Business Companies in Sri Lanka

Business Companies in Sri Lanka are considered as one of the prime topics talked about in recent days. Yes, this is mainly because of my investors friends seeking in more and more to take full advantages of various business sectors in Sri Lanka.

To improve and bring in stability over the country’s Economic growth, Sri Lanka has introduced some lucrative changes in its prime business sectors and made company registration methods for various Business Companies in Sri Lanka much simpler, cheaper, and hassle-free.

Hence, more foreign investors and business owners are looking in to incorporate or establish their own business company in Sri Lanka.

Sri Lanka has been recently developing and applying various strategies to improve the country’s very own business sectors to get full attention of the foreign investors to invest in both small and large scale within the country.

Sri Lanka has also improved themselves in various sectors like Garments, Information Technology, Education Centers, Healthcare Centers, Industries Gas, Construction and many more to make themselves strong and drag attention of both the local and foreign investors’ attention from all over the world.

The country has planned and taken crucial steps to make foreign company registrations simpler, easy to understand and straightforward to its maximum limit.

This attempt taken by the country and its government has eventually picked up interest of various foreign investors around the world for investing in both small and large content in Sri Lanka.

This step just not only helped Sri Lanka to outcome with outstanding business revolution but has also made significant improvements in the economy of the country.

The Sri Lankan Government has not just made their company registration processes simpler but has taken remarkable steps to develop lucrative investment policies.

There are several investment vehicles and business company types that can be chosen for establishment by both the local and foreign investors. All these business entities have different registration methods, policies, laws, limitations and paid-up capital respectively.

Types of Business Companies in Sri Lanka

There are mainly SIX types of business companies in Sri Lanka that can be legally incorporated and established within the country under the government regulation and concern. They are listed below:

• Sole Proprietorship
• Partnership
• Limited Liability Company, LLC
• Public Limited Company, PLC
• Overseas company
• Offshore company
  

Sole Proprietorship

The structure, demonstrations and outcomes of a sole proprietorship business entity is quite similar in almost every country around the globe.

Whenever an investor or any business owner start up his business as a sole trader, he or she is simply taxed at a personal income rate set by the government. The sole investor or the business owner is responsible for all sort of company obligations and ligations.

This Sole Proprietorship Business Company in Sri Lanka is considered as the easiest and quickest business procedure to set up. As a sole trader, the investor will be permitted to employ other individuals if needed.

Partnership

An officially registered Partnership business company in Sri Lanka is almost similar to that of a Sole Proprietorship business entity, but in this case the ownership of the company is shared.

All the company partners, directors, shareholders share the company capital, limitations and obligations of the business in perspective to legal issues and taxation.

Partnership business companies registration in Sri Lanka are never taxed as a separate legal business entity in Sri Lanka, so each individual partner is subjected to personal income rates.

Limited Liability Company (LLC)

The Limited Liability Company, LLC in Sri Lanka is also known as the Private Limited Business Company in Sri Lanka. It is considered as the most common type of business entity among all other business companies in Sri Lanka.

Such Company formulation requires a minimum of One Company Director and Two Company Shareholders. No minimum share capital is required to be deposited.

The company secretary appointed or the company director must be a Sri Lankan resident. Foreign investors and Business Owners often chose to register their business entity as Limited liability company in Sri Lanka.

Public Limited Company (PLC)

Well these Public Limited Company (PLC) and (LLC) Limited Liability Company  in Sri Lanka does matches in one particular point regarding company policies, they both do not require deposition of any sort of share capital.

The Public Limited Business Companies in Sri Lanka are said to have a minimum of two company shareholders and two company directors.

The company directors are asked to file annual returns every year, along with audited company bank accounts and authorized financial statements regarding company sales and profits.

In case of Public Limited Business Companies in Sri Lanka the company shares are permitted to be issued on the stock exchange for the public. Public Limited Company are often choosing for companies with large investment, production and manpower policies.

Overseas Company

An overseas company can be 100% foreign-owned and can also stimulate as a branch. The parent company mainly defines the business nature and types of operations the company runs. The overseas company must register with the Treasury and is said to provide a 10% branch tax on its profits.

Offshore Company

An offshore company is registered within Sri Lanka and is permitted to conduct business outside of Sri Lanka, but it cannot conduct business within the country.

Barriers and Limitations for all these FDI Businesses in Sri Lanka

There are boundaries and limitations set by the Government of every countries over different business policies that can be run by the foreign investors. Sri Lanka has also set some limitations as well for the foreign investors to take deep look into.

This limitations and barriers must be obeyed and maintained by the foreign companies at their highest peak. Foreign Direct Investment over following business policies by the foreign business companies are not permitted;

1. Money Lending
2. Pawn Brokerage
3. Retail Trade with an initial capital less than USD $1 Million
4. Coastal fishing
5. Security services and security management, assessment and consulting individuals or private organizations

There is a limitation of 40% of the initial capital of the company being registered over Foreign Direct Investments of the overseas companies in some certain businesses.

Business polices with a higher percentage of foreign ownership is not applicable for these law or barrier. This limitation can only be applied when an authorized approval is obtained from the Board of Investment (BOI) of Sri Lanka:

1. Production of goods where Sri Lanka’s exports are subject to quota restrictions.
2. Growing or planting or farming of tea, rubber, coconut, cocoa, rice, sugar and spices.
3. Mining and primary processing of non-renewable national resources.
4. Timber-based industries using local timber.
5. Deep sea fishing.
6. Mass communication
7. Education
8. Freight Forwarding
9. Travel Agencies
10. Shipping Agencies

Various Business Sectors & related Business Companies in Sri Lanka that requires essential approvals from relevant government authorities for investments in:

1. Air transportation
2. Coastal Shipping
3. Industries involved in ammunition, explosives, military vehicles and hardware, poisonous chemical, narcotics and other addictive drugs, or security documents.
4. Large scale mechanized mining of gems or jewelries.
5. Lotteries

Other essential requirements needed when registering or incorporating an overseas business company in Sri Lanka:

In few cases preparation of financial statements by the registered overseas companies are required. Each of the foreign companies have to provide certified copies of these documents to the Registrar of Companies yearly based.

The foreign companies might also be asked for submission of Certified statement copies of the parent company. Well, documents related to the appointment of the company directors and secretaries or other official heads and prescription of number of employees in the company are not required as it is not a seperate legal entity.

The overseas companies have one point of concern that the official secretaries and the appointed attorney or other specific official heads are resident of Sri Lanka.