If you want to register your business in Ghana, then it is important that you know the types of companies that can be registered. The Companies Act – 1963 (Act 179), Section 9 only allows for some types of companies.
You can choose between any of these companies depending on the number of employees you have and how you want your company to be viewed.
Types of Companies in Ghana
There are 6 types of companies that can be registered in Ghana. It is important that you go through the privileges and limitations of any company type before settling for that type.
Below, we are going to reviews the types of companies in Ghana. This will help you understand the privileges and limitations of each company type and help you make a decision on which company suits your business operations.
1. Company Limited Shares
A company limited by shares simply means a company that has the liability of its shareholders limited to a certain amount. The shareholders of such a company have limited liability and the shares of the company cannot be offered to the general public.
In this type of company, the personal asset of the shareholder is protected. This would mean a lot in a situation where the company goes bankrupt. If such an event occurs, the shareholders will only lose the money they have invested in the company.
A company limited by shares can be either a public company or a private company. The major difference between public limited companies and private limited companies is that the shares of a private company may not be offered to the general public. Thus, its shares cannot be traded on a public stock exchange.
A private limited company is mostly favorable to small companies, however, the company’s disclosure requirements are higher.
You can register this company type at the Registrar’s General Department. To register a company of this type, you will need at least two individuals representing the directors of the company and at least one person representing a shareholder in the entity with objects which are for the generation of profit.
2. Company Limited by Guarantee
This company type best suits non-profit organizations that require a legal personality. With this company type, the liability of its members is limited to a certain amount as the members may contribute to the assets of the company in the event of bankruptcy.
Generally, a company limited by guarantee does not have shares or a shareholder. The members who are usually referred to as guarantors will not have any profit distributed to them, that’s if, a non-profit organization is registered under this company type.
In the case that the company to be registered is not a non-profit organization, it can distribute its profit to its members.
With this company type, the personal finances of the members are protected. If the company goes bankrupt, the members will have to pay the company debts up to the number of their guarantees.
Also, such companies are not liable to pay corporate tax, however, they will have to pay income tax on behalf of any salaried employee in the company.
A Company Limited by Guarantee and A Company Limited by Shares are jointly recognized as “Limited Liability Companies”.
3. Company Unlimited by Shares
A company unlimited by shares is similar to a company limited by shares. However, there are several differences that you should note when signing up for such a company. A company unlimited by shares is riskier as the personal assets of the members of the company are not protected.
In the event that the company is unable to pay off its debts, the members wouldn’t only lose their investment but also their personal assets to the creditors.
This company is registered in a similar way a company limited by shares is registered. The major advantage of this type of company is improved creditor confidence.
4. Sole Proprietorship
A sole proprietorship refers to a business entity that is owned and run by one person. This person or sole trader is entitled to all the profits of the business and liable for all the liabilities of the business.
A sole proprietorship is not a legal entity. It can be operated under the name of its owner or do business under a factious name.
This type of company is best for small-scale businesses. It is very popular as it requires a minimal cost to set up. However, if the owner of the business wishes to operate under a business name, the owner would have to register such a name at the Registrar General’s Department.
Owners of a sole proprietorship have complete control over the business profits which is quite advantageous. Unfortunately, they are also solely responsible for all the losses, debts, and liabilities of the business.
While such a business is easy to open and could cost less than most other company types, it is best you completely know all the advantages and disadvantages before settling for such.
5. External Company
An external company is a business incorporated outside Ghana that wishes to establish a firm in Ghana. This might be a branch from where it will run its operations in the country.
An external company is subject to corporate tax and income tax in Ghana. However, the company wouldn’t be regulated by the laws in Ghana but by the laws of the country in which it was originally incorporated.
6. Incorporated Partnership
An incorporated partnership is an entity registered by two or more people for the generation of profit. This company type does not offer protection of the assets of the members.
There are several rules to creating an incorporated partnership including the maximum number of people that can open such a company. Usually, the maximum number of people that can register an incorporated partnership is 20.
Going through the list of the type of companies, you can find several advantages and disadvantages of each company. If you want protection for your personal assets then a private limited liability company makes for the best company. However, there are several limitations to registering such a company.
A sole proprietorship is the best company type for small-scale businesses. They are free of several taxes that are imposed on private limited liability companies. They also cost less to set up and run.
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