To register a business in tanzania can have a powerful impact on your life and the lives of those around you. But before you can run a business, you need to learn how to register a business in Tanzania.
Deciding to start your own business can seem like a daunting prospect if you’ve never done it before. Luckily, plenty of other entrepreneurs have, and you can benefit through the wisdom they gleaned from their successes—and their mistakes.
Legal Requirements to register a Business in Tanzania
This includes things like determining the legal structure of your business, nailing down your business name, registering with the government, and — depending on your business structure and industry — getting a tax identification number, a business license, and/or a business permit.
Furthermore, businesses in Tanzania are regulated by the state, and sometimes even local level. It’s important to check what’s required on all those levels. When you register your business with the government, be sure you’re covering registration on all the levels required for your business’ location.
Below, you’ll find a brief explanation of what goes into each one of these steps, along with links to helpful resources where you can dig into the details.
Business Legal Structure
The 4 most common business structures in Tanzania:
1. Sole proprietorship
Example: Mangi’s Shop.
- What it is: A sole proprietorship is a business that’s owned and run by one person, where the government makes no legal distinction between the person who owns the business and the business itself. It’s the simplest way to operate the business. You don’t have to name your business anything other than your own, personal name, but if you want to, you can give it its own distinctive name by registering what’s called a Business Name (BN). (We’ll get back to that in the “How to Register a Business Name” soon.)
- Pros: It’s easy and inexpensive to create a sole proprietorship because there’s only one owner, and that owner has complete control over all business decisions. Tax preparation is also pretty simple since a sole proprietorship is not taxed separately from its owner.
- Cons: It can be dramatically more difficult to raise money and get investors or loans because there’s no legal structure that promises repayment if the business fails. Also, since the owner and the business are legally the same, the owner is personally liable for all the debts and obligations of the business.
- How taxes work: The individual proprietor owns and manages the business and is responsible for all transactions, including debts and liabilities. Income and losses are taxed on the individual’s personal income tax return at ordinary rates. In addition, you are also subject to payroll taxes, or self-employment taxes, on the money you earn. (More on self-employment taxes later.) Find IRS tax forms here.
Example: Multiple doctors maintaining separate practices in the same building.
- What it is: A partnership is a single business where two or more people share ownership, and each owner contributes to all aspects of the business as well as shares in the profits and losses of the business.
- Pros: It’s generally pretty easy to form a business partnership, and it doesn’t tend to be super expensive, either. Having two or more people equally invested in the business’ success allows you to pool resources. It also means you have access to more than one person’s skill set and expertise.
- Cons: Just like a sole proprietor, partners have full, shared liability if the business goes south. That also means that partners aren’t just liable for their own actions, but also the actions of their partner(s). There is a variant on partnerships called a limited liability partnership, or LLP, that protects against that — which is how most law firms are organized, for example. Finally, when more than one person is involved in decisions, there’s room for disagreement — which means it’s important to have an explicit agreement over how the obligations and earnings will be split, especially if/when things go wrong.
- How taxes work: To form a partnership, you have to register your business with your state, a process generally done through your Secretary of State’s office. Find IRS tax forms here.
3. Limited liability company (LLC)
Example: A small packaging firm.
- • What it is: LLCs are a type of business structure that’s more complex than sole proprietorships and partnerships, but less complex than corporations. They are called “pass-through entities” because they’re not subject to a separate level of tax. Most states don’t restrict ownership on LLCs, and so members can include individuals, corporations, and even other LLCs and foreign entities. Most states also permit “single-member” LLCs, those having only one owner.
- • Pros: As the name suggests, owners of an LLC have limited liability, meaning that they personally are not responsible for any financial or legal faults of the business. This reduction in risk is what makes an LLC a very popular business structure.
- • Cons: LLCs are often more complex than sole proprietorships or partnerships, which means higher initial costs, and certain venture capital funds are hesitant to invest in LLCs because of tax considerations and the aforementioned complexity. That being said, they’re simpler to operate than a corporation because they aren’t subject to as many formalities.
- • How taxes work: LLCs have the benefit of “flow-through” tax treatment, meaning that the owners – not the LLC – are the ones who are taxed. Having only one level of tax imposed makes taxes easier. Find IRS tax forms here.
Example: Microsoft, Coca-Cola, Toyota Motor, and almost all well-known businesses.
