How to Set Up a Sole Proprietorship in Bangladesh: A Complete Guide

One of the fastest emerging economies in South Asia, Bangladesh ranks 39th in the world regarding market exchange rates. From small-scale establishments like retail and wholesale stores to relatively large-scale ventures like real estate, business owners mostly choose to set up a sole proprietorship in Bangladesh. In the last twenty years, almost 65% of the businesses in Bangladesh have been operating on a sole proprietorship model.

A sole proprietorship is a lucrative option for entrepreneurs planning to establish a business in Bangladesh, incurring minimum risks and tax liabilities. Due to the low capital requirement in Bangladesh, a sole proprietorship is the preferred business model for business owners. Moreover, for budding entrepreneurs, autonomy is an essential aspect that sole proprietorship delivers.

If you are a citizen of Bangladesh and a minimum of 18 years of age, setting up a sole proprietorship in Bangladesh should not be a problem. However, you must obtain a trade license and renew it every year from the appropriate authorities. 

You should know that a sole proprietorship is not a distinct legal entity in Bangladesh. Hence, you will be fully liable for all operations and proceedings of your business. The upside is that all profits earned are your income, and you only need to pay income tax. So, you will be exempt from periodic audits of your accounts. 

Since it is a single-owner business, the risks involved in a sole proprietorship in Bangladesh are relatively low, and you can start with a modest amount of capital. However, you must have proof of citizenship in Bangladesh since expats cannot establish such business ventures. 

When you register a sole proprietorship in Bangladesh, you must acquire a Tax Identification Number certificate and register it from the Bangladesh Investment Development Authority. The authorities demand the certificate to levy an Advance Income Tax before your business starts operating in the country.

Sole proprietorships in Bangladesh engaged in trade deals/transactions with overseas companies – such as export or import business – must procure an Export/Import Registration Certificate.

Setting up a sole proprietorship in Bangladesh is one of the least complicated methods to start your own independent business. Moreover, since it will be run entirely by the owner, the risks are relatively minimal compared to other companies with multiple shareholders.

Here are some advantages of owning a sole proprietorship in Bangladesh:

• Cost-saving: The procedure for setting up a sole proprietorship in Bangladesh is straightforward and least complicated. You only need to pay the registration fees without any hidden charges. 
• Easy to set up: You can start operating your business once you receive the trade license. 
• Complete autonomy: As the sole proprietor, you are entirely in charge of your business and need not consult other partners for decision-making. 
• Total control of profits: All the profits you gain are counted as your income. 
• Easy to terminate: Since only one person runs a sole proprietorship, you can close your business operations when you deem fit. 
• No complex tax returns: Sole proprietorships are not a separate legal entity in Bangladesh. Thus, you can simply file for personal income tax every financial year.

When applying to register a sole proprietorship in Bangladesh, keep the following documents ready:

• The name for your business in Bengali and a name clearance certificate from the RJSC
• Statements from Memorandum of Association and Articles of Association
• A clause of four hundred and fifty (450) words summarizing the principal activities of your sole proprietorship business
• Filled up documents of all the schedules associated with the object clause
• Form IX comprising “Consent of the Director to act” duly filled up and signed Form VI providing information about the registered business address
• Evidence of your Bangladesh bank account for business transactions

You must procure the following permissions and licenses before registering for a sole proprietorship in Bangladesh.

• Your trade license permit
• Proof of information on the director and subscriber, as comprised in Form XII
• Evidence of the rental agreement or lease given to your sole proprietor’s office
• A copy of your National Identification document, since only Bangladeshi citizens can be registered for a sole proprietorship in Bangladesh
• A citizenship document proving you are a Bangladeshi citizen and at least 18 years old
• Taxation Identification Number and VAT registration number

To establish your business in Bangladesh, you must know how to register a sole proprietorship in Bangladesh. Since sole proprietorship is a private business, you need to complete the basic formalities of setting up a sole proprietorship in Bangladesh.

1. Get name clearance: Procuring the name clearance for your commercial establishment is the first step in setting up any business in Bangladesh. The Registrar of Joint Stock Companies and Firms (RJSC) must approve the name of your enterprise. For this, you must create an account on its official site and submit your proposed name. RJSC officials will run your name within their existing database and check whether your submitted domain name is identical to any previously registered business name. 

If your proposed domain name is unique, you will get a name clearance certificate from RJSC. It is valid for one hundred and eighty(180) days, within which you must get the approved business name registered. For registering individual names, you need to pay 600 BDT (Bangladeshi Taka) each time. 

2. Procure a Trading license: Getting a trade license is necessary to legalize your business according to Bangladeshi law. The local authorities issue trade permits. Depending upon your location, it will be either the City Corporation Office, the Upazila Council, the Municipality Office, or any other relevant government institution. To get your trade license, you have to submit the following documents:

• The name clearance certificate of your sole proprietorship
• Your residential address, date of birth, and parent identities
• The type of business
• The duly filled and signed trade license form
• Your name and photograph
• Your business location and registration certificate
• The rental deed of your office
• A VAT challan proof of your trade license

3. Fill up the clauses of the Memorandum of Association and Articles of Association: You have to prepare these documents in accordance with the proposed format for company registration in Bangladesh and mention the Authorized Capital and Minimum Capital in the clauses. You should draft these alongside the other forms mentioned in the Required documents per RSJC guidelines.

4. Set up a Bangladesh bank account: Next, you have to open an account in any scheduled bank located in Bangladesh. This is necessary to execute your business transactions smoothly. 

5. Submit the documents to RSJC: This is the final step where you scan and upload all documents to RSJC’s web portal and pay the registration fees. RSJC also demands that you upload Form IX and subscriber documents. Once you submit these, you will receive a bank payment slip via which you can deposit the registration amount and stamp duty. 

Once you have submitted all documents to RSJC, the officials verify your information before issuing the incorporation certificate. You can track your application’s progress on RSJC’s website. 

Post-registration, you should procure a Fire Certificate and an Environment Clearance Certificate, if needed. Once your application is approved, you will receive the following documents in your email, with digital signatures from the authorities:

• Memorandum of Association and Articles of Association
• Certificate of Incorporation
• Form XII, where you need to fill up the details of directors and managing agents, if any.

Once these processes are cleared, you can operate your registered sole proprietorship business in Bangladesh. 

While it can initially seem challenging to establish your sole proprietorship in Bangladesh, it is crucial to understand the legal regulations. However, considering the numerous documentation and formalities, it’s best to partner with a global PEO-EOR firm like Multiplier. 

Our expert consultants are ever-ready to guide you in setting up a sole proprietorship in Bangladesh. We manage numerous HR responsibilities like employee onboarding, wage handling management, and much more, so you can focus on building global teams.