Choosing a legal structure for your business is among the most important opinions any new business proprietor will have to make and the decision would mean a significant impact on crucial areas including ease of doing business, backing options, compliance liabilities, legal arrears, scalability, duty rates, ease in transfer of share and control over the work.
The different options for business structure and the pros and cons of each option generally present a grueling task for numerous entrepreneurs and investors. It becomes more grueling indeed for the most educated business possessors when they consider the present and future requirements. For this reason, it’s a decision that should be made in discussion with educated business counsels and Commercial attorneys to gain expert advice on which legal structure will be most suitable for the specific and unique conditions of your work. There are trusted commercial service providers in Ghana who help their customers in dealing with the dilemma.
Legal structures in Ghana
The major legal structures for businesses in Ghana are:
- Sole Proprietorship/ Enterprise.
- Partnership.
- Incorporated Companies.
- External Companies.
Sole proprietorship
This type of reality comes under the business names act registration, 1962 (Act 151). In the Ghanaian law’s eyes, this business doesn’t need enrollment at the registrar of Companies (registrar general’s department) unless the proprietor would like to carry on business under a business name. It has no separate actuality from its proprietor. It simply refers to a person retaining a business and being self-liable for its debts. Some advantages of a sole proprietorship include low cost and ease of formation, no commercial levies, freedom to blend business and personal assets, and low position of formalities and nonsupervisory compliance. Some disadvantages of a sole proprietorship include unlimited arrears of the work, insolvable to raise equity capital, and the absence of formal structures for business durability.
Incorporated partnership
The private incorporated partnership act, 1962 (act 152) provides for the association of two or further persons (not exceeding 20) carrying on business concertedly to make a profit. In this type of business, there’s further than one proprietor, and the profits, losses, and arrears are distributed by the partners. Though the partnership establishment assumes the status of a body commercial after the allocation of the registration document by the registrar general’s department, each partner shall be liable without limitation for the debts and scores of the establishment. Among the major advantages of a partnership, business is the ease of conformation relative to other businesses like limited liability companies, raising finances is easier relative to sole proprietorship, the partnership establishment benefits from partners with reciprocal skills, and profits flow directly through the partner’s particular duty return. Some of the disadvantages of the Partnership are the absence of work durability since the establishment may discontinue upon the death or withdrawal of a partner, disagreement between partners, and the joint and individual arrears of partners performing from the act of a partner.
Limited liability companies
In Ghana, the companies act, 1963 (Act 179) is the law that regulates the formation and operation of incorporated companies. A company limited by guarantee is one having the arrears of its members limited by the quantities that the members may independently take over to contribute to the means of the company in the event of its being wound up. Companies limited by shares and guarantees are appertained to as private companies. Unlimited liability companies, as the name, implies don’t have a limit on the arrears of their members. The simplest and general form of a public or unlimited company is one in which the general public can buy its shares, generally through the stock exchange. This type of company can have further than 50 shareholders or debenture holders. A limited liability company incorporated in Ghana shall have a minimum of two directors both of whom are natural persons over twenty-one years of age and one of whom shall at all times be present in Ghana. Any one or further persons may form a company in Ghana. still, the number of shareholders shall not exceed fifty for private limited liability companies.
Branch Office
This type refers to a body commercial incorporated outside Ghana but registered with an established place in Ghana. A person competent to be a director of a limited liability company shall be appointed as an original director to manage it. An external company isn’t considered an original company and doesn’t have a separate legal personality distinct from its parent company.
Among the advantages, no minimum capital is needed to register an external company. Stamp duty is also not needed to be paid for by external companies. External Companies can assist with a market entry for parent companies. Some of the disadvantages are that the parent company bears all the threat of the external company. External Companies have confined conditioning, unlike incorporated companies. There are compliance threats for example taxation and immigration.
