Ghana’s micro, small and medium-sized enterprises (MSMEs) account for more than 90 per cent of businesses and roughly 70 per cent of national GDP, but many remain sole proprietorships or informal partnerships. That can limit access to finance, government support, public contracts and investment, even when the underlying business has strong growth potential.
The law does not require every entrepreneur to incorporate. However, the choice of legal identity can determine whether a business is able to scale safely and attract the capital, customers and support needed for expansion.
Protection and access to finance
A sole proprietor is legally inseparable from the business. If an order fails, a customer does not pay or a contract dispute escalates, personal savings, property and other assets may be exposed. Partners in a general partnership face similar risks: Section 16 of the Incorporated Private Partnerships Act, 1962 (Act 152) makes them jointly and severally liable for the firm’s debts.
A Private Limited Company under the Companies Act, 2019 (Act 992), provides a separate legal identity. Section 7(2)(a) limits members’ liability to the unpaid amount on their shares. The Office of the Registrar of Companies (ORC) says incorporation “safeguards personal assets from business debts”.
That protection enables entrepreneurs to pursue larger contracts, enter new markets and employ staff without placing all personal assets at risk.
The Bank of Ghana estimates Ghana’s annual MSME financing gap at US$4.8 billion. Only about 35 per cent of MSMEs have access to bank finance, while more than 50 per cent are excluded from formal credit.
The Collateral Registry, created under the Borrowers and Lenders Act, 2008 and reinforced by the 2020 Act (Act 1052), allows movable assets including stock, receivables, vehicles, machinery and tools of trade to secure loans. It recorded more than 1.92 million secured transactions between 2010 and 2025.
Formal registration also improves visibility to lenders and the venture capital market. The Venture Capital Trust Fund (VCTF) reports 77 companies funded, more than GHS 2 billion in leveraged capital and over 28,000 jobs created.
Government support, procurement and investment
Under LI 2470, micro enterprises have 1–5 employees and annual turnover below GH¢300,000. Small enterprises have 6–29 employees and turnover between GH¢300,000 and GH¢6 million.
The Ghana Enterprises Agency (GEA), established under Act 1043, provides programmes, advisory services and funding links. Its BizBox Project, in partnership with the Mastercard Foundation, aims to support 250,000 young Ghanaians through training, start-up kits and market connections. Formal registration is central to accessing such programmes.
The government spends an estimated $3.5 billion annually on public procurement, around 11 per cent of GDP. The Public Procurement Act, 2003 (Act 663) provides preference margins for domestic goods and works, and the government has proposed a margin of about 30 per cent for Ghanaian goods. Unregistered businesses cannot bid, complete tender documentation or claim those preferences.
Investors also generally favour Private Limited Companies because they can issue and transfer shares under Act 992. A sole proprietorship has no shares, while a general partnership under Act 152 cannot issue equity. The Ghana Alternative Market (GAX), launched in 2013 with VCTF support, was created to give growth-oriented businesses access to long-term capital.
Continuity and tax
Companies enjoy perpetual succession, allowing ownership to change without ending the business. By contrast, a sole proprietorship dies with its owner and a partnership may dissolve when its partners change. Registration can therefore provide credibility, continuity and greater confidence for lenders, investors, customers and partners.
The Ghana Revenue Authority’s Modified Taxation Scheme (MTS) allows eligible informal-sector taxpayers earning up to GHS 500,000 annually to pay a flat 3 per cent tax through a dedicated mobile app, with fixed quarterly or turnover-based options. The GRA has proposed extending the scheme to qualifying small limited liability companies with turnover up to GH¢750,000, in line with the VAT registration threshold.
Kweku Hammond Snr is Sales & Marketing Consultant/Faculty at Nova Business School Africa.
