Business Structures in Ghana: How to Choose Between a Sole Proprietorship, Partnership and Company Under Act 992

By Seth Doe Esq and Yaw Mensah Bosompem, ESQ

INTRODUCTION

The choice of an appropriate business structure in Ghana is a critical strategic decision that directly affects liability, continuity, capital formation, ownership, governance, and long-term sustainability. Entrepreneurs must therefore understand the legal nature and implications of operating as a sole proprietorship, partnership, or company as regulated respectively under the Registration of Business Names Act, 1962 (Act 151), the Incorporated Private Partnerships Act, 1962 (Act 152), and the Companies Act, 2019 (Act 992).

The courts of Ghana have also played a pivotal role in shaping and clarifying the legal contours of these business forms. This article integrates the key statutory provisions and leading judicial authorities to provide business owners and professional advisors with a comprehensive understanding of the legal and operational consequences associated with selecting each type of business structure.

Legal Personality and Liability

Legal personality determines whether the business is separate from the people who own and manage it. This determines who owns property, who bears liability and who can sue or be sued.

Sole Proprietorship

A sole proprietorship has no separate legal personality. Registration  under  Act 152 does not create an entity distinct from the proprietor. The courts have consistently affirmed this.

Ghanaian case law has played a decisive role in elucidating the true legal nature of sole proprietorships and partnerships under Act 151 and Act 152, consistently affirming that these business forms do not possess corporate personality unless incorporated under Act 992. The courts have developed a clear and consistent line of authority distinguishing business names, sole-owned enterprises, and legally recognized partnerships.

A consistent theme emerges from the jurisprudence: registration of a business name under Act 151 does not create a separate legal entity. In Barclays Bank Ghana Ltd v. Lartey & Others [1978] GLR 282, the administrators of a deceased sole proprietor attempted to argue that the registered business name, Scarts, had become an artificial legal entity after registration. The court rejected this, holding firmly that the business was inseparable from Lartey himself and that personal liability remained intact.

This principle was reinforced in S.A. Turqui v. Dahabieh [1987–88] 2 GLR 486, where the Supreme Court held that a business name consisting of a single individual,such as TTC,has no legal personality and therefore cannot sue or be sued. Only firms made up of two or more persons may be sued in the firm name.

Similarly, in Baidoo v. Sam [1987–88] 2 GLR 666, the court clarified that the registration of a business name does not create property rights or partnership interests. A registered business name is not a chose in action and has no independent legal existence.

Together, these cases form an unbroken chain of authority establishing that a sole proprietorship is merely the proprietor trading under another name, and registration does not elevate it into a legal person separate from the owner.

2. Partnerships Under Act 152: Registration as the Basis for Enforceability

While partnerships possess more structural complexity than sole proprietorships, the courts have been firm that legal enforceability depends on compliance with Act 152.

In Re Sasu-Twum (decd); Sasu-Twum v. Twum [1976] 1 GLR 23, an unregistered partnership agreement was brought before the court. Because the partnership had not been registered under Act 152, the court refused to enforce any right arising from it. The case emphasizes that an unregistered partnership lacks legal effect, and the “judicial doors remain closed” to such arrangements.

The courts have also clarified what constitutes a valid partnership. In Mensah & Others v. Adu & Others [1965] GLR 198 (SC), individuals conducted a timber business which the trial court mistakenly attributed to a traditional council. The Supreme Court held that a partnership existed because the individuals were carrying on business for profit. The death of a partner dissolved the partnership, but the survivors were entitled to reform. This case underscores both partnership formation (through conduct) and dissolution (upon death, unless agreed otherwise).

The territorial scope of Act 152 was clarified in Levandowsky v. Attorney-General [1971] 1 GLR 38, where the court held that foreign partnerships without a business presence in Ghana are not required to register and may sue in Ghana. This decision draws an important line between carrying on business in Ghana and merely litigating in Ghana.

Finally, Akpakpo v. Soli [1971] 1 GLR 183 reiterates a foundational principle: partners are jointly and severally liablefor partnership debts, and dissolution does not extinguish liabilities incurred before dissolution.

Statutory duties and rights

Section 24 of Act 152 sets out the default rules including equal sharing of profits and losses, right to participate in management, prohibition against remuneration for acting in the business, requirement of unanimous consent to admit new partners and majority rule for ordinary matters.

