Registering a business in Ghana, or any other country in the world requires having such a business registered as a first step. In Ghana, there are various types of business organizations a business owner is required to choose from to have their business registered. We will be considering them below.
The agency responsible for carrying out business registration in Ghana is the Registrar General’s Department.
Types of business entities to Register in Ghana
1. Sole Proprietorship
This type of business entity is owned and managed by an individual. The liability of a sole proprietor is unlimited. In other words, in the event of a debt recovery against a sole proprietorship for instance, the means of recovering such debt will not be limited to the business alone, but to the personal asset of the proprietor.
Sole proprietorships are usually not registered as individuals may carry out business in either their birth names or adopt a trade name. Where a trade name is adopted, such name must be registered at the Registrar General’s department.
One disadvantage of registering a sole proprietorship is that it cannot be used for the purpose of carrying out business in certain sectors such as; Banking and Finance, Telecommunications, Maritime and Shipping, etc. due to licensing requirements.
2. Partnership
A partnership is a type of business entity that consists of two or more persons coming together to operate a business jointly for the purpose of making a profit. The maximum number of persons permitted to form a partnership is 20 persons.
To form a partnership, all partners must;
i. Be of sound mind
ii. Be above the age of 18 years
iii. Not be found guilty of any offense involving fraud or dishonesty in the preceding five years
iv. Not be a company or another registered partnership
In Ghana, a partnership must be registered with the Registrar General’s department.
3. Companies
When you create a company in Ghana, it means that you are creating a legal person that is different from yourself. Such a company has the ability to sue and be sued in its name, and own assets in its name. The liability of members of the company is limited to their contribution to the extent of that company and such a company is guaranteed to continue its existence where all or some of its members are deceased or bankrupt.
There are 3 types of companies a person can register in Ghana. They are;
a. Company limited by shares
This is a more common type of company frequently registered in Ghana. It is classified as “limited by shares” because the liability of members is limited to the amount contributed as share capital by members.
The maximum number of members a company limited by shares is required to have is 50 members. In addition, companies limited by shares are restricted from calling out members of the public to buy their shares.
b. Company limited by guarantee
This is a company that has 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. It does not own shares.
This type of company is suitable for promoting non-profit, social, or charitable purposes. This type of company does not acquire shares or distribute profits. All income derived from its activities is applied towards promoting its objects.
c. External companies
This type of company applies to foreign-owned companies registered outside Ghana, that want to own a branch or place of business in Ghana. Such a branch is usually registered by a local manager on behalf of the company. In addition, such local managers must reside in Ghana at all times.
d. Unlimited companies
Under this type of company, there is no limit on the personal liability of shareholders of the company when it comes to liabilities (such as debt) incurred by the company.
MINIMUM EQUITY CONTRIBUTION REQUIREMENT FOR FOREIGN INVESTORS
All companies with foreign participation are required to be registered with the Ghana Investment Promotion Centre. Below is a breakdown of minimum equity contribution requirements for wholly foreign-owned companies with foreign participation as provided by the Ghana Investment Promotion Centre respectively.
Minimum equity contribution for companies that are 100% foreign owned
Service Industry :
Such as Construction and Civil Works
(i) Minimum of five hundred thousand US Dollars (USD 500,000) in equity i.e Ghanaian Cedi equivalent for the foreigners at the Prevailing Bank rate
Trading Industry
Such as general Trading, Importers, Dealers in General Goods and Retail Trading, Manufacturers’ Representatives
(i)Minimum of One Million US Dollars(USD 1,000,000)in equity i.e Ghanaian Cedi equivalent for the foreigners at the Prevailing Bank rate
Minimum equity contribution for companies that are partly foreign-owned
Service Industry
(i) Foreign Applicants must have a minimum of two hundred thousand US Dollars (USD 200,000) (Stated Capital) i.e cedi equivalent at the prevailing Bank rate
(ii)Ghanaian applicant must have 10% equity participation of the company at the time of incorporation
Trading Industry
Such as general Trading, Importers, Dealers in General Goods and Retail Trading, Manufacturers’ Representatives
(i)Foreign Applicants must have a minimum of one million 1,000,000 US Dollars (USD 1,000,000) in equity i.e cedi equivalent at the prevailing bank rate
(ii)Ghanaian applicant must have 10% equity participation of the company at the time of incorporation
Equity contribution in this case could be in cash, in capital goods, or a combination of both.
The minimum equity contribution requirement for foreigners does not apply to foreigners in the following sectors: manufacturing, export trading, and portfolio investment. Foreign spouses of Ghanaian citizens who meet certain requirements are also exempt from the minimum equity requirement.
CONCLUSION
There are many factors that determine which of the above entities will be suitable for your business such as; the nature of business activities, tax implications, ease of formation, etc. Whichever is the determining factor for opting for any of the types of business entities listed above, you need a legal team who understands the regulatory terrain of doing business in Ghana to advise and assist you with the process so as to avoid starting off on the wrong foot.
Registering a company in Ghana as a foreigner has become relatively easy as the process can be done online.
Are you looking to expand your business in Ghana? Our team of legal experts will be delighted to assist you in this regard. Click the Whatsapp icon on the lower right part of the page or reach out to us here, and we will be delighted to assist you.
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