Partnership business in Bangladesh in 2023- Everything you need to know
Barrister Tahmidur Rahman
Director, The Law Firm in Bangladesh
24 Jan 2022
This article will explain in details about Partnership Business in Bangladesh and how can you start your business in Bangladesh.
Types of Companies in Bangladesh
There are six ways of doing business in Bangladesh:
- Public Limited Company
- Private Limited company
- Branch office
- Liaison Office
- Partnership Business in Bangladesh
In general, these five types of business entities can be found in Bangladesh. Around 65 percent of businesses are run on a sole proprietorship basis.
In simplest way: How you can incorporate a Partnership in Bangladesh
PARTNERSHIP BUSINESS IN BANGLADESH
A partnership is a type of business structure where two or more partners start an entity to do business. For a partnership to exist, there must always be two or more partners.
A Partnership is defined by the Partnership Act, 1932, (the “Partnership Act”) as ‘the relation between persons who have agreed to share profits of the business carried on by all or any of them acting for all’. This definition gives three minimum requirements to constitute a partnership:
The individuals who wish to form a partnership must enter into a verbal or written agreement.
The purpose of the agreement must be to divide the profits from the business that will be conducted by the partnership, and
The business must be operated by all of the partners or by one of them acting on their behalf.
The Partnership Act does not define the term “person.”
There are no penalties for failing to register your partnership, so registration is not required. However, it is recommended as the following rights are denied to unregistered businesses:
The Partnership Act prohibits a partner from bringing a lawsuit against the firm or other partners to enforce any contractual or statutory right.
A contractual right cannot be enforced in court by or on behalf of your company against a third party.
In addition, neither the firm nor any of its partners may assert a set-off (i.e., the mutual adjustment of debts owed by disputing parties to one another) or other proceedings in a dispute with a third party.
PARTNERSHIP BUSINESS IN BANGLADESH QUICK FACTS
In Bangladesh, a registered partnership is the only way to establish a separate legal identity (i.e. separate from its owners) for liability purposes.
All partners of a partnership are jointly and severally liable for the partnership’s liability.
In Bangladesh, the concept of Limited Liability Partnership does not exist.
TAXATION in Partnership Business in Bangladesh:
Tax-wise, partnership business in Bangladesh are not taxed at the entity level; rather, profits are treated as part of each partner’s personal income and taxed at rates applicable to personal income.
MEMBERS & MANAGEMENT in Partnership Business in Bangladesh:
There must be at least two and no more than twenty partners in partnership business in Bangladesh.
The partners can be individuals or corporations.
In Bangladesh, unlike private or public limited companies, partnerships do not have directors, shareholders, or secretaries; instead, the partners own and operate the business.
PARTNERSHIP DOCUMENTS REQUIRED:
For a partnership to be registered in Bangladesh, the following information/documents are required:
- Proposed business name;
- Contract of partnership duly notarized;
- Form I;
- Details about the partners;
- Addresses of the partners’ homes;
- Details of the partnership’s registered address; and
- Percentage of each partner’s share of the profit.
PARTNERSHIP REGISTRATION PROCEDURE in Bangladesh:
The Registrar of Joint Stock Companies and Firms of Bangladesh (“RJSC”) can register a partnership.
The registration process for a partnership business in Bangladesh consists of two steps: name reservation and entity registration. Typically, registration of a partnership can be completed within one or two days.
STEP 1- CHOOSING THE PARTNERSHIP NAME:
The partners may choose any name for their partnership business in Bangladesh , subject to the following restrictions:
The names must not be too similar to or identical with the name of an existing business engaged in a similar line of work. The reason for this rule is that a company’s reputation or goodwill may be damaged if a new company adopts an allied name.
The name cannot contain certain words that express or imply the sanction, approval, or sponsorship of the government.
After selecting a name, you must submit an application for name clearance via the RJSC website.
STEP 2 – PREPARE A PARTNERSHIP DEED:
You must create a partnership agreement for your partnership business in Bangladesh. Typically, a partnership agreement will include the following clauses:
- Name and address of the company, as well as the names of all partners;
- Nature of the enterprise to be conducted;
- Date of Business Commencement;
- Whether the duration of the partnership is fixed or indefinite;
- Contribution of capital by each partner;
- ratio of profit-sharing among partners;
- Rules for retirement, death, and admission of a partner; and
- The aforementioned are the minimum requirements for all partnership agreements. Additionally, the parties may include any additional clauses.
The Partnership Deed must be printed on stamp paper in accordance with the Stamp Act, and all partners must sign it. It should then be notarized.
STEP 3- REGISTER PARTNERSHIP DEED WITH RJSC:
The partnership deed and its completion Form I must be submitted to RJSC. These documents will be reviewed by RJSC representatives. When officials are satisfied with the points stated in the partnership agreement, he shall record an entry of the statement in the Register of Firms and issue a Certificate of Registration.
