business vehicles to choose from
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The business registration regime in Uganda is a three tier system, with each tiers having subcategories therein including;
- Business Name Registration
- Company Incorporation
- Company Registration
Each of the above different business registration tiers come with several advantages, limitations, business capacity and liability to the to the owners, we are more than able to advise our clients depending of one’s circumstances, which business vehicle would most appropriate for their situation and capacity.
Business Name Registration
This kind of business regime is open to the following kinds of business entities;
Limited Liability Partnerships
This is kind of partnership is almost similar to a limited liability company. LLP is a hybrid between a company and a partnership, in that while being a partnership, it allows either individuals or entities to achieve business intent. A group of partners called limited partners, only invest financial resources in the partnership in exchange for limited liability protection up to the amount of their financial contribution, with managerial rights to the business, while the other partners called general partners who also contribute financial resources, shoulder all the risk of the business (unlimited liability) but have the sole right to manage/ run the partnership business.
This kind of business is common where the general partner(s) is a skilled professional with a high reputation able to source a greater amount of business but allows for the limited partner to benefit from the skill and expertise of the general partner.
You may find Limited Liability Partnerships in Law Firms, Architect Firms, Accounting Firms, Engineering Firms, Medical Practices, Wealth Manager Firms, and many more.
The Limited Liability Partnership in Uganda is a formal structure that requires a written partnership agreement and the filing of statutory forms.
General Partnerships
This is perhaps the most commonest and oldest kind of partner, solely created to profit generation and sharing.
A general partnership is a business arrangement by which two or more individuals agree to share in all assets, profits, and financial and legal liabilities of a jointly-owned business. In a general partnership, partners agree to unlimited liability, meaning liabilities are not capped and can be paid through the seizure of an owner’s assets. Furthermore, any partner may be sued for the business’s debts.
Joint Ventures
Investopedia defines Joint Ventures as a business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity.
Each of the participants in a JV is responsible for profits, losses, and costs associated with it. However, the venture is its own entity, separate from the participants’ other business interests.
JVs can combine large and small companies to take on one or several projects and deals.
Regardless of the JV structure, the most important document will be the agreement that sets out all of the rights and obligations of each party to the venture. The objectives, the initial contributions of the parties, the day-to-day operations, the right to the profits, and the responsibility for losses are all set out in the JV agreement.
Sole Proprietorships
A sole proprietorship is an unincorporated business that one person owns and manages. As the business and the owner are not legally separate, it is the simplest form of business structure. It is also known as individual entrepreneurship, sole trader, or simply proprietorship.
The business owner, also known as a proprietor or a trader, conducts business using their legal name. They may also choose to do business using another name by registering a trading name with their local authority.
This type of business is the easiest and cheapest form to start. For this reason, it is common among small businesses, freelancers, and other self-employed individuals.
A sole proprietorship begins and ends when the business owner decides, or upon their death.
A sole proprietorship may transform into another, more complex business structure if the business grows substantially.
Company Incorporation
Kindly note the terminology used, “Incorporation” This means the company is considered a Ugandan Company/ Local Company.
Incorporation is the legal process used to form a corporate entity or company. A corporation is the resulting legal entity that separates the firm’s assets and income from its owners and investors.
Corporations can be created in nearly all countries in the world and are usually identified as such by the use of terms such as “Inc.” or “Limited (Ltd.)” in their names. It is the process of legally declaring a corporate entity as separate from its owners.
Types of companies that can be incorporated in Uganda
Private / Limited by Shares
A company limited by shares is one of the most popular commercial vehicles used in Uganda today. It refers to a company in which the liability of its members is limited to the amount (if any) unpaid on the shares held by them.
The limited liability of these companies means that the personal assets of members are not at risk when they invest in the company. If the company experiences financial difficulties, its debts do not typically become the debts of the shareholders. Limited liability provides investors certainty and security and can result in stimulating investment.
A private /limited by shares company can have no more than fifty non-employee shareholders.
A private /limited by shares company can be large or small. The difference between small and large proprietary companies depends on their assets and revenue as well as the number of entities that the company controls. Small private/limited by shares companies have fewer reporting requirements than larger and public companies.
The management and control of Private / Limited Companies are in the hands of the board of directors, who are always appointed by the shareholders.
The word ‘Limited’ or the abbreviation ‘Ltd’ must appear at the end of its name.
Private / Limited by Guarantee without Shares
Private Limited by guarantee by Guarantee companies is most often formed by non-profit organizations such as sports clubs, workers’ co-operatives, and membership organizations, whose owners wish to have the benefit of limited financial liability.
A company limited by guarantee does not have any shares or shareholders (like the more common limited-by-shares structure) but is owned by guarantors who agree to pay a set amount of money towards company debts.
Furthermore, there will generally be no profits distributed to the guarantors as they will usually be re-invested in the business to help promote the non-profit objectives of the company.
The incorporation of a Private Limited by guarantee by Guarantee company in Uganda HOWEVER is not an automatic right or right to start trading, it’s the first step to enable one to conduct business. The subsequent registration with an acquisition of a license from the Non-Governmental Organisations Board of Uganda is the final step to being able to trade.
Single Member Company
A single member Company is essentially a Private /Limited by Share company, having only one shareholder, who owns all the shares or part of the shares in the company.
The single member/shareholder can also be the sole director of the company.
However, it’s a legal requirement for a Single Member to appoint two other directors, who can run the affairs of the company in the interim in case, the single member dies. The Nominee Director will act as director in case of the death of a single member, while the Alternate Nominee Director will act as director in case of the death of the Nominee Director.
The abbreviation “SMC” must appear immediately before the word Ltd or Limited.
Public Company
This a company that has sold all or a portion of itself to the public via an initial public offering (IPO), meaning shareholders have a claim to part of the company’s assets and profits.
This may be previously incorporated Private / Limited by Shares Company or a freshly incorporated company that goes to issue its shares to the public.
They have the ability to tap the financial markets by selling stock (equity) or bonds (debt) to raise capital (i.e., cash) for expansion and other projects.
Company Registration
This kind of registration applies only to the registration of a branch of your company in Uganda. It is about registering a Foreign Incorporated Company in Uganda, for example, XYZ Company Ltd, is registered in Denmark and wants to extend its business in Uganda, XYZ Company Ltd will be able to do so by registering itself in Uganda and having Denmark as its Head Office.
The registered company in Uganda is only a branch, in that all decision and filings in the country of origin are notified in Uganda, meaning appointment and change of directors is done in the country of origin and notified to Uganda.
This kind of registration can be done for;
- Private / Limited by Shares
- Private / Limited by Guarantee without Shares
- Public Company
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