Before setting up a business in Jamaica (or elsewhere), you should consider exactly what your business would like to accomplish. Some questions to ask yourself are:– what is the main focus of the business; who is your target market; do you intend to make a profit or offer a non-profit or charitable service; do you want to go it alone as a sole trader or as a registered company; would you need a bank loan for start-up capital or an equity investment by involving other parties in the business; what are the statutory reporting requirements after registration; do you want to protect a name or logo you created from being used by some other person; will you need to transfer funds to invest in the business; do you intend to repatriate funds from the business; do you intend to import any plant or equipment or motor vehicles for use in the business; do you intend to reside and work in Jamaica.
Having answered all the questions and formulating your business plan whether mentally or in writing, the following are the ways in which your business can be registered, as a co-operative; an industrial and provident society; a sole trader; a partnership; a limited company; an overseas company registered in Jamaica. An overview of the three basic legal forms of organization – sole trader, partnership and limited company, as well as the overseas branch registration are set out below:
The Registration of Business Names Act (RBNA)
Every trader having a place of business in Jamaica is required to be registered under RBNA. There are two ways to effect registration of a business name: (1) as a Sole Trader or (2) as a Partnership.
- Sole Trader
This is known in Jamaica as the one-man shop. There is no difference between what you own and what the business owns as under the law you are considered one and the same person. Completion of a Business Registration Form, proof of identification and residence are all that you will need to submit to the Companies Office of Jamaica (COJ). Once your documents are approved, the COJ will issue a Certificate of Registration which is valid for three years after which period you must apply to renew the business name if you wish to continue your operations.
The registered business name is automatically issued with a Taxpayer Registration Number to enable it to start operating but if you intend to import say a piece of equipment or motor vehicle you must go through the process of applying to Tax Administration Jamaica (TAJ) for a Tax Compliance Certificate and have the import documentary evidence available.
The disadvantages of a sole trader is that the owner has unlimited liability and is legally responsible for all debts against the business. If you are unable to pay the debts of the business you can lose your personal property. It may also be difficult to expand the business through credit arrangements hence you stand the risk of going bankrupt.
- Partnership
A partnership can be either two or three persons or two companies or a combination of both. The same procedure for application and operation would apply as with the sole trader. Partners are jointly and individually liable for the actions of the other partners and profits must be shared among the partners. A partnership has a limited life and may end on the withdrawal or death of a partner.
- General Remarks
When doing business in Jamaica, whether you operate as a sole trader or partnership, the business is required by law to file its annual income tax return with the TAJ on March 15 each year as well as an estimate of taxes for the following year payable each quarter – June, September and December. Completing the relevant forms can be done online using the TAJ website or either with assistance from your accountant or a TAJ representative. The registration fees are very minimal, under US$50.
A partnership that is not an entity distinct from its partners and which does not have perpetual succession is governed by Part II of The Partnership (General) Act.
The Companies Act 2004
A company is a legal body in its own right with an existence that is separate in law from its owners. The company can therefore be sued and can sue in its own name. Limited liability is a form of business protection for company shareholders; the maximum sum a shareholder can lose from a business venture is the sum of money that he has invested in the company – this is the limit of their liability.
You should first decide on the name of your company and apply for a name reservation to ensure availability prior to proceeding to registration. A company may either be limited by shares, limited by guarantee with or without shares or unlimited. It may also be registered as a public company but note that a private company can be converted to a public company at some future date. A start-up business is usually registered as a private company limited by shares.
An application to register a company must be done on the same Business Registration Form used for registering Business Names. However, in addition to this form, you must also complete and submit the Articles of Incorporation either using Form 1A, Form 1B or Form 1D, depending on the type of company being registered.
- Requirements for Registering a Private Company
The Act allows one person to register a private company. You can be the sole director and shareholder of the company but cannot also hold the office of company secretary. Form 1A, which is the Articles of Incorporation used to register private and public companies, requires you to state:
- The name of the company
- The core purpose or objective of the company
- Share capital – ordinary and preference, if any
- Minimum/maximum number of directors, if not one director
- The full particulars of the director and shareholder including nationality
- The number of shares to be issued
- The full particulars of the company secretary
- Whether or not you are adopting the regulations set out in Table A of the First Schedule to the Act. Table A is basically the internal regulations governing the management of the company.
- Requirement for Registering a Public Company
The same registration process applies as in the registration of a private company – submission of Business Registration Form and Form 1A as earlier mentioned. The exceptions are that:
- the value of the allotted shares must be stated and should not be less than $500,000
- the company must have at least three directors
- at least two of the directors should not be employees of the company or of any affiliated company
- Limited by Guarantee With or Without Shares
It is usual to register a company limited by guarantee without a share capital but there are cases where these companies are registered with shares. In each case, registration without shares requires completion of the Business Registration Form and Form 1B which is the adoption of Table B of the First Schedule to the Act while Table A or Table B applies to guarantee companies with shares. Without shares means that each member of the company undertakes to make a contribution to the assets of the company in the event of a winding up or closure. If this company is registered for a charitable purpose the next step is to seek registration under the Charities Act for charitable registered status and tax exemption by making an application to the Charities Authority, Department of Co-operatives and Friendly Societies.
- Unlimited
An unlimited company with a share capital requires the adoption of Table D to the First Schedule to the Act. The shareholder has to contribute an unlimited amount that is required to pay the debts of the company in the event of liquidation. This type of company is not popular but is useful to hold assets.
- General Remarks on Limited Companies
The Act was recently amended to impose a requirement on companies to disclose the name and particulars of the legal and beneficial owners of shares. Where the shareholder is a company, you must indicate who has controlling interest in terms of percentage shares (over 50%) or who has ultimate direct control in the decision-making process. In addition, a company is subject to greater statutory reporting as in each year it must not only submit its annual income tax returns but also provide the Companies Office with an annual return and a declaration of assets to the TAJ. After two years of existence, a company must also pay over to the government a minimum business tax of $60,000 – $30,000 in June and $30,000 in September, whether or not it is active. The registration fees for setting up a company is no more than US$200.
Some advantages of registering a company as opposed to a business name are that if a member dies, the company continues to exist; it is easier to expand and better able to obtain credit if your business is a company; it can be transferred as a going concern; it is responsible for its own liabilities.
- Registration of An Overseas Company
This option is opened to companies registered outside of Jamaica which are desirous of operating in Jamaica through a branch. The branch must have a local agent who is authorised to accept service of processes or notices required to be served on the company. Once the branch is registered locally and in operation, it is required to submit audited financial statements (or annual report) to the Companies Office on an annual basis and maintain an overseas branch register of the shareholders of the company.
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