The first step in formalizing a business in all jurisdictions including Ghana is to legally register the business entity at the Companies Registry. Business registration in Ghana is undertaken by the Companies Registry is the Registrar General’s Department (RGD). There are various forms of business entities that can be registered under the laws of Ghana and it is therefore imperative to choose the right legal structure that best serves the intended business intentions.
FORMS OF BUSINESS REGISTRATIONS IN GHANA
These are the various forms of business registration under the laws of Ghana, they include:
- Sole Proprietorship;
- Cooperative societies;
- Companies Limited by shares;
- Companies Limited by guarantee;
- Companies with unlimited liability; and
- External Company.
For better understanding, below is a brief description of the various forms of business registrations in Ghana:
SOLE PROPRIETORSHIP IN GHANA
A sole proprietorship is one of the forms of business registration in Ghana. It is a business solely owned and usually run by a single individual. The business owner is not distinct from the assets of the business. Equally, a sole proprietor and the business are the same as there is no distinction in law between the business being carried out and the individual behind the business. In essence, the entrepreneur’s liability is not limited such that whenever the business is in any form of debt, the personal assets of the entrepreneur can be used to satisfy the debt.
The registration procedure for a sole proprietor business is less complicated and less costly than the other forms of business registration. The business must have commenced before registration is effected. If the name consists merely of the sole proprietor’s surname without any additions apart from all his/her true personal name or names or his initials, registration is not required.
PARTNERSHIP REGISTRATION IN GHANA
Partnership is another form of business registration in Ghana. It is simply defined as an association of two or more individuals (not more than twenty) carrying on business jointly for the purpose of making profits. In essence, a partnership relationship would consist of two or more owners, who must:
- be of sound mind;
- be above the age of 18 years;
- not have been found guilty of any offence involving fraud or dishonesty in the preceding five years;
- not be a company or another registered partnership.
Partnership is most suitable for persons who want to share liability for a business venture without the stringent requirements associated with incorporating a company. A registered partnership confers a separate and distinct legal entity from the individuals who make up the partnership. However, a partner is jointly and severally liable with the firm such that a partner can be sued individually in respect of debts and other obligations of the firm or he can be sued jointly together with the other partners and with the partnership.
COOPERATIVE SOCIETY IN NIGERIA
A Co-operative society is defined as a business voluntarily organized, operating at a cost, which is owned, capitalized and controlled by member-patrons, sharing risks and benefits proportional to their participation. A society which has as its object the promotion of the economic interests of its members in accordance with Co-operative principles may be registered with or without limited liabilities.Registrar of Co-operatives is responsible for registration, liquidation and general development of Co-operative societies in accordance with the laws of Ghana.
COMPANIES LIMITED BY SHARES IN GHANA
This is the most used form of business registration in Ghana. For an entrepreneur who desires to have his personal assets distinct from the assets of the business, a limited liability company is the best option, because a company is regarded as a separate legal entity and is recognized by law as a person. A company is limited by shares, where members or shareholders subscribe to the shares and pay an agreed amount for each share they subscribe to.
The shareholder’s liabilities are therefore limited to any amounts unpaid on the shares, and once a shareholder has fully paid for his shares, he is not to incur any further liabilities in respect of the company. Thus no contribution is required from any member, exceeding any amount unpaid on his shares, where the company is being wound up.
A company limited by shares must expressly state the fact of the limited liability of members. The last word of the name of a company limited by shares shall be “limited”, or its abbreviation “ltd.” A company limited by shares can either be private or public.
COMPANY LIMITED BY GUARANTEE IN GHANA
Unlike company limited by shares, company limited by guarantee has the having the liability of its members limited to amounts that they respectively undertake or guarantee to contribute to the assets of the company in case of liquidation or after the commencement of the winding up of the company. The Companies Code provides for the total liability of members, and no further contribution shall be required from any member. A guarantee company is not registered with shares and is not permitted to create any shares.
This type of company is therefore only suitable if no initial funds are required or those funds are obtained from other sources, e.g., endowments and donations. The company is also not permitted to engage in trading. The company is not permitted to pay dividends or distribute or return any assets to members but to continually apply the income and property of the company towards the promotion of its objects.
COMPANIES WITH UNLIMITED LIABILITIES
From the name, this company is undoubtedly registered with shares, but most importantly, there is no limit on the liability of the members. This form of company is not common due to the restraining factor of non-limitation of the liability of members, the few that exists in Ghana are mostly law firms and other professional establishments who may be prevented from operating as limited liability companies by professional ethics.
EXTERNAL COMPANIES IN GHANA
This is a company formed outside of Ghana and seeks to register a place of business in Ghana (Offshore Company). External companies may set up the establishment of such liaison and representative offices or external companies for reasons such as proximity to customers, providing customer support, market research, feasibility studies, and assessing investment opportunities for investment decisions. It gives the foreign company minimal exposure and risk as far as investment capital requirement and corporate taxes are concerned It is branch of an existing company usually registered by a Local Manger on behalf of the company registered outside the jurisdiction of Ghana, who wants to own a branch or place of business in Ghana.
According to the Ghana Investment Promotion Centre, all external companies, liaison and representative offices are to invest a minimum capital requirement of $500,000 as a wholly foreign company and $1,000,000 as a wholly foreign (general trading) company.
MINIMUM CAPITAL REQUIREMENT FOR COMPANIES IN GHANA
A company that is 100% Ghanaian-owned must have minimum nominal capital of at least GH¢500. A foreign investor may team up with a Ghanaian entrepreneur or company for a joint venture, usually in the form of a partnership or a limited liability company. However, under the Ghana Investment Promotion Centre regulation, a minimum equity capital of US$10,000 is required from any foreign investor who intends to enter into a joint venture partnership with a Ghanaian in any area of economic activity, except trading.
Trading requires the minimum equity capital requirement is US$300,000. The foreign shareholder is required to satisfy this minimum equity capital either in cash transferred through Ghana’s banking system or its equivalent in the form of goods, plant and machinery, vehicles or other tangible assets imported specially and exclusively to establish the enterprise. The imported items must be covered by a Destination Inspection Report issued by an accredited inspection company, stating the value and condition of the goods. Consideration for goodwill of a business or services rendered by partners cannot be used to satisfy the minimum foreign equity capital.
Foreigners are permitted 100-per-cent ownership of an enterprise. Wholly foreign-owned enterprises must have a minimum paid up capital, the equivalent of US$50,000 in all areas of economic activity except import trading, where the minimum equity capital requirement is US$300,000. In the cases of export trading and liaison (external) offices, there is no minimum foreign equity requirement.
REGISTRAR GENERAL’S DEPARTMENT
With the automation at the Registrar General’s Department (RGD), business registration has become fairly easy. All business registration forms are downloadable on the RGD website and application can be commenced and completed online.