Types of companies in Sri Lanka

Sri Lanka, a country situated south of India also known as the pearl of the Indian ocean is a developing country. The country is the second wealthiest country in the southeast Asian region only seconded by Malaysia and is as an upper middle-class nation. The main source of foreign exchange the country receives is from foreign employment. Apart from which, the country’s main income is from tourism, tea export, apparel, textiles, and other agricultural products.

The country’s economy got effected by the gruesome civil war 1983. Yet, it managed to recover from it in 2009 as the war came to an end in the month of May.

As the country is back on track toward achieving economic growth there is room for new business. The government has made efforts to encourage trade and entrepreneurs to enter the market.

For example, The Department of the registrar of Companies – Sri Lanka now offers many services online which helps save on valuable time and hassle. The eROC offers services such as Name registration, registration application, and view application to be done online to help you save hassle concerning paperwork and time wastage.

These are the main categories of the business carried out in the country.

1. Sole Proprietorship

This method is the easiest way to set up a business and is similar to what happens in most countries. There is sole ownership were you at a personal income rate. You are responsible for all company obligations and will be able to hire staff as required. Well, now you can check sole proprietorship business registration in Sri Lanka.


  • Owner will be the controller as well
  • Is not considered a legal entity
  • Formation is easy & inexpensive
  • Not governed under strict rules and regulations
  • Ability to enjoy all benefits
  • No tax charge of business profit


  • Unlimited liability
  • Limited skills
  • Needs to bear entire loss
  • Business will close down if owner incapable

2. Partnership

One or more partners are involved in such businesses. Similar to sole proprietorship, you will be taxed on personal income rate. The partners share all obligations of the company.

A partnership could be done verbally or in writing. Most Partnerships are based on a Partnership agreement.

Key duties, responsibilities of each partner, contribution of capital, profit/loss sharing, salary payment are points included in the partnership agreement.


  • Easy to startup                                                        
  • Not many rules and regulations
  • A variety of skill and capabilities involved
  • Profit motive
  • Common goals


  • Unlimited liability
  • Limited lifetime
  • Disagreement may erupt between partners
  • Some decisions can’t be implemented

3. Private Company

This type of business is treated as an independent legal entity.

A legal entity means that the company is treated as a separate unit/person from the people who own, control and manage it.

  • Shareholders are the owners of the company and they receive dividends as compensation,
  • Registration is more complex than sole proprietorship or partnership
  • Shareholders, directors and secretary should register at the Registration of Companies – Sri Lanka.

There are many types that fall under this category

Limited Liability Company (LLC)

LLC is the most common type of company in Sri Lanka. It requires one director and two shareholders. The company secretary should be a Sri Lankan citizen. Minimum share capital is not necessary.

Public Liability Company (PLC)

PLC does not require share capital either. But there has to be two shareholder and two directors to run this company. Directors are required to file annual returns, audit and issue financial statements. Company shares are issued on the Colombo stock exchange.

Overseas Company

An overseas company is foreign owned and its operations is defined by the parent company. The company in Sri Lanka can serve as a branch. Registration with the Treasury is a must. These companies are subjected to 10% of branch tax on profit. Every calendar year the company must prepare financial statements in the native Sinhala Language or English.

Commercial, Trading, industrial activities that are not permissible for overseas companies are:

  • Money Laundering
  • Pawnbroking
  • Retail trade with a capital less than two million US Dollars
  • Coastal fishing
  • Growing and processing tea, rubber or coconut & rice
  • Mining and primary procession of non-renewable national resources
  • Freight forwarding
  • Shipping agency business
  • Merchandizing mining of gems
  • Lotteries

Financing of Activities carried out by an overseas company

A company that wants to establish a branch, project office or similar should fulfill following criteria:

  • Invest a minimum of USD 200,000.
  • Provide evidence of remittance of USD 200,000 to the registrar of Companies within 30 days of registration.
  • Record and maintain the funds remitted in the Company books until the company closes down.

Offshore Company

An offshore company conducts business outside of the country. It will be registered in the country but it cannot function in it.

Related Article:

Company Registration Fee In Sri Lanka

Trademark Registration In Sri Lanka


Company Registration Expert Since 2012