How to start a company in Addis Ababa by Addis Software

 Part 1

What prompted me to write this blog is, it was complicated for me and my partner to find full information on how to start a company eight months ago when we were about to Start Addis Software, Read more .

I have tried to put everything you need to know about starting a PLC in Addis Ababa. 

Let me first walk you through the two most popular types of business organizations in Ethiopia.

1. Sole Proprietorship: Is a type of enterprise that is owned and run by one person and in which there is no legal distinction between the owner and the business entity. 
2. Private Limited Company: To start this type of company a minimum number of two members are required and the liability of each member or shareholders is limited. It means that if a company faces loss under any circumstances then its shareholders are liable to sell their assets for payment. The personal, individual assets of the shareholders are not at risk.

So what we first did was, we decided that PLC is the type of business we want to start and agreed on our share contributions. What is next? Company name right? It is not necessary to decide on a company name at this step, just keep thinking of different names for your company in the back of your head because later you will be asked for several names.  

I am going to put the next steps one by one. 

Step1: Decide which sub-city (ክፍለ ከተማ) in Addis you want to start your business.

Article of Memorandum (የመመስረቻ ጽሁፍ)  is a document that sets up the company and it includes things like

•  Company name
• Date of establishment
• Type of company
• Names and signatures of all original shareholders

Article of Association (የመተዳደሪያ ጽሁፍ) sets out how the company is run, governed and owned. It also includes the responsibilities and powers of the directors, it includes things such as

• Directors’ powers, responsibilities, decision making, appointment, and removal, indemnity, and insurance
• Shares, distribution of shares and Dividends
• Capitalization of profits
• Shareholders
• General meetings
• Voting Rights

Writing your company Article of Memorandum and Article of Association from scratch might be a bit tricky, you can get samples from a nearby stationary or business centers near any Documents Authentication and Authorization Agency (የፌደራል የሰነዶች ማረጋገጫና ምዝገባ ኤጀንሲ) office. They have branches in different parts of the city. We were getting services from a Documents Authentication and Authorization Agency located in Megenagna Derartu Tulu Building. 

After looking at a sample you can also include your ideas, I suggest to talk to a lawyer or someone from the law firm to consult you with your Article of Memorandum and Article of Association before publishing it.

And print draft copies of Article of Memorandum and Article of Association without a company name. 

Step 3: Come up with at least 5 alternative company names and get approval on your choice of sub-city.

Firstly go to the sub-city you decided to start your business and go to the office of trade and Industry (የክፍለ ከተማው ንግድ እና ኢንዱስትሪ ቢሮ) of that sub-city. In our case, the Bole Sub-city head office, located right below Megenagna roundabout, and the office of trade and Industry is located on the third floor. 

secondly tell one of the officers that you came for a company name approval, they will ask you for your Article of Memorandum and Article of Association and list of alternative names. This will take around 10 to 15 minutes for them to check on their system whether the company name you proposed exists or not. If you are fortunate, you will get your first choice otherwise they will check all the alternative names. 

We were lucky enough to get our first company name choice “Addis Software PLC” I love this name more than anything now.  

 And Include your approved name in your Article of Memorandum and Article of Association and print three copies. Also print copies of each shareholder ID (Government ID, Drivers License, Yellow Card, Passport… )

Step 4: Get your Article of Memorandum and Article of Association approved (የመመስረቻና የመተዳደሪያ ጽሁፍ ማጽደቅ)

To do this you have to go to any Documents Authentication and Authorization Agency (የፌደራል የሰነዶች ማረጋገጫና ምዝገባ ኤጀንሲ) office that is close to you. The office is usually known by the name Wulina Masreja (ውልና ማስረጃ). The place is usually crowded, I suggest to go in the early morning to save time. 

Then, give your Article of Memorandum and Article of Association to one officer, after carefully reading it they will ask you to sign the papers in front of them.

In this case, all members of the PLC must be present physically because each share-holder will sign on each page of the ‘Article of Memorandum and Article of Association’ (የመተዳደሪያ እና የመመስረቻ ጽሁፍ/ሰነድ). 