- What it is: A legal entity that is separate and distinct from its owners, and has most of the rights and responsibilities that an individual possesses (to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes.) It’s more complex than the other business structures, and it’s generally suggested for larger, established companies with multiple employees.
- Pros: They make seeking venture financing easy. They also provide the best protection for personal assets, as the founders, directors, and stockholders are (usually) not liable for the company’s debts and obligations – only the money and resources they’ve personally invested.
- Cons: Because they’re much more complex than other business structures, they can have costly administrative fees, and more complicated tax and legal requirements.
- How taxes work: Corporations are required to pay federal, state, and in some cases, local taxes. There are two different types of corporations: “C corporations” and “S corporations.” C corporations are subject to double taxation – so any profit a C corporation makes is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends.
The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation, but they are also not responsible directly for taxes on their earnings – just on the dividends they give to shareholders.
S corporations, on the other hand, have only one level of taxation. Learn more about the difference between “C corporations” and “S corporations” here, and find IRS tax forms here.
Mus Have Documents To Register a Business In Tanzania
- Certified copy of memorandum and articles of association or other instrument constituting or defining the constitution of the company. If the instrument is not in English, a certified translation is required.
- A list of directors and company secretary of the company.
- A statement of all subsisting charges created by the company.
- Names and addresses of one or more persons, resident in Tanzania authorized to accept on behalf of the company service of process and any other notice required to be served on the company and to represent the company as its permanent representative at its place of business (with a statement as to the extent of its authority).
- The full address of the registered principal office of the company and the full address of the place of business in Tanzania.
- A statutory declaration made by the director or secretary of the company stating the date on which the company’s place of business in Tanzania was established, the business that is to be carried on and if different from the registered name of the company, the name under which that business is to be carried on.
- A copy of the most recent accounts and related reports of the company including, if not in English, a translation of the same.
[su_quote]However, in order to be able to register a company in the United Republic of Tanzania, one is required to have copies of National Identification Cards or the passport for all local and foreign prospective shareholders, respectively.[/su_quote]
These Are 10 Steps on How to Register a Business in Tanzania
1. Business Name Clearance
If you wish to register a company you must conduct the name search, to be sure that your proposed is not yet taken and that name is available for registration. The name search is made through the online system (ORS) under BRELA.
If the name is available for registration, it is advised to file an application for reservation of the said name, the registry will reserve the name by granting exclusive rights over the said name and will not allow another person to register the same.
2. Obtain Notarization of Compliance
In this, an entrepreneur/business owner should visit the notary for notarization of the declaration of compliance. Notaries do charge at the range of TZS 10,000-50,000, for notarial services to normal documents. E.g. Form 14b.
Get details of notary agencies in Tanzania NB: Notary is a person authorized to perform certain legal formalities, especially to draw up or certify contracts, deeds, and other documents for use in other jurisdictions.
3. Apply for Certificate of Incorporation
Certificate of Registration
An individual may opt to register the business name to the agency commissioned by Ministry of Trade and Industry known as Business Registration and Licensing Authority (BRELA). The registered business name shall be indicated on the TIN certificate together with an individuals’ name showing the owners’ name trading as (T/A).
A Corporation (limited Company)
Starting a corporation requires a person to apply for the Certificate of incorporation from Business Registration and Licensing Authority (BRELA). The promoters of the company are required to draw and submit the certificate and Memorandum and articles of association.
Partnership Certificate of Registration
The partners have to register for the firm at BRELA and acquire the certificate of registration which shows the number and names of partners with their respective distribution ratio.
4. Draft Memorandum and Articles of Association
The next step will be the preparation of Memorandum and Articles of Association, together with the compliance declaration, Form 14B and Form No.2 in Tanzania Mainland, declaring that all the requirements relating to the formation of the company have been complied with.
The forms are filled and signed by either a proposed director or company secretary or an Advocate of the High Court engaged in the formation of the company which is sworn before a Commissioner for Oath. All these documents are to be filed with the registrar of companies together with all necessary registration fees.
5. Apply for taxpayer identification number (TIN)
Another main step is to apply for a TIN number. Where you will be provided with either of the following application forms depending on the type of TIN you want to register.
