What is Startup Company
According to Wikipedia, a startup is a company or project undertaken by an entrepreneur to seek, develop, and validate a scalable business model.
Startup means any company in the first stages of operations. Startups are set up by one or more entrepreneurs who want to develop a product or service to fill in demand gab.
A startup company or venture focuses on a single product or service that the founders want to bring to market. Such companies usually don't have a fully developed business model, and lack enough fund to progress onto the next phase of business.
Funds and sometimes skills are usually the major constraints startups face. To assist startups, government may create legal framework, startup hubs, and startup trust fund. Like in the United States, there is Silicon Valley, a startup hub, that provides incubation for startups in the States.
Startups are very critical players in a country’s economic development in the areas of job creation, innovations, problem solving, and wealth creation.
The Nigerian Startup Act 2022 provided for establishment of the Nigerian Startup Bill Secretariat, which is saddled with the responsibility of implementing the Act, and it is located at the Headquarters of the Nigerian Technology Development Agency (NITDA).
Here are some impacts Nigeria Startup Act will have on business
1. Certification
For a business to be regarded as a “startup”, such business will need to obtain startup certificate from the Nigerian Startup Bill Secretariat.
2. Tax Relief
Nigerian company that has been certified as a startup may benefit from tax holiday. The beneficiaries will include the company, its staff, and its investors.
For companies: Start-up companies may enjoy up to 4 years tax exemption, starting from the time it obtained a startup label. Startups under this Act may qualify for a Pioneer Status Incentive. Pioneer incentive grants tax break of up to 3 years, with possibility of additional 2 years extension to companies in the critical sectors of the economy such as technology, agriculture, etc.
The Act further provides additional incentive of 5% income tax relief on earned profits for companies that employ young talents with less than 3 years post-graduation work experience.
For employees: Employees of startup companies may enjoy Personal Income Tax relief of 35% of their income for two years of their employment.
For investors: Angel investors, accelerators, and venture capitalists may be entitled to tax credits of up to 30% of their investment in a labelled startup.
3. Startup Seed Funding
The Start-up Act provides for the establishment of a Startup Investment Seed Fund to be managed by the Nigeria Sovereign Investment Authority (NSIA).
The SISF will provide early-stage seed funds for startups on the orders of the Fund Manager (NSIA), and provide relief and incentive to technology laboratories, accelerators, incubators and hubs.
4. Capacity Building Trainings
The Startup Act provides for startups to receive capacity building trainings to be organized by the Nigerian Startup Bill Secretariat. The NSB council plans to partner with universities, polytechnics, and colleges of education to train students with the requisite entrepreneurial skills to start and run a startup businesses when they leave school.