This guide provides information on registration of a sole proprietorship in Bangladesh. To learn about various types of business entities in Bangladesh, refer to start a business in Bangladesh.
Sole proprietorship is the simplest form of business structure in Bangladesh. However, it is suitable only for very small single-owner type business that does not carry any risks. Unlike a private limited liability company, a sole proprietorship does not provide limited liability protection and your personal assets are not protected from business risks.
Sole-Proprietorship – Key Facts
- A sole proprietorship in Bangladesh does not constitute a separate legal entity therefore it is not distinct from the owner/ proprietor. The business owner is personally accountable for all liabilities incurred during the course of the business.
- Any Bangladeshi citizen of at least 18 years of age is eligible for a sole proprietorship.
- A local commercial address must be provided as the business address for the sole proprietorship.
- Profits of the sole proprietorship are treated as income of the individual who owns the entity, thus it is subjected to a tax rate as that of personal income.
- As a Bangladesh sole proprietorship is not a legal entity, it cannot register another business firm.
- Sole proprietorships do not need to audit their accounts as any profits will be taxed as personal taxes.
- Trade License is the basic requirement for proprietorship.
- Trade License needs to be renewed annually.
Considerations for Foreigners
Practically, a sole proprietorship is not an option for foreigners. Foreign business professionals should incorporate a private limited company instead. For further details about private limited companies, refer to company registration in Bangladesh guide.
Documents Required and Registration Procedure
In order to register a sole proprietorship business in Bangladesh, the following documents/information are required:
- Proposed business name in Bangla
- Description of principal activities
- Local business address for the proposed business in any commercial area.
- Lease/Rent Agreement or title deed for the office address.
- Copy of National ID for the owner.
Sole Proprietorship Advantages
- Ease of setting up: It is the easiest and least expensive business structure to set up.
- Owner Control: As a sole proprietor you are in complete control of all the business affairs including decision making.
- No profit sharing: You accrue all income generated by the business.
- Ease of termination: Terminating a sole proprietorship is easier, less time consuming and less expensive than other business entities.
- Least compliance requirements: You are free of the obligation of filing returns annually and only need to renew your membership every year.
Sole Proprietorship Disadvantages
- No separate legal entity: You are inseparable from your business. This makes you financially and legally responsible for all debts and legal actions against the business.
- Unlimited liability: Creditors may sue you for debts incurred and can also obtain a court order to claim against your personal assets, including your property.
- No corporate tax benefits or incentives: Taxes are determined at your personal income tax rate and you do not enjoy special tax benefits that are available to a private limited company.
- Limited capital: Capital is limited to your personal finances and the profits generated by the business. Thus, business expansion is limited and difficult.
- No perpetual succession: The business lives and dies with you as you and the business are one and the same thing. However, after the death of the owner of proprietorship, the successor may continue the business in the same name.
- Low public perception: This entity is the least preferred for serious businesses as nobody would be willing to lend you large sums of money. It is also difficult to attract high-caliber employees, or senior level executives who usually look for a more advanced form of business structure such as a private limited company.
- Sale/transfer of all or part of the business: You can transfer the business only by the sale of business assets.