When you want to choose a business entity, make sure you remember this – the right choice for more than 80% of small businesses is a limited liability company. I will share with you why you should choose a private limited liability for your business, but first let’s find out what a limited liability company is all about.
To make things clearer, I will talk about private limited liability company. It should be noted that there two types of limited liability companies – private and public limited liability companies (corporation).
In Cameroon, a private limited liability company is a corporate structure where the owners or shareholders are not personally liable for the liabilities and debts of the company. Abbreviated LLC, it is the easiest business entity that helps to protect your personal assets once the business is in debts.
From my experience, many people know about a sole-proprietorship and partnership and very little about LLC. It is a hybrid of a sole-proprietorship, partnership and a corporation. It combines some aspects of each and to ensure that the owners are not liable for the debts or liabilities, just like in a corporation.
The difference between a private limited liability company in Cameroon and others, like the USA is that they don’t only have the limited liability of a corporation, but pass through taxation of a corporation. What do I mean by this? To obtain a business license in Cameroon, an LLC must have a minimum of 10 million francs turnover declared.
All those with a yearly turnover of this amount and more pay company tax. This holds same for sole proprietorship with turnover 10 million francs and above. They pay corporate tax.
In Cameroon, LLC may not be one of the most popular forms of business. This is because many people regard a sole-proprietor business as a company since it pays company tax. However, we have been educating people on their difference, and more and more people will prefer to register an LLC when they want to register their business.
If you are the owner of a small business that you may need asset protection, flexible in its management and taxes, then an LLC is the best entity for you. It provides the same limited liability for its owners just as it does for corporations or public limited companies. The nice thing is that LLC works for solopreneurs, advisors, real estate and every other types of business.
Read Also: Incorporating your company in Cameroon
It should be noted that in Cameroon you can incorporate a private limited liability company alone. It is called a sole member private limited liability company where you are the lone shareholder.
This means owners are not liable to the debts and liabilities of the business in case you are sued. An LLC is seen as a separate legal entity from its owners. In this case, the liability of members is limited to what they have invested in the company. This helps to protect their individual assets.
For those who choose a private limited company, the minimum authorized capital to incorporate it is XAF100,000 ($168 or £141). This was to encourage entrepreneurs to go in for limited companies instead of sole-proprietorship business which many confused for a company.
There is no ownership restriction when it comes to incorporating a private limited company in Cameroon. Both nationals and foreign nationals are allowed to own part or all of the shares if they choose a private limited liability company. Even corporations and other private limited companies are allowed to be members of or an LLC.
During registration for business license, the LLC chooses the tax regime in which they want to belong. This is done by setting their annual forecast turnover to meet up with the various tax regimes. If they want to collect VAT, they will decide to put their yearly turnover above 5o million francs which is VAT liable (actual earnings tax system). They can also choose to remain within 10 million to less than 50 million which does not collect VAT (simplified tax system).
There are many compliance requirements that public limited companies or other corporations go through which is not required for LLC. Corporations are usually obliged to call for a yearly board of directors and shareholders meeting where they deliberate, adopt bylaws and register minutes and resolutions. Private limited liability companies are not obliged to do same. They can organize their meetings as they want and are not obliged to keep minutes.
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This content has been prepared for information purposes only. It is not intended to provide, and should not be relied on for, tax, accounting or legal advice. You need to consult your own tax, accounting or legal advisors before engaging in any transaction.