Bangladesh is quite liberal when it comes to foreign ownership. Furthermore, in a few industries, both domestic and foreign investment is restricted because of government clearance.
There are numerous different ways to launch a business in Bangladesh. However, the most popular and practical ones for both domestic and foreign businesses are the incorporation of a private limited company or the registration of a branch office.
Therefore, the question is, “Is company incorporation service really legal in Bangladesh?”
A new business structure is said to be incorporated when it is created so that it can be legally recognized as a person or entity. This is a charter that a governmental authority issues to a group of people to enable them to conduct business as a legal entity rather than as individuals.
Let’s discuss it without any delay!
Why Are Company Incorporation Services Legal?
The legal procedure needed to create a corporate entity or a company is referred to as incorporation. A corporation that has been incorporated is regarded by the law as a distinct legal being.
The official, legal process of creating a corporation is known as incorporation. This could be a business, a group of friends, or a nonprofit. However, it usually refers to the official process of forming a company.
Moreover, businesses that are incorporated can take the risks necessary for growth without placing the shareholders, owners, and directors at danger of financial loss beyond their initial investments in the business.
The market for business software and services was estimated to be worth USD 474.61 billion in 2022, and from 2023 to 2030, it is anticipated to increase at a CAGR of 11.9%.
A Guideline of Incorporating A Company in Bangladesh
This section outlines the step-by-step process for establishing a corporation limited by shares in Bangladesh.
1. Getting Name Clearance to Register a Business in Bangladesh:
Before moving forward with the registration of the name, you must select an appropriate business name for your organization.
Following the submission of the pay order, you must update your information on the RJSC portal, and they will let you know whether the name has been successfully secured within 24 to 48 hours.
2. Documentation and registering a business in Bangladesh:
The constitution of a company in Bangladesh is composed of the Memorandum of Association (MOA) and the Articles of Association (AOA) of the company.
However, it is advised that you hire a business or company lawyer in Bangladesh who specializes in company laws because failing to do so may result in you having to limit the scope of your business.
3. Financial procedures:
The company registration process in Bangladesh includes a new clause if a foreign corporation wishes to register as a shareholder of the company.
According to Bangladeshi legislation and RJSC’s directive, the foreign business must contribute the required amount toward its shares in the proposed Bangladeshi company.
4. Registration and Business Formation in Bangladesh:
Registration fees and stamp duties must be paid in the RJSC-required bank in order to register a company with the organization;
A certificate of company incorporation services must be received from the RJSC after all procedures have been successfully completed.
5 Advantages of Incorporating Your Business
1. Low personal liability:
When a corporation has debts, its stockholders are not held accountable. Shareholders are safeguarded in the event of bankruptcy, whereas creditors often only have access to the company’s assets as a source of redress.
2. Streamlining ownership transfers:
A company is a distinct legal entity, and its owners do not directly own its assets. Instead, they are stockholders in the company, which is the real estate owner. This makes selling ownership stakes considerably simpler.
3. Infinite life:
The fact that incorporated businesses have a theoretically endless lifespan is another important benefit of incorporation. Shareholders’ shares are either sold or handed to their heirs when they pass away.
4. Immediately credible:
Your company might get legitimacy right away by becoming an incorporation. Potential investors, lenders, suppliers, clients, and employees will recognize right away that you are committed and considering the long term.
5. Reduced tax rates:
Businesses may pay less tax after incorporating owing to additional tax benefits. Corporate tax rates for corporations are often lower than tax rates for individual income.
Types of Corporation in Bangladesh
The four primary types of corporations are a sole proprietorship, limited liability company (LLC), S-Corporation (S-Corp), and C-Corporation.
1. Sole proprietorship:
Making a single proprietorship is the simplest choice for small business owners. A single person owns and runs a sole proprietorship, which is an unincorporated business.
2. Limited Liability Company (LLC):
A limited liability company, or LLC, is another typical business structure.
Owners of an LLC are not individually liable for the company’s debts and legal duties, and the cost is quite minimal. You also report the company’s financial results in your personal tax file.
3. Corporations S (S corps):
S Corps are often small firms that combine the advantages of incorporation with partnership tax exemptions. Similar to an LLC, you can distribute money to shareholders directly while avoiding paying federal corporate taxes.
4. Corporate entities (C-corps):
A C-Corp is a totally independent legal body that is in charge of paying corporation taxes and submitting yearly reports. A board of directors must also be chosen by it.
Who Needs Company Incorporation Services?
1. To register a startup:
To limit their personal liability, founders should incorporate as soon as feasible. If your company is incorporated, it takes on this risk so that, in most situations, third-party lawsuits won’t have an impact on your personal income.
2. To get flexibility:
You can transfer shares at any time without the consent of other shareholders if you incorporate.
To safeguard the company and its shareholders, the majority of startups do, however, limit transfers. For instance, the corporation has the option to repurchase the shares of a leaving founder under the right of first refusal.
3. To get investors:
You are not permitted to mix any investor funds you receive with your personal cash. You must incorporate to be able to separate company cash, open a bank account in the company’s name, and keep track of financial statements in order to avoid this.
FAQs
1. What does it mean to incorporate a company?
A company becomes incorporated when it registers with a state to become its own legal entity. By incorporating, you may create a limited liability company (LLC), a C-corporation (C-corp), or an S-corporation, among other legal entities.
2. How is a business formed?
Creating the company’s articles of incorporation and listing its shareholders are two steps in the incorporation process. Limited liability refers to the ability of a corporation to maintain its own assets and cash flows apart from those of its owners and investors.
3. Why is incorporation necessary?
They act as official documentation indicating your business has a presence in your state. The required clauses give the state government certain fundamental facts about the organization.
Final Thought
A corporation can be founded from scratch, just like any other type of business organization. Moreover, there is no requirement for a minimum turnover in order to incorporate the business as a company.
Entrepreneurship is currently a hot topic, and when deciding on a company model, an entrepreneur must take into account all of the benefits and hazards.
The destiny of the company is greatly influenced by the choice of a suitable business form. A corporation that has been incorporated offers security and has a lot more legitimacy than other business structures. To know more get in touch with us!