Companies under Act 992

The Doctrine of Separate Legal Personality in Ghanaian Company Law

A company incorporated under the Companies Act, 2019 (Act 992) acquires a legal personality distinct from its shareholders and directors. Upon incorporation, section 18 of Act 992 provides that the company becomes a body corporate with capacity analogous to that of a natural person,able to own property, contract, sue and be sued in its own name. Ghanaian courts have consistently reinforced this foundational principle, drawing heavily from the common law doctrine established in Salomon v. A. Salomon & Co. Ltd. [1897] AC 22.

Judicial Affirmation of the Corporate Personality Doctrine

The early Ghanaian case of Appenteng & Others v. Bank of West Africa Ltd. & Others [1961] GLR 196 set the tone by holding that a company is not the agent of its members and acts in its own capacity. This decision confirmed the autonomy of the incorporated entity and reflected the Salomon principle within the Ghanaian context.

The courts reiterated this position in Owusu v. R. N. Thorne Ltd. & Another [1966] GLR 90, emphasizing that a company remains distinct from its shareholders and directors irrespective of the level of control they may exercise. The decision underscores the inability of courts,absent fraud or impropriety,to disregard the corporate form merely because a company is closely held or family-owned.

This doctrine continues to be affirmed in modern jurisprudence. In Agricare Company Limited v. Chicks & Chicken Services Limited & Anor, the court reaffirmed that a company bears its own obligations and enjoys its own rights independent of its members. Contracts entered into by the company are its own, not those of the shareholders, highlighting the practical implications of separate personality in commercial litigation and transactional dealings.

A more recent and detailed analysis appears in Bank of Africa Ghana Limited v. Sibel Company Limited, where the High Court clarified the conditions under which the corporate veil may be lifted. The court held that only clear evidence of fraud, sham, or improper conduct can justify piercing the veil. Without such evidence, the company’s separate identity remains protected. This reinforces a strict approach that preserves the predictability and stability of corporate operations.

Limited Liability as a Consequence of Separate PersonalityThe logical and legal consequence of separate personality is limited liability, another cornerstone of Ghanaian company law. Members of a company limited by shares bear liability only to the extent of any unpaid amount on their shares, while members of a company limited by guarantee are liable only to the quantum of their guarantee. This shield protects personal assets and encourages entrepreneurship, innovation and investment—key policy objectives of Act 992.

Scalability and Membership Limits

The capacity for growth varies significantly among the three structures.

Sole Proprietorship

A sole proprietorship has one owner and ceases upon the death or incapacity of the proprietor. It has no perpetual succession. It cannot admit investors or additional owners unless converted into a partnership or company.

Partnership

Under section 8 of Act 992, a partnership must consist of at least two persons and not more than twenty persons unless it is a professional partnership or a special category permitted by statute.

A partnership automatically dissolves upon death or bankruptcy of a partner unless otherwise agreed. A partnership cannot exist with one person. If one partner remains, the business may continue only as a sole proprietorship.

Company

Companies offer the greatest scalability.
Section 9 of Act 992 provides that
• a private company may have between one and fifty members
• a public company must have at least two members but has no maximum limit
• companies may issue new shares or transfer shares under sections 33, 97 and 98 of the Act

Section 172 imposes personal liability on members who knowingly allow the company to operate for more than six months with fewer than the required minimum number of members.

Companies therefore possess perpetual succession and unlimited growth potential.

Capital Mobilisation

The ability to raise capital is essential for business growth.

Sole Proprietorship

Sole proprietors cannot issue shares. They rely on personal savings, retained earnings and loans. Their inability to offer equity severely limits expansion.

Partnership

Partnerships rely on partner contributions and loans.  Act 152 does not permit public subscription or issuance of shares. Many partnerships reach a growth ceiling because they cannot invite public investors.

Companies

Companies limited by shares have the strongest ability to raise capital.
Section 55 allows companies to issue shares.
Section 59 allows an increase in share capital.

Public companies may invite the public to subscribe for shares or debentures under sections 292 to 304, including the issuance of a prospectus.

This makes the public limited company the most suitable structure for large scale equity mobilisation.

Conclusion

The structure chosen for a business in Ghana is a strategic legal decision with long term implications for risk exposure, valuation, continuity and growth. Sole proprietorships offer simplicity but expose owners to unlimited liability and cannot attract substantial capital. Partnerships allow shared ownership but remain restricted in size and carry unlimited liability for partners. Companies under Act nine nine two provide the strongest framework for capital raising, perpetual succession, asset ownership and limited liability.

For any enterprise anticipating significant growth or external investment, early incorporation as a company limited by shares or a public limited company is the most prudent decision.