FOUNDATIONS OF ENTREPRENEURSHIP Elikem Nutifafa Kuenyehia CLASS SIX: LEGAL AND REGULATORY CONSIDERATIONS & IDEA GENERATION

Agenda For Class Six Recap of class five Legal and regulatory considerations Forms of business organizations Idea Generation Guest Speaker:

Recap of Class Five What did you learn from the entrepreneur and entrepreneurial mindset? What did you learn from Kwabena Adu- Kusi, Managing Partner, Law Bureau?

Forms of business organisations Sole Proprietorship Partnership Limited Liability Company Unlimited Liability Company External Company Cooperative

Sole Proprietorship Most common form of business organisation in Ghana Business owned (and typically also run) by a single individual The sole proprietor and the business are essentially one –No distinction at law –No distinction between the entrepreneur and the enterprise –No limitation on liability

Sole Proprietorship (cont’d) If carrying out business in his/her true personal name, surname or initials, no formality required But if using name different from true surname, name, initials, must register under Registration of Business Names Act Certificate of Registration to be renewed annually to be able to use the name

Sole Proprietorship (cont’d) Reg. Of Business Name separate from intellectual property registration which gives intellectual property rights to the name Sole Proprietor has sole responsibility for decisions relating to business No fetters on authority so long as lawful No requirement for board No obligation to disclose information or financials

Partnership An association of two or more individuals carrying on business for the purpose of making a profit Must be incorporated under Incorporated Private Partnerships Act 1962 Maximum number of individuals = 50 Partners must be of sound mind & not have been convicted of dishonesty offence in last five years

Partnership (cont’d) Is a legal person separate from its partners –May be sued and sue in its own name, own assets etc Partners share decision making, profits and losses Partners jointly and severally liable with the firm and the other partners for all the debts and obligations of the firm

Partnership (cont’d) Passive/Sleeping vs. Active partners –Key decisions involving all partners Individual partners taxed on their share of partnership profits –Each treated as a sole proprietor for tax purposes Required to keep proper accounts Required to produce financial statements –No requirement for audit but highly advisable

Partnership agreement provisions Commencement Name Financial Contribution Profit (or Loss) Share Ownership of partnership assets Drawings and/or salaries Decision making Dissolution Payment in event of death or retirement Restraint of trade following departure Dispute resolution (litigation & arbitration) Governing Law

Companies Regulations – constitution of the company Types: –Limited liability Liability limited to amount paid for the shares Generally, shareholders cannot be held liable for liability of company Assets of Directors not available for company’s creditors –Unlimited liability Not generally used or suitable for entrepreneurial ventures; though some professional firms use this

Companies Incorporating a company Incorporation documents to the Registrar of Companies o Regulations o Form 3 o Form 4 o Registration and presentation fee o A sum equivalent to 0.5% of the stated capital for public companies and GH¢500 for private companies

Types of Companies Limited by shares –Owners given shares for money they contribute –Liability tied to shares purchased –Shareholders paid dividend from profits if and when declared Limited by guarantee –No shares issued –Members liability tied amount members agree to contribute if company winds up

External Companies Company incorporated outside Ghana establishes a ‘branch’ in Ghana No separate legal personality from parent Obtain external company status by filing certain documents and Registrar informing you that you have been registered in the register of external companies Must have a Local Manager & a local process agent

Co-operatives Association set up to provide service(s) or benefit(s) for its members Typically made up of members with similar characteristics (same employer, trade, profession) May be incorporated or just be a body of individuals –Where incorporated must have word ‘co- operative’ after its name Not permitted to grant loans to anyone other than their members

Co-operatives (cont’d) Registered under the Cooperative Societies Decree 1968 Must have a minimum of ten members Members of co-operative are liable for debts of the co-operative Separate legal personality – can sue and be sued in its own name

Other forms of business organisations Joint Venture –2 or more businesses pool resources to achieve a common objective –Can be established by agreement or by setting up a JV limited liability company

Other forms of business organisations Franchising –An agreement where an owner of a business format, trademark, trade name or copyright (the franchisor) gives the right to another (the franchisee) to sell products or services under the franchisor’s trade name and/or to use his systems and business formula

Other forms of business organisations Principal/Agency –Agent acts on behalf of principal in relation to 3 rd parties –Ultimate liability as far as 3 rd parties are concerned is the principal’s Mergers & Acquisition –Not a separate business form –Typically involve 2 or more companies coming together to form a single entity

Other Legal Considerations Internal Revenue Act, 2000 (Act 592) National Pensions Act, 2008 (Act 766) Value Added Tax, 1998 (Act 546) Ghana Investment Promotion Centre (‘GIPC’) Act, 1994(Act 478) Immigration Labour Issues Factory, Office and Shop Regulations Free Zone Act,1995 (Act 504) Workmen’s Compensation Regulations

Idea Generation From idea to profit? IDEA OPPORTUNITY CONCEPT INSIGHT GENERATION ENTERPRISE?

What is an idea? An idea is a conception or plan formed by mental effort Every entrepreneurial venture rests on at least one fundamental business idea It is an entrepreneur’s initial dream & mental picture for his enterprise

Nature of ideas Need not be outstanding/complicated Need not be original –Search & Spin –Though some entrepreneur are inventors To form the basis of a business, must provide a solution to a customer need –Customer Pain (Gari Soakings) An unmet need Existing enterprises may fall short unless –Using additional features & benefits

Sources of ideas Opportunity & Environment Scanning –Keeping eyes wide open/alert to opportunities –Various changes: Social Economic Technological Changing customer tastes & preferences Media –In all forms –NB: what you might not typical pay attention to

Sources of ideas (cont’d) Reading Travel Government Personal Experience and Frustration Skill Set Franchises Conferences, Workshops, Exhibitions Brainstorming

IdeaQuest Be very observant –Keep your eyes open for inspiration: use a notebook Interest: what you like doing Take a critical look at your major irritations Skills – what are you good at? (irrespective of whether you like doing them) Personality/Work Styles What product or service will make my life easier?

Which comes first? IDEA THE DESIRE TO START A BUSINESS?

Ideas vs. Opportunity A good idea is not enough It must be underpinned by an opportunity An idea may be underpinned by opportunity through: –Patent Opportunity –Tacit Discovery

Ideas vs. Opportunity For an idea to be considered an opportunity it must: Meet a customer need Create value for the customers Create value for stakeholders – depends on:  Number of potential buyers  Purchasing power of potential buyers  Return on investment Be the right fit  Reflect values, interests, aspirations  Match resources & skills Pass the realistic/sense check

Concept Development What is the customer pain that the enterprise will remove? How is the pain dealt with at present (competitor products/substitutes)? How it will remove the pain (customer value proposition and how different is it from the competition)? Description of target market Distribution – how will you distribute the product? Production – how you will make the product? Idea of cost of set up/production and key resources required Idea of pricing ?

Guest Speaker How is the pain dealt with at present (competitor products/substitutes)? How it will remove the pain (customer value proposition and how different is it from the competition)? Description of target market Distribution – how will you distribute the product? Production – how you will make the product? Idea of cost of set up/production and key resources required Idea of pricing ?