- Individual tax registration Form
- Business or Organization tax registration form
- Fill and submit the individual/Company tax registration form
- Complete the application form and attach the required documents before submission to the revenue officer
- The following documents need to be attached to the application before submission.
- A copy of a valid National Identity card
- A copy of a valid passport
- A copy of a valid driving license
- A copy of a legitimate voter’s identification card
- Certificate or letters of business registration
- Memorandum and Articles of Association.
Once the application for Tax Identification Number is made and submitted, the applicant will wait for not more than one day for individuals and 2 days for companies. The TIN can after be collected from the designated office after the 2 days.
6. Apply for a Business License
Prior to making an application for a business license a Tax Clearance Certificate for the business has to obtained from the Tanzania Revenue Authority.
Depending on which industry/sector, your business is intending to operate, it will have to apply for a business license from the relevant authority such as the Trade office in District, Municipal, City and the Ministry of Industry, Trade and Investment, depending on the type of business the company has intended to run.
7. Apply for the VAT Certificate
Registration for VAT is mandatory to every person upon attaining the registration threshold of 100 million in the period of twelve months and above or 50 million in a period of six months ending at the end of the previous months.
This step applies to all types of businesses except for professional service providers, Government entity or institution which carries on economic activity and intending traders after fulfilment of sufficient evidence such as contracts, tenders, building plans, business plans and bank financing.
A person who is required to be registered shall make an application to Commissioner General within thirty days (30) but an intending trader may make such application at any time.
If the Commissioner-General is satisfied that a person is required to be registered with VAT and there is a good reason including protection of Government revenue but has not applied for it, shall register and notify such person not later than 14 days after the day on which registration is done regardless of the turnover.
Application for VAT registration manually done by filling THIS FORM
VAT Registration Certificate
Upon registration, you will be issued with a Certificate of Registration stating the name and principal place of business of the business, the date on which the registration takes effect, Taxpayer Identification Number and VAT registration number.
A person shall show his Taxpayer Identification Number and his VAT registration number in any return, a notice of appeal or other documents used for official VAT purposes and display his certificate of registration in a noticeable position at his principal place of business.
8. Register for Workmen’s Compensation Insurance
Register for the workmen’s compensation insurance at the National Insurance Corporation or an alternative insurance provider.
To register for workers’ compensation insurance, employers must complete the Workmen’s Compensation Tariff Proposal Form. This is done at the Workers Compensation Fund (WCF) and Tanzania Insurance Regulatory Authority (TIRA).
This form should be completed once the firm begins hiring employees and just before the firm becomes operational. However, because the insurance industry is privatized in Tanzania, employers may opt to take an insurance policy instead of the workmen’s compensation claims.
9. Obtain Social Security Registration
Every employer in the formal sector is required to register his/her employees with any of the mandatory schemes, provided that it shall be the right of the employee to choose the mandatory scheme to register under. These mandatory schemes are established by law and guaranteed by the Government to provide social security benefits to employees.
Here are the steps to register for NSSF
- Visit the Nearest National social security fund (NSSF) with your Identity Documents and two coloured passport photo.
- Provide your ID documents to the NSSF office at the service desk for verification.
- Obtain application form for membership registration, NOTE; if you are an employer obtain application form NSSF/R1A, and registration for Statutory members obtain application form NSSF/ R.3A.
- Fill in the application form with the correct information and attach the two passport photos to it
- Submit the filled-in application form to the attending NSSF officer.
- The official will validate the information you have provided and approve your application for registration.
- Then the office will process the application and provide you with a receipt which will provide info about your registration number and the date your member’s card will be ready
- On the date indicated on the registration form, visit the NSSF office to collect your Members card.
10. Register with the Occupational Safety and Health Authority (OSHA)
Any company or individual owning or occupying a factory or another workplace in Tanzania needs to obtain the Certificate of Compliance with the OSHA Chief Inspector. The registration of a workplace should be done before the commencement of any business operation as per section 16(2) of the Occupational Health and Safety Act, 2003.
After registration of the workplace, OSHA will conduct an inspection. Depending on the nature of the business, these inspections could encompass general, plant, electrical safety, industrial hygiene inspections, medical examinations, buildings and construction safety, ergonomics.
A Certificate of Compliance/Compliance License is issued if the workplace is approved. It is mandatory as per the Occupational Health and Safety Act No.5 of 2003. The license is renewed every year.