There are numerous types of businesses in Bangladesh. One is a Partnership Firm, while the others are Sole Proprietorship and Limited Liability Company. The Partnership Act of 1932 governs the formation of a Partnership Firm. In Bangladesh, only RJSC (The Registrar of Joint Stock Companies and Firms) has the authority to register Partnership Firms. For Partnership Registration in Bangladesh, the steps outlined at the end of this article must be followed.
Liability of a Proprietorship Business in Bangladesh:
A sole proprietorship is not a separate legal entity. The owner is responsible for all business outcomes.
Taxation in Proprietorship Business in Bangladesh:
The proprietor will be required to pay the tax on his personal income from the business.
Maintenance & Operation in Proprietorship Business in Bangladesh:
- The running expenses of a proprietorship are quite cheap.
- Annual preparation of a profit & loss statement and audit report is not necessary.
- The only individual who makes business decisions is the owner.
Additional necessary approvals and documents for Proprietorship Business in Bangladesh:
After obtaining a Trade License for a sole proprietorship, a Taxpayer Identification Number (TIN) certificate is required to create a bank account (business account) in order to conduct commercial transactions.
Currently, most businesses incorporate VAT (Value Added Tax). To deduct VAT, a VAT Registration Certificate must be collected. To operate a business and deduct AIT (Advance Income Tax) at the source, a TIN is required.
If a proprietor desires to engage in international or multinational company, he or she must possess an Export Registration Certificate or an Import Registration Certificate. Bangladesh is now one of the world’s largest exporters of ready-made clothes, jute, frozen foods, leather goods, and potatoes.
In Bangladesh, a significant number of proprietorships, partnerships, and limited liability companies are interested in engaging in international commerce or export and import operations. In Bangladesh, when two or more entrepreneurs wish to start a firm, they must either form a Limited Company or a Partnership Firm.
When two or more people with a similar mindset or similar professional backgrounds start a business and create a voluntary agreement with the intention of making and sharing profits, this is referred to as a Partnership Business. Minimum of two and maximum of twenty individuals can form a business partnership.
In order to open a bank account for a partnership business, registration with the RJSC is now required. For this reason, many unregistered Partnership Business proprietors will register their Partnership Business with RJSC. To obtain legal privileges, however, Partnership Business Registration with RJSC is required.
The partnership agreement is commonly referred to as the partnership deed. Typically, the following provisions are included in a Partnership Deed:
- Partner’s Name, Current Address, and Permanent Address.
- Firm’s name as a partnership
- Business Description Business Address
- Duration of the Relationship
- Profit participation for each Partner
- Capital contributions made by each partner
- Conditions of Retiring
- Mode of Administration
- Interest on Lending
- Breakup of a Partnership
Steps in Bangladesh Partnership Registration:
A partnership can be registered either at the time of formation or later. An application must be submitted to the RJSC with the following information:
- Initial Clearance Declaration of Partnership Firm
- Date of Incorporation of the Partnership
- Duration of the Business Partnership
- Principal place of business with Complete Address Date of
- Partnership Formation
- Partners’ Particulars
- Business Information The application must be submitted on the prescribed Form- I.
We recommend that you immediately register your existing Partnership Firm to avoid unforeseen circumstances. Also, if you establish a new partnership in Bangladesh, you must register with the RJSC. Please review the specifics of additional RJSC.
Benefits of Partnership Business in Bangladesh:
Due to the nature of business start-up capital funds provided by the partners, the greater the number of partners, the more capital they can invest in their business, allowing for greater adaptability and advancement potential.
Generally speaking, a partnership is simpler to register, operate, and manage. Partnerships are subject to less stringent rules and regulations than corporations. As long as all partners are in agreement, they are free to run their business as they see fit.
Every business partner contributes new ideas and abilities. It is easier to make a decision to solve a problem when there are more minds to consider it. Each partner can share in the business’s duties and responsibilities.
After completing Partnership Registration in Bangladesh, the following documents are required to commence business operations:
Certificate of Trade License for your newly registered Partnership.
Certificate of VAT Registration for a Bank Account
Import Registration Certificate (In case of Import Business)
Certificate of Registration for Export (In case of Export Business)
If you want to open a liaison office in Bangladesh or about branch formation click here!
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What are some alternative ways to set up a company in Bangladesh?
A branch is not a separate incorporated entity, but rather an extension of its parent company. In other words, the parent company is liable for the liabilities of its branches.
With Bangladesh Investment Development Authority’s (BIDA) approval, a branch can engage in commercial activities. The Exchange Control Guidelines, on the other hand, strictly monitor its operation.
In Bangladesh, the average time to open a branch officis 45- 60 days.
A liaison, also known as a representative office, is subject to BIDA approval similarly as a branch.
