Introduction to Business Incorporation in Bangladesh
Business incorporation is the process of legally establishing a business entity and registering it with the relevant authorities. It ensures that a business is recognized as a separate legal entity, capable of engaging in commercial activities, signing contracts, and managing liabilities independently of its owners. Bangladesh, as an emerging South Asian economy, has become an attractive destination for entrepreneurs looking to tap into its growing market. In this article, we will explore the process, requirements, and benefits of incorporating a business in Bangladesh.
What is meant by Business Incorporation in Bangladesh?
Business incorporation refers to forming a legal business structure under the jurisdiction of a specific country. It provides various advantages, including legal protection, limited liability, and access to capital markets. Incorporating a business in Bangladesh involves multiple steps and requires compliance with the country’s legal framework.
Why Choose Bangladesh for Business Incorporation?
Strategic Location and Market Potential
Bangladesh is strategically located, with access to major Asian markets. It is bordered by India and Myanmar, providing a gateway to the South and Southeast Asian economies. The country’s youthful population and increasing purchasing power offer immense market potential for various industries. Further information may be found at Bangladesh Government’s website here.
Favorable Government Policies
The Bangladeshi government has implemented numerous policies to attract foreign investments, including tax incentives, relaxed foreign ownership rules, and reduced tariffs for certain sectors. These initiatives have made the country an appealing destination for business setup.
Low Operational Costs
Compared to other Asian countries, the cost of setting up and operating a business in Bangladesh is relatively low. Labor is affordable, and the country offers competitive utility costs, making it an ideal location for new ventures.
Legal Framework Governing Incorporation in Bangladesh
Incorporating a business in Bangladesh is regulated by the Companies Act of 1994, along with other laws and regulations issued by the Registrar of Joint Stock Companies and Firms (RJSC). Understanding these laws is crucial for ensuring compliance and smooth business operations.
Types of Business Entities in Bangladesh
There are several types of business entities that entrepreneurs can choose from when incorporating in Bangladesh. The choice depends on the nature of the business, the number of shareholders, and future growth plans.
Private Limited Company (Ltd.)
A private limited company is the most common business structure in Bangladesh. It requires at least two shareholders and a minimum of one director. The liability of shareholders is limited to the shares they hold.
Public Limited Company
Public limited companies are larger entities that can raise capital from the public through share offerings. They must have a minimum of seven shareholders and at least three directors.
Partnership Firm
A partnership firm is ideal for businesses where two or more individuals want to share responsibilities and profits. It does not provide limited liability, making partners personally liable for business debts.
Sole Proprietorship
Sole proprietorships are simple to set up and manage, making them suitable for small-scale businesses. However, the owner is personally liable for all business debts and obligations.
Branch Office or Liaison Office
Foreign companies looking to establish a presence in Bangladesh can opt for a branch office or a liaison office. These offices are not separate legal entities and can conduct market research or represent the parent company. These companies must adhere to limitations put in place by BIDA, known as specific “Conditions”. We Taxample.com provide our consultation service to alleviate some of these conditions which is required by branch/liaision offices to carry on business in Bangladesh.
Steps to Incorporate a Business in Bangladesh
Step 1: Choosing the Type of Business Entity
Decide on the most suitable type of business structure based on the nature and goals of the business.
Step 2: Name Clearance and Approval
Obtain a name clearance certificate from the RJSC to ensure that the proposed business name is unique and not already in use.
Step 3: Preparing the Required Documents
Gather the necessary documents, including the Memorandum and Articles of Association, shareholders’ details, and other statutory forms.
Step 4: Registering with the Registrar of Joint Stock Companies and Firms (RJSC)
Submit the required documents to the RJSC for approval and obtain the Certificate of Incorporation.
Step 5: Acquiring the Trade License and Other Registrations
Apply for a trade license from the local municipal authority and register for other necessary permits and tax registrations.
Step 6: Opening a Bank Account
Open a corporate bank account in Bangladesh to facilitate business transactions.
Step 7: Compliance and Post-Incorporation Requirements
Ensure compliance with post-incorporation requirements, including filing annual returns and maintaining statutory registers.
Required Documents for Business Incorporation
The required documents vary depending on whether the business is owned by local or foreign entrepreneurs.
For Local Entrepreneurs
- National ID or Passport Copies of Shareholders and Directors
- Memorandum and Articles of Association
- RJSC Application Forms
For Foreign Investors
- Passport Copies of Foreign Shareholders and Directors
- Board Resolution from the Parent Company
- Power of Attorney
Costs and Fees for Business Incorporation in Bangladesh
The cost of incorporating a business in Bangladesh includes RJSC registration fees, name clearance fees, and charges for obtaining a trade license. Additional expenses may arise depending on the type of business and industry.
Post-Incorporation Requirements
After incorporation, businesses must register for corporate tax, obtain VAT registration, and comply with ongoing filing requirements.
Challenges of Business Incorporation in Bangladesh
Bureaucratic Delays
Delays in the approval and registration process can occur due to bureaucracy and administrative hurdles.
Language Barriers
Foreign entrepreneurs may face challenges in understanding legal documents, which are often in Bengali.
Regulatory Changes
Frequent changes in regulations can complicate compliance and business operations.
Tips for a Smooth Business Incorporation Process
- Seek guidance from a local legal expert.
- Prepare all documents in advance.
- Understand the local business culture and regulations.
Conclusion
Incorporating a business in Bangladesh can be a rewarding venture, given the country’s strategic location, favorable policies, and market potential. By understanding the legal framework and following the correct procedures, entrepreneurs can establish a successful business in this thriving market. We Taxample.com, a prominent management consulting firm situated at the heart of Dhaka, aim to provide easy and super fast processing for foreign individual/companies, helping our friends to get on top of the barriers and a easy pathway to doing business in Bangladesh. We also offer other necessary consultation services that help your business to stand on its feet. Please feel free to ask your query at info@taxample.com, we shall be happy to make you smile 🙂
FAQs
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What is the minimum capital requirement for incorporating a business in Bangladesh?
The minimum capital requirement for a private limited company is typically BDT 50,000 (approximately USD 550). -
Can a foreigner own a 100% share in a Bangladeshi company?
Yes, foreigners can own 100% shares in a Bangladeshi company, except in specific restricted sectors. -
How long does it take to incorporate a business in Bangladesh?
The incorporation process usually takes 2-4 weeks, depending on document preparation and regulatory approvals. -
What are the most common types of business structures for foreign investors?
Foreign investors often opt for private limited companies or branch offices. -
Is it mandatory to have a local director in a Bangladeshi company?
No, there is no requirement for a local director. However, having a local representative can be beneficial. - What other services do you provide?
You can find a list of our services here. You can ask your query at info@taxample.com to receive a catered proposal to your specific need.