Step 5: Office Rent Agreement (የቤት/የቢሮ ኪራይ ውል)

Find an office for rent and get approval for your contract at Documents Authentication and Authorization Agency or “wulina masreja” by signing a contract with the landlord. Every document that is signed between two or more parties gets its legality at this office. You may keep coming back here oftentimes 

Step 6: TIN Registration (ቲን ምዝገባ)

In addition, you have to go to a new office called ERCA (Ethiopian Revenues and Customs Authority or ገቢዎች ቢሮ) near your office to get your company’s TIN Number.

TIN is an acronym for Taxpayers Identification Number and it is usually a 10 digit number assigned to a tax-paying business and other entities for identification, reporting, and record-keeping purposes. 

You will get your TIN very quickly from ERCA. 

Step 7: Business Registration (የንግድ ምዝገባ)

Registering your business means simply putting your company’s information such as your business name or your TIN in the government’s files.

After completing the above steps you will return to your sub city office of trade and Industry, They will require previous documents such as office rent agreement, copies of ID’s of shareholders and General Managers photograph. They will give your Business Registration Certificate with few minutes. 

Step 8: Competency Certificate (የሙያ ብቃት ማረጋገጫ ሰርተፊኬት) | IT sector for Addis Software

Having a Business Registration certificate does not mean you are now able to start your business, you will also need to have a business license depending on the type of business you want to start. To get a business license you will need to have a competence certificate first

For instance Since our Company is in the IT sector, we were asked to bring a Competency certificate from the Ministry of Information and Communication located inside the Global Hotel. in other words this step differs from business to business.

Step 9: Business License (ንግድ ፍቃድ).

Finally! A Business License gives you the right to run a business. You will also get this from your sub-city office of Trade and Industry. The General Manager must be present physically and sign to get the license.

Easy right?! after that you can start running your business. There are multiple steps and rules to follow. On the other hand It took three and a half-day for me and my partner to finish these processes. Consequently it wasn’t as difficult as we thought it would be. However you need to be first in line in the morning. Above all make multiple hard copies of all of your documents .

Step 10: Stamp

 Get a stamp for your company from any business center or printing service shop.

A company stamp is a must to proceed with the next steps, Documents you need to get your company stamp are:

1. Business Registration
2. Business License 
3. Logo (if you have one)

Step 11: VAT Registration

This step may vary from business to business. You will only need to have a VAT registration certificate if you are a VAT payer. We can take our Addis Software as an example, it is a VAT registered company. Most businesses or companies are VAT Payers. 

You will get your VAT Registration Certificate from the nearest ERCA office (የኢትዮጵያ ገቢዎችና ጉምሩክ ባለስልጣን ), most likely it will be the office you visited to get your company TIN Certificate. 

You will be asked to bring your Business License, TIN Certificate and a stamp. This step will not take more than 30 minutes. 

Step 12: Bank Account

You may be asking why opening a bank account is among the last steps. Although it may sound unusual, you are only required to state the amount of money you want to put in starting your business on the previous steps. 

What I advise here is to carefully choose your bank. As Addis Software, I and my partner had to visit multiple banks and discussed with the bank managers to find out what special services they will offer. The offers may include internet banking, mobile banking and other offers for the company and employees. 

Step 13: Sales Register Machine and Manual Receipt Print

A Fiscal printer or cash register machine is a must for VAT Registered businesses. 

To start processing a sales register machine Go to the ERCA office and write a letter to get permission. 

Step 14: Additional Business Licenses 

If you think you need additional business licenses, you can always go back to your sub city Trade and Industry office to expand your license. 

Addis Software got its software export license at this step. 

Step 15: Investment License 

If your business is in the IT sector you can get an additional investment license from the office of Addis Ababa Bureau of Investment located around Senga Tera 

To summarise all steps

Offices to get services:

• Addis Ababa Sub City Offices
• ERCA (ገቢዎች)
• DARA (ውልና ማስረጃ)
• MCIT for IT sector
• Addis Ababa Bureau of Investment (optional)

A little secret from Addis Software:

• Always have multiple copies of your documents when you visit the above offices except for MCIT.
• Go to the offices early in the morning to save time. Because of this, we were able to finish all the processes with less than 4 days.

Last but not least!

Relax and Enjoy! Addis Software wishes all people reading this blog Best of Luck in your business.