It must have an overseas parent company, and its activities are limited because it only serves as a communication or coordination instrument for Bangladesh’s business resources.
Also, keep in mind that a liaison office in Bangladesh cannot earn any local income. Through remittance, the parent company bears all of its expenses and operational cost. It also adheres to the general business registration procedure in Bangladesh.
Are you planning to register a private limited company in Bangladesh?
The legal team of Tahmidur Rahman, The Law Firm in Bangladesh Remura: TLS, The Law Firm in Bangladesh are highly experienced in providing all kinds of services related to forming and registering a Private Limited Company in Bangladesh . For queries or legal assistance, please reach us at:
E-mail: [email protected]
Phone: +8801847220062 or +8801779127165
Address: House 410, Road 29, Mohakhali DOHS
How much money is required for company registration in Bangladesh?
The governmental fees for registering a company are determined by the amount of authorized capital. Government fees for the issuance of an Incorporation Certificate shall be BDT 1000.
How long does it take to register a company in Bangladesh?
Once the aforementioned formalities have been completed, RJSC will usually issue the certificate of incorporation (Company registration certificate) within 6-8 working days.
It usually takes 2-3 weeks from the date of submission of all documents to RJSC to register a company.
What is BIDA?
Bangladesh Investment Development Authority (BIDA) is in charge of facilitating foreign investments in the country.
BIDA's responsibilities include issuing work permits for foreign employees, visas for foreign investors, processing loans from foreign sources, approving remittance of royalties and technical fees, assisting in the acquisition of industrial plots, facilitating utility connections, approving foreign loans, suppliers credit, and providing assistance and advice on a variety of investment-related issues.
Foreign investors with industrial projects are strongly advised to register with BIDA after forming their limited company. However, there is no requirement for a commercial or trading company to register with BIDA. The average time frame for obtaining registration is 7-10 working days.
What documents are needed to set up a private limited company in Bangladesh?
1. Memorandum of Association
2. Article of Association
3. Certificate of Incorporation
4. Trade License
6. VAT Registration Certificate
7. Name Clearance
8. Environmental Clearance Certificate
9. Fire Certificate
What is the minimum capital required for a private limited company in Bangladesh?
In Bangladesh, there is no minimum or maximum authorised capital for a local company.
However, for practical reasons and to obtain complete flexibility in terms of expatriation and bringing in foreign expatriates, a minimum of USD 50,000/- must be invested in the Company.
Can a single person start a company in Bangladesh?
Bangladesh does not allow a single person to open a private limited company or One Person Company (OPC).
A private limited company must have at least two shareholders. In the case of a public limited company, however, the total number of shareholders required is seven.
Can a private limited company have one director in Bangladesh?
A private limited company must have at least two directors. Local or foreign nationals may serve as directors.
Directors must be at least 18 years old and have never been bankrupt or convicted of a crime. A director is required by law to own the qualification shares specified in the Articles of Association.
- Authorised capital: The amount of authorised capital must be specified in the Memorandum of Association and Articles of Association. It is the maximum amount of share capital that a company may allocate to shareholders.
In Bangladesh, there is no minimum or maximum authorised capital for a local company. However, for practical reasons and to obtain complete flexibility in terms of expatriation and bringing in foreign expatriates, a minimum of USD 50000/- must be invested in the Company.
-Paid-Up Capital : The minimum paid-up capital for registering a Bangladeshi company is Taka 1 (for local companies) and USD 50000 (for foreign companies).
About Meheruba Mahbub | One of the most innovative young lawyers in Bangladesh
Meheruba Mahbub is a finance partner and one of the Bangladesh's market leading international lawyers. She is head of the firm's Mergers and Acquisitions practice, which advises corporates and financial institutions on outbound and inbound investments, projects and financings.
Meheruba has a diverse finance practice , representing large banks, financial sponsors, and corporations. She specializes in acquisition and structured financings, loan portfolio purchase and financing, real estate financings, and inbound and outbound transactions. She has extensive expertise in the energy and infrastructure industries.
Meheruba has acted on many high-profile Finance and Commercial deals in Bangladesh and India. These include advising:
⦾ Standard Chartered Bank on the sale of a portfolio of loans in Bangladesh, the first in a series of similar deals in Bangladesh as part of the government’s directive to banks to focus on the robustness of their balance sheets.
⦾ the lending and underwriting banks on the refinancing of US$6.9bn worth of debt uninsured by the Summit Group
⦾ Brookfield Property Partners on the acquisition and financing of Unitech’s real estate portfolio
⦾ Enron on the US$3bn Dhabol power project (since renamed Ratnagiri Gas and Power), the first ever inward investment into the power sector
⦾ the sponsor and borrowers on the Sakhalin LNG project, the world’s largest integrated oil and gas project and the largest LNG financing in Russia
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