Contrary to popular believe, creating a company in Cameroon and a few other countries , is pretty straight forward.
A private limited company is a small business entity that is held by private owner(s), and the total number of people who can form the shareholding is a maximum of 50.
Advantages and Disadvantages of Private Limited Company.
- There is no obligation to make your financial statements public
- The owner(s)’s liability does not extend to their personal assets
- The business is likely to continue with a new leadership even if the founder/owner(s) dies
- Taxes paid by private companies are usually looser
- Can raise capital through private investors or venture capitalist, trading shares with the public
- Gives the business room for long term growth and can be
- It is a little bit more complex to register than a sole proprietorship
- Demands a lot of individual liquidity to set up, depending on the size of the business
- If a shareholder wanted to get out of the business, they cannot share their shares on the stock market.
Capital Requirement
The minimum amount of capital as per the law is XAF 100,000.
Step One- Required documentation
- Copy of your National Identity Card- XAF 25
- Apply for a Tax Payer’s Card with cost – XAF20,000
- Visit a Notary Public, to notarise the Articles and Memorandum of Association- XAF 100,000
- Draw the Localisation plan for your business( A 4 sheet of paper)
Step Two- Deciding What Tax Center is Best for Your Business
- For a new business, your declared capital for tax purposes will usually be below XAF50,000,000 ( Simple tax regime).
- Once your business makes a taxable turnover > 50,000,000 , your business must be moved to the ( Real Regime).
- Visit your local tax center with the documents above, for your business to be registered into the online tax system.
Step Three- Location
- Obtain a lease contract from the landlord of your commercial premises;
- Register the Lease contract (10% of the Annual rental cost);
- Pay 15% as an advance payment on yours annual rental.
Step Four- Business Licence and Taxes
- Apply for a Business License(For your first year of operations, your business benefits from a tax exemption);
- Ensure to declare your monthly income tax and social insurance obligations;
- Put all signed documents into a neat folder and put them away in a safe place.
Notable Tax Obligations for all small businesses.
- Value – Added Tax(TVA): 19.25%
- Company Tax: 33% (30% corporate tax increased 10% for communal taxes)
- Turnover Tax: 49.4% for small companies
According to the collected data, the overall cost of forming a Private limited company ranges between XAF 150,000 and XAF 200,000.
Please investigate the websites listed below for additional information on this subject.
Personal Recommendations
Based on my own experiences as a business owner, an accountant, and finance manager with both national and international enterprises in Cameroon, it is crucial to take the following actions to preserve your company’s financial health and prevent tax penalties:
1. Understanding Finances
To make sure your financial statements are in order, hire a full-time or part-time accountant with a lot of experience to handle your tax matters. Most business owners don’t realise how dangerous it is to ignore their business’s finances. This can lead to expensive tax fines, lost income, and sometimes even bankruptcy. Don’t fall into this trap.
2. Building a Solid Network
Actively try to get to know at least one person who works in any of the government offices that could affect your business in some way. You can ask them for advice and suggestions about things that have to do with the institution where they work. For instance, you should have at least one direct contact with someone at your tax centre, CNPS office, and Ministry of Works.
3. Be proactive with Administrative Bodies
If you can’t file your taxes by the deadline, write an official letter to the right institution explaining why.
Note that when you have a private Limited company, you can put together a complete offer of your services, take it to the different organisations that could use your services, and broker deals with them. If you want to make more than XAF 50,000,000 by doing business with other regulated companies like banks, the local council, parastatals, and even multinationals, a private limited company is the best place to start.
If you have any comments or questions, kindly leave them in the comment section below.
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