Proprietorship business in Bangladesh in 2023- Everything you need to know
Barrister Remura Mahbub
Director, The Law Firm in Bangladesh
24 Jan 2022
This article will explain in details about Proprietorship Business in Bangladesh and how can you start your business in Bangladesh.
Types of Companies in Bangladesh
There are five 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. A proprietorship business can be started by a single entrepreneur. Small and medium-sized businesses typically opt for sole proprietorship.
In simplest way: How you can incorporate a Proprietorship in Bangladesh
In short for you: The following steps outline how to start a sole proprietorship business:
1. First, you have to select a name for Your Business in Bangladesh
2. You have to rent a commercial space to begin your business.
3. Fill out an application for a trade license from your local city corporation/union, etc.
4. Apply for and obtain a business license
5. Complete an application for an e-tin certificate
6. Open a bank account in the company’s name.
That’s all you need! Once you are done with these simple formalities, you will have a legal Proprietorship business under your ownership.
You can still stick around here for more information on this matter! We are glad you are doing so!
Now some key facts about Sole Proprietorship
- In Bangladesh, a sole proprietorship does not constitute a separate legal entity and thus is not distinct from the owner/ proprietor.
- The owner of the business is personally liable for all liabilities incurred during the course of the business.
- A sole proprietorship is open to any Bangladeshi citizen over the age of 18.
- As the sole proprietorship’s business address, a local commercial address must be provided.
- Profits from a sole proprietorship are treated as income of the individual who owns the entity, and thus are taxed at the same rate as personal income.
- Because a sole proprietorship in Bangladesh is not a legal entity, it cannot register another business firm.
- Sole proprietorships are exempt from auditing their accounts because any profits are taxed as personal income.
- The most basic requirement for a proprietorship is a trade license.
The Trade License must be renewed annually.
CONSIDERATIONS FOR FOREIGNERS in regards to
Proprietorship Business in Bangladesh:
Sole Proprietorship Business in Bangladesh
If you are thinking of having a proprietorship business in Bangladesh, you are not the only one.
The easiest and quickest way to start a one-owner firm is through a sole proprietorship. When you begin performing business, sole proprietorship commences.
It does not need the filing of government or state forms and imposes little regulatory requirements, making it a perfect starting point for self-employed individuals.
The absence of a separate legal entity distinguishes a sole proprietorship from a company, be it public or private. The owner of a sole proprietorship is therefore not free from liabilities incurred by the business.
For instance, the debts of a sole proprietorship are also the owner’s debts. However, the gains of a sole proprietorship are also the owner’s profits, as all profits pass directly to the sole proprietor.
Approximately 65 percent of enterprises are operated as sole proprietorships. A sole owner can establish a sole proprietorship. Small and medium-sized businesses typically operate as sole proprietorships.
First get a trade license to start your proprietorship Business
A Trades License must be obtained from the local authority, which could be the City Corporation Office, Municipality Office, Upozila council and Union Council, or the respective Govt. authority, if a proprietorship business is to be established.
To receive a Trade License, one must choose a suitable name for their Proprietorship business, submit the required paperwork, and pay the applicable government fees (for the type of business) to the Trade License granting authorities.
A Trade License is issued by the authority following a review of all applicable documentation and a mandatory field inquiry.
Following issues are considered by the authority:
- The proprietorship’s name – Name of the proprietor
- Such enterprises like Export, Import, Supplier, etc.
- Business Address
- Address, Date of Birth, and Name of Parents
- Owner’s Identification Cards copy
- Photograph of the owner Registered business address VAT chalan copy of the company license Office rental deed
- Fill up Trade license form with the Owner’s signature
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.
Proprietorship Business in Bangladesh and its benefits:
- It is the most convenient and inexpensive business structure to establish.
- As a sole owner, you have complete authority over all aspects of the firm, including decision-making.
- There is no profit sharing: All income earned by the business is accounted for.
- The termination of a single proprietorship is simpler, quicker, and less expensive than that of other company structures.
- Least compliance requirements: You are exempt from filing annual tax returns and are simply required to renew your membership annually.
SOLE PROPRIETORSHIP BUSINESS IN BANGLADESH’s DISADVANTAGES:
- No independent legal entity: You cannot exist without your business. This renders you financially and legally accountable for all corporate obligations and legal proceedings.
- Creditors may sue you for debts committed and may also get a court order to seize your personal assets, such as your property.
- No tax benefits or incentives for corporations: Taxes are assessed based on your personal income tax rate, and you do not receive the particular tax benefits provided to a limited liability business.
- Your personal finances and the business’s income are the only sources of capital.
- Thus, corporate expansion is restricted and challenging.
- There is no perpetual succession, as you and your business are one and the same. However, after the death of the proprietor, the successor is permitted to continue the firm under the same name.
- Nobody would be prepared to lend you huge sums of money due to this entity’s poor public impression, which makes it the least desirable for serious businesses.
- It is also challenging to attract high-caliber staff or senior-level executives, who typically want a more advanced business structure, such as a limited liability corporation.
- Sale or transfer of all or part of a business: You can only transfer a business by selling its assets.
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.
“To start a private limited company in Bangladesh, you will need to open a temporary bank account in the proposed company name with any scheduled bank in Bangladesh.
This stage is solely applicable if the proposed company has foreign shareholding.”
Are you planning to register a private limited company in Bangladesh?
Company formation and registration at Tahmidur Rahman Remura: TLS: The Law Firm 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
Email: [email protected]
Address: 2 Turner Street, Canning Town, E16 1FH, United Kingdom
Job Title: Barrister and Senior Associate
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