CambodiaIntroduction to 8 types of business entities in Cambodia

March 21, 2022by Tetra Consultants0
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Thinking of starting a business in Cambodia? The Cambodian government highly values foreign direct investments and has provided foreign investors with a business-friendly environment in Cambodia. The nation lays out numerous attractive benefits to facilitate and ease the integration of international business owners into the country’s economy. Prior to setting up a business in Cambodia, it is necessary to register company in Cambodia first. Therefore, whether you are an aspiring entrepreneur or an experienced business owner, we will explore what are the 8 types of business entities in Cyprus.
 types-of-business-entities-in-cambodia

Types of Business Entities in Cambodia 

Cambodia offers different types of business entities for you to choose from, where each business entity caters to different types of business activities. Foreigners who wish to register business in Cambodia can choose between these 8 business entities, which includes: 

  1. Sole Proprietorship
  2. Limited Liability Company
  • Single-member Private Limited Company
  • Private Limited Company
  • Public Limited Company

3. Partnership

  • General Partnership
  • Limited Partnership

4. Foreign business entities

  • Branch Office
  • Representative Office

Before you register a business in Cambodia, it is crucial to fully understand your business model before choosing the most suitable business entity. Some considerations you should take into account include the type of business activity, tax obligations as well as potential personal liability. 

1. Sole Proprietorship

A sole proprietorship is owned and operated by one individual. The simplest form of business structure, Sole Proprietorship does not include the separation of legal personalities between the owner and the entity. As such, the owner and its entity are seen as one and the same, and the owner is personally liable for any debt. 

If you are looking to set up a small business yourself or within your family that includes the advantages of an easy startup and complete control, Sole Proprietorship may be the business form for you.

2. Limited Liability Company 

The Limited Liability Company (LLC) is the most common business entity and there are 3 types of LLCs in Cambodia.

  • Private Limited Company

A Private Limited Company in Cambodia can have 2 to 30 shareholders and requires at least 1 director of any nationality/residency. It also requires a minimum paid up capital of US$1,000 (KHR4 million).

The private limited company is not allowed to issue shares and securities to the public. The company name has to include “Private Limited Company” or appropriate abbreviation at the end of the name. 

All Cambodia LLC have to file annual returns and tax returns and register for Value Added Tax (VAT).

  • Single-member Private Limited Company

A single-member private limited company is a private limited company which has one person or entity as the company shareholder. Upon the shareholder’s approval to increase the number of company shareholders, a single-member private limited company can be converted to a private limited company.

  • Public Limited Company

A Public Limited Company is authorized to issue shares and securities to the public. The name must include Public Limited Company at the end of the company name.

The company needs to have a minimum of 2 shareholders and requires at least 3 directors. It is mandatory for banks, financial institutions and companies to register as public limited companies. 

3. Partnership

  • General Partnership

As stated in Article 8 of the Law on Commercial Enterprises (LCE), a general partnership is a contract between 2 or more persons who combine their property, activities or knowledge to engage in business to make profits. All general partners are jointly and severally liable for the obligations of the general partnership. 

The name of a general partnership has to include at least one of the partner’s name, and it is mandatory to place the words “General Partnership” at the end of the name or below it. 

The general partnership has a legal personality separate from that of each of its partners. A general partnership will obtain legal personality upon registration in accordance with the Law on Commercial Rules and Register, and will have the following rights to

  • To own movable and immovable property in its own name
  • To carry on business in its own name
  • To enter contracts in its own name
  • To sue and be sued in its own name

A general partnership has Cambodian nationality if it has:

  • A place of business and a registered office located in Cambodia
  • The recorded ownership held by natural or legal persons of Cambodian nationality exceeds 51%
  • Limited Partnership

As stated in Article 64 of the Law on Commercial Enterprises (LCE), a limited partnership is a contract between 1 or more general partners who are the sole persons authorised to administer and bind the partnership, and 1 or more limited partners who are bound to contribute to the partner’s capital. 

The liability of the limited partner is liable only to the extent of the sum of money/property the partner contributed, whereas the general partners are jointly and severally liable for the debts of the partnership to third parties.

A limited partner is not allowed to manage the limited partnership’s business. Additionally, the limited partner cannot negotiate business on behalf of the limited partnership, act as agent for the limited partnership and allow his/her name to be used.

4. Foreign business entities

  • Branch Office

A branch office is a viable option when a foreign company wishes to expand its company in Cambodia. Owners of international business in Cambodia can establish an extension of the parent company by setting up a branch office in Cambodia.

The purpose of a Branch Office is to facilitate operation and revenue generation in Cambodia on behalf of the foreign parent corporation. The parent company must account for all the liabilities and debts of the Branch Office. An additional 14% withholding tax will be imposed on the remittance of branch profits.

The requirements to set up a Branch Office in Cambodia are minimal, which includes:

  • The name of the Branch office has to be identical to that of the parent company’s corporate name.
  • Minimum 1 Director of any nationality is needed.
  • A local Cambodian stockholder is not necessary and the minimum number of shareholders depends on the parent company.
  • A company must have a registered office in the Kingdom of Cambodia under the Law of Commercial Enterprises (LCE).
  • Representative Office

Foreign investors interested in gaining an in-depth understanding of doing business and exploring investment opportunities in Cambodia have the option of setting up a Representative Office (RO) within the country. A Representative Office aids foreign investors to comprehensively evaluate the viability of doing business in Cambodia before finalizing a decision to set up a company in Cambodia.

Representative Offices in Cambodia are prohibited from partaking in business activities such as regular buying and selling of goods, engaging in manufacturing, processing, or construction-related activities in Cambodia. Hence, the Corporate Income Tax does not apply to Representative Offices in Cambodia.

The requirements to set up a Representative Office in Cambodia are minimal, which includes:

  • There is no minimum amount of paid-up capital.
  • There is no minimum number of stockholders.
  • Minimum 1 Director is necessary (does not have to be a Cambodian local).
  • A company must have a registered office in the Kingdom of Cambodia under the Law of Commercial Enterprises (LCE).

Cambodia company registration is hassle-free if you are familiar with the entire incorporation process. Tetra Consultants strives to provide our clients with a seamless experience when setting up a company in Cambodia. Our team of experts will ensure that your Cambodia company can be operationally ready as soon as possible.

Tetra Consultants

Tetra Consultants is the consulting firm that works as your advisor and trusted partner in your business expansion. We tell our clients what they need to know, instead of what they want to hear. Most importantly, we are known for being a one-stop solution for our valued clients. Contact us now at enquiry@tetraconsultants.com for a non-obligatory free consultation. Our team of experts will be in touch with you within the next 24 hours.

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