It is important to choose the right legal entity to meet the specific needs of your business.
Depending on your business needs there are 6 main types of legal entities you may form in Ghana.
Company Limited by Shares– This is a business entity registered at the Registrar General’s Department comprising at least two individuals acting as directors of the company and at least one person (company or individual) acting as a shareholder in the entity with objects which are (usually) for the generation of profit. The liability of the members of this entity are limited by the value of their shares.
Company Limited by Guarantee:This company structure is best suited for Not-For-Profit Organisations. This is because the objects of a company limited by guarantee cannot include any for the generation of profit. As such these companies are exempt from corporate tax (although the organisation will have to pay income tax on behalf of any its salaried employees)
The Company Limited by Shares and Company Limited by Guarantee are jointly referred to as “Limited Liability Companies” this is because the personal assets of a persons who form such entities are protected from liability. In other words, the liability of members of such a company is limited.
Company Unlimited by Shares: This is a business entity registered at the Registrar general’s department comprising at least two individuals acting as directors of the company and at least one person (company or individual) acting as a shareholder in the entity with objects which are (usually) for the generation of profit. The liability of the members of this entity are not limited by the value of their shares. It is typically used for entities that give professional advice and services such as law firms.
Sole Proprietorship: This is an entity exclusively owned by an individual who is entitled to all the profits of the business and personally liable for all liabilities of the business. In Ghana such entities are not required to be incorporated at the Registrar General’s Department (RGD). If the owner of this entity would like to operate under a business name it is however required to register such business name at the RGD.
External Company:An external company is a corporate body registered outside of Ghana which has a place of business in Ghana. Although an external company is subject to Ghanaian tax laws (income& corporate tax), such a company is regulated by the laws of the country in which it was originally incorporated in.
Incorporated Partnership: Where two or more people (up to a maximum of 20) decide to go into business for the generation of profit together, they may decide to do so through an incorporated partnership registered at the RGD. There is no protection of a partner’s personal assets in an incorporated partnership. The acts of one partner binds the whole partnership.
Our focus today will be on a limited liability company, although the process is largely similar for the other legal entities.
First step is to perform a name availability search and reservation at the Registrar General’s Department (RGD). This typically takes 1-5 days. A reserved name is valid for 30 days only. Unless special permission has been sought a company limited by shares, must have a name that ends with either “Limited or” Ltd.” For instance, using the word “corporation” in your company name will be deemed misleading by the RGD as it is reserved for only government owned companies.
The RGD may reject names which in its opinion are too similar to existing names, misleading, offensive, undesirable or violates existing trademarks or business marks. It is advisable to submit alternate company names. Be creative with the company names in order to avoid them being all deemed too similar to existing company names or trademarks by the RGD.
3. Obtain Tax Identification Number for all participants
In Ghana, all participants (Member(s)/Shareholder(s), Company Secretary, Director, Auditor, Council Members, Process Agents, Local Managers, Partners, Sole Proprietors) of any business entity are first required to obtain a Tax Identification Number (TIN) by registering with the Ghana Revenue Authority (GRA). It typically takes 1-3 days to complete. It is free to obtain.
You are required to submit one of the following forms of identification in addition to your application:
Form 3 (Return of Particulars of a Company Limited by Shares): You’ll be required to complete this form with details of the directors, secretary, auditor of the company (name, age, nationality, occupation, postal and physical address) as well as the physical and postal registered address’, contact details and the objects of the company as well.
Form 4: You’ll be required to complete this form with just the details of the directors and company secretary (yes it’s a tad repetitive we know!)
Regulations: The regulation of the company are the rules which govern the operation of the company. You’ll be required to complete this form with such details as the number of shares the company is registered with, who the shareholders of the company are and the respective shareholding proportions between its members. The minimum stated capital a company limited by shares may have is currently GHS 500.
You may hire a Ghanaian lawyer to draft the regulations for you or alternatively you may use the standard regulations issued by the RGD for free.
Once you have the name reserved, it is time to complete your RGD documents.
Once all the documents above are completed and signed, they are submitted to the RGD for payment of filing fees and the capital duty. Capital duty in Ghana is assessed as 0.5% of company’s stated capital and the official filling fees too are averagely GHS 500.
Minimum Capital Requirement
One important thing to note – If the company has one or more foreign shareholders, different minimum stated capital requirements apply to it.
In a fully foreign owned company, the minimum stated capital requirement is USD 500,000
In a joint venture between a Non-Ghanaian and a Ghanaian the minimum stated capital of the company is USD 200,000
Below are the fees you are likely to pay for incorporating:
GHS 500 (for official fees) + 0.5% of GHS 500 (stated capital)
= GHS 500 official fees + GHS 2.50
GHS 500 (for official fees) + 0.5% of USD 500,000
= GHS 500 + USD 2500
GHS 500 (for official fees) + 0.5% of USD 200,000
= GHS 500 + USD 1000
When the filing fees and capital duty has been paid, the documents are then verified and filed at the RGD. If there are no objections, in a few weeks, expect to receive your original certificate of incorporation, certificate to commence business (in a few instances, the certificate to commence business may not be issued, this is where a specific business permit must be obtained by the company before the business commences) and certified true copies of the form 3, form 4 and the regulations.