9 Benefits Of A Private Limited Company

Brief: If you have been planning to register a company in Cameroon, make sure you check out these 7 benefits of a private limited company.

Many readers have been asking me the benefits of a private limited company for a while now. Many find it difficult to make out a clear cut difference between a private limited company and a public limited company. For this, in the coming days, I will write separately on these two.

Many have now understood the difference between a sole proprietor and a limited company. Most entrepreneurs with registered sole trader businesses usually call them ‘companies’. This wrong thought is because a sole proprietor business is allowed to use a name other than the owner’s name. However, the official registration document is in the name of the owner. You can find more about this in previous posts that I made.

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Today, let’s talk about some of the benefits of a private limited company. Due to the confusion many have between a private and a public limited company, I have decided to treat this separately. However, the benefits of both are similar.

This is going to help, most especially those who are planning to start a private limited liability company. If you are planning to incorporate a private limited company in Cameroon, make sure you check out these requirements. Those who already have may find some advantages or benefits which they had missed out.

Advantages and benefits of a private limited company

Below are some of the benefits of registering a private limited liability company in Cameroon:

1. Limited liability

Many have been wondering what limited or unlimited liability means. I am sure this will clarify their doubts. I always have to explain this point as if I am explaining to a child. Most of the people I explain this to usually come to register a sole proprietor business, but end up going for a private limited company because of the limited liability advantage.

Unlike a sole proprietor and general partnership, a member of a private limited liability company is liable to the debts of the company only proportionately to the amount they have put in as equity.

This means their personal property and personal savings are not at risk in case the business is unable to pay its debt. Only the investment put in the business is lost, meanwhile the personal assets of the managers or members are safe.

2. Has more credibility in the market

Most businesses don’t want to deal with individuals. This is where sole trader businesses have a problem. You know one of the disadvantages of a sole proprietorship is that the business dies when the owner dies. Companies will want to engage with other companies to limit the end of activities in case the owner dies. Which will you choose? A sole proprietorship or limited company?

3. Exemption from business license contribution

This benefit occurs only once in the life of a private limited company in Cameroon. Newly incorporated private limited companies are given at least one year exemption from paying the business license contribution in Cameroon. The business license is “patente” in French and that’s how it’s commonly called in Cameroon.

This may be surprising, but true! Many English-speaking entrepreneurs in Cameroon are not aware that the patente is actually a business license. To them, it’s just another documents required to by the tax office to carry out business activities in Cameroon.

This is one of the reasons this platform was created – to help the English-speaking community in Cameroon understand the basic laws in doing business in Cameroon. Note that most business related documents come in French and when they even have an English version, it rarely makes sense.

It was just an aside worth mentioning. Let’s continue!

4. Shares can be easily transferred

Shares of a limited liability company can be transferred from one shareholder to any other person. This means, if a shareholder or member wants to leave the company, he or she can sell or transfer her shares to another (it can be a legal or natural person).

The ease of transferring shares makes it a favorite business structure for investors. It’s well structured and has less strings attached – easy to enter and easy to exit.

5. There’s continuity

A company has an uninterrupted existence unless it’s legally dissolved. In Cameroon, the life span of a company is 99 years and renewable as many times as possible. See how to incorporate a limited company in Cameroon.

The death of shareholder won’t affect the company’s existence. The heir(s) or successor(s) may take over the shares of the company in case a shareholder dies. Perpetual succession is one of the most important characteristic and benefits of a limited liability company.

If at this level, you are still unable to be convinced, make sure you learn why you should choose a private limited company for your business. It will help you further to make an informed choice.

6. Not required to appoint an auditor

This is one of the benefits of a private limited liability company many are unaware of in Cameroon. They’re not obliged to appoint an auditor because they may not need to get an audit of the company’s annual accounts.

This is unlike the public limited liability company which is required to appoint an auditor upon creation. However, the need for an auditor or audit arises if the articles of association provides for it or the shareholders ask for one.

Your private limited liability company will qualify for an audit exemption if it has not met at least 2 of the following conditions set forth by the Foundation for a Unified Business Law in Africa (French acronym, OHADA):

  • the annual turnover is greater than XAF25,000,000
  • the number of staff is more than 50 people
  • the total amount of the balance sheet is greater than XAF125,000,000

7. Easy to raise funds or loans

A private limited company enjoys a better avenue for raising funds when compared to a partnership or sole proprietor business. They can raise funds from Angel Investors, crowdfunding, venture capitalists and can accept deposits from the public.

See how entrepreneurs fund their businesses in Cameroon. They have a wider chance of getting loans from banking and financial institutions. In effect, the continuity theory plays a great part when it comes to banks and financial institutions. I have heard of cases where sole proprietor business owners take loans and die or fake their deaths. It’s funny, but very true!

At least a company is a legal person that doesn’t die except it’s legally dissolved. Before it is dissolved, the creditors have to declare and their debts or part of their debts paid in the case where the company is liquidated.

form a limited liability company in Cameroon

8. Minimum share requirement

OHADA puts the minimum authorized share requirement to incorporate a private limited liability company at XAF1,000,000. However, this is not the case in Cameroon as it is lower.

To encourage entrepreneurs to register their business, the government has reduced the minimum authorized capital to XAF100,000. This is to help individuals in particular to incorporate sole member limited companies where you have only one shareholder.

9. Managers must not be nationals

Ownership or management of private limited companies in Cameroon is not only for nationals. Foreigners can own 100% shares of a private limited company and all directors could be made up of foreigners. In addition to this, corporate bodies, both foreign and national, are also allowed to own shares in private limited companies in Cameroon.

It should be noted that the highest title of a private limited liability company is a Manager and not a General Manager or CEO. Many people have been misusing titles in Cameroon not knowing that OHADA provides for the responsibilities of corporate titles. You can see a previous post I made on this – the proliferation of corporate titles in Cameroon.

There are many other benefits of a private limited company that we cannot exhaust here. If you think you want to know more, then get in touch with us with any of the medium below. Don’t forget to leave a comment or share this post with others.

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