Formal registration of companies has many immediate benefits for the companies and for business owners and employees. Legal entities can outlive their founders. Resources are pooled as several shareholders join forces to start a company. Formally registered companies have access to services and institutions from courts to banks as well as to new markets. And their employees can benefit from protections provided by the law. An additional benefit comes with limited liability companies. These limit the financial liability of company owners to their investments, so personal assets of the owners are not put at risk. Where governments make registration easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and generating more revenue for the government.
Below is a detailed summary of the bureaucratic and legal hurdles faced by entrepreneurs wishing to incorporate and register a new firm in Eritrea. It examines the procedures, time and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy's per-capita gross national income.
| No. | Procedure | Time to Complete | Associated Costs |
|---|---|---|---|
| 1 | Deposit initial capital in bank account | 1 day | no charge |
| 2 | Search for company name | 2 days | no charge |
| 3 | Notarize company statutes | 3 days | ERN 715.2 |
| 4 | Register with the Commercial Registry | 7 days | no charge |
| 5 | Incorporation notice published in official journal | 33 days | ERN 600 –1000 |
| 6 | Apply for tax identification number at the Inland Revenue Department | 7 days | 450 |
| 7 | Obtain tax clearance from Inland Revenue Department | 1 day | no charge |
| 8 | Apply for business license at Ministry of Trade and Industry | 14 days | ERN 500 |
| * 9 | Receive business license inspection from Ministry of Trade and Industry | 7 days (included in previous procedure) | ERN 500 |
| 10 | Obtain approval from local municipality | 2 days | ERN 100-500 |
| 11 | Notify Ministry of Labor and Human Welfare | 1 day | no charge |
| 12 | Make a company seal | 3 days | ERN 400 |
| 13 | Apply for tax receipts from the Inland Revenue Department | 10 days | ERN 200 for 10 packs of receipts |