When setting up a new business as a first time entrepreneur, it’s always important to know which forms of business are available and the implication of that particular structure. Here’s a basic breakdown of the options available in Namibia and what they entail.

In a nutshell, the forms that businesses may choose are either entities with incorporation or non-incorporation. Incorporated entities are companies and non-incorporated entities in Namibia are sole proprietors and partnerships. Things can start sounding a little technical but fear not, we’ve broken it down for you into the basics.

A COMPANY

A company is a business entity, existing as its own juristic person, recognised as an entity capable of engaging in transactions and being able to own assets in its own name. It is formed by a person (natural or juristic) or persons, with the objective of gain, incorporating themselves as a single entity.

There are a number of different types of companies, however every company is formed through an incorporation of natural or other juristic persons. These companies can be either, companies having shares or companies without shares that are limited by guarantee of liability (the persons agree on how much of losses they will all be liable for).

Companies are usually the most chosen form of enterprise as the company offers the most attractive characteristic, which is that of limited liability and separate juristic authority.

Limited liability means that the shareholders will not be liable for more money than was invested into the company. Separate juristic authority means that a company, upon full registration, is able to own assets in its own name, incur debt and conclude contracts in its own name and generate income in its own name. It is basically allowed to enter into most business activities as if it were a natural person.

THE CATCH

This sounds pretty ideal if you’re looking to startup your business, however, consider the ramifications of incorporating. This is usually, admin. And, let’s face it. If you’re a startup, no body needs more paperwork.

Legal requirements of registration, tax compliance, disclosure requirements of assets, incomes liabilities, means a lot of paperwork and filing which can be pretty daunting for someone venturing out into business for the first time. Getting bogged down in name reservations, founding statements, articles of incorporation, association agreements and their costs can prove to be a headache when all you want to do is sell your product or service and build your ideal client base.

SOLE PROPRIETOR

When starting out the best strategy is to keep administration costs down and spend more time getting your products straight to client.

Which is why, some serious thought must be given using a sole proprietor as a form of enterprise. A simple low cost form of enterprise, it’s suitable for those branching out for the first time. Limited to a single owner, it offers unparalleled control over a business. Minimum start-up costs, make it very easy to operate. This business form allows for the proprietor to be the sole governing ownership entity.

However, it too isn’t without its shortcomings. This form doesn’t give the business any existence beyond the sole proprietor which is often seen as its disqualifying characteristic. The inability of the sole proprietor to have any limited liability with regards to losses makes people fearful of this structure.

The sole proprietor form also doesn’t allow for succession. It must be dissolved in the event of the sale or discontinuation of its business operations.

The sole proprietor is intimately linked to the owner, which can be challenging when raising funds or acquiring new skill sets. When a company wants to raise money, it just issues new shares to the public for subscription. And, if it wants to attract the best talent, compensation packages can include a share bonus scheme and share buy-ins. A sole proprietor doesn’t have share capital to issue and only has a single owner.

BUILD FROM THE BASICS

Look at the various forms of enterprises available to entrepreneurs. Start with the most basic form of enterprise and then move your way up to more complex company structures, if it’s fitting for your goals. At the end of the day, when choosing one though, you the entrepreneur should be the driving force of the decision to incorporate or not to incorporate.

 

Written by Brice Mihigo
Turipamwe Design, Number Cruncher

LIKED THIS POST? WHY NOT SHARE IT BELOW?