequences that need to be looked at before it is done rather than after. The practical implication is that the cost of restructuring rises with the value of the brand, which is an uncomfortable shape: the cheapest time to move the asset is when moving it feels least necessary.

Five signals, any one of which makes the conversation worth having now rather than at the next crisis. The brand has become worth more than the trade it carries. There is, or is about to be, more than one operating entity. Somebody outside the family is acquiring shares in the business that trades. The founder's personal estate would be materially complicated by the brand sitting in it. Or the operating business has begun to carry a risk — a product category, a customer concentration, a borrowing — capable of taking the company down with it.

This sub-cluster began with a distinction between three arrangements people describe with one word, and it has spent eleven essays taking apart everything that follows from choosing the one where your name goes on somebody else's manufacturing. Who owns the name. What the agreement has to say. How the mark is registered and what the certificate does not do. Who the regulator holds answerable. Who answers the injured consumer. Who owns the formulation, and the packaging, and the record of control. What the margin is really paying for. And what it costs to leave.

Every one of those questions has the same shape. Something is being built that will outlast the arrangement that produced it, and the law does not attach it to whoever built it. It attaches it to whoever took the step. The essays are, in the end, a list of steps.

This last question is the same shape once more, asked about the person rather than the asset. The mark can be perfect, the registration in the right name, the formulation documented, the tooling scheduled, the records held independently — and all of it can still sit in a place that ends when a person ends, or fails when a company fails. The second essay in this sub-cluster asked who owns the name on the product. The twelfth asks the same question with the time horizon extended, and the answer is not a name. It is a structure.

A trading company is a way of doing business. A brand is a thing capable of outliving one — but only if it was never kept inside it.

The man in the opening did everything the trade would have called right. He built something people asked for by name, he registered it, and he kept the certificate somewhere safe. What he never did was decide where it should live, and so it lived where he did, and it ended when he did — not because the law failed him, but because the law did exactly what it always does, which is to look for the person whose name is on the paper and, finding one, ask no further questions.

This publication is educational and analytical. It describes how legal and commercial structures work; it does not advise on any particular matter, and nothing here should be relied upon as advice on a reader’s own affairs. The author holds commercial interests in the brand-building and private-label sector examined by this series.