How to Start a tech company or PLC in Ethiopia | Addis Ababa

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How to Start a tech company or PLC in Ethiopia | Addis Ababa

How to start a company in Addis Abeba 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.

Sub cities in addis abeba

Addis Ketema, Akaki Kality, Arada, Bole, Gullele, Kirkos, Kolfe Keranio, Lideta, Nifas Silk Lafto, and Yeka are the sub-cities in Addis Ababa, I guess choosing a sub-city depends on several factors such as type of business, location, etc… We decided to start our business addis software in Bole Sub-city. 

Step 2: Write Article of Memorandum and Article of Association (የመመስረቻ እና የመተዳደሪያ ጽሁፍ/ሰነድ) for your company. 

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 .

I will cover the rest important steps in Part 2 of the blog. 
also in collaboration with our Swedish partner Sweetopia