Establishing a Business in Cambodia March 2010 trong economic growth, low startup costs, Contents Sand a wealth of untapped markets make Cambodia an attractive environment for starting ? Choice of Legal Entity up a business. Many foreigners arriving with ? Registering a PLC no intention of becoming an entrepreneur, nd themselves opening their rst business in this ? Bank Account & Deposit exciting marketplace. ? Name & Trademark Whether you are an experienced entrepreneur ? Tax Considerations coming here to start another venture, or are transitioning to self-employment for the rst ? Labor Obligations time, properly establish your company in full ? Licensing compliance with the law is crucial. While many a single member limited company, with all the businesses operate informally, many more have advantages of a PLC. e law also allows for been shut down or encounter ongoing problems public limited companies, though these will only from the authorities. Spending the time and be established once the Cambodian Securities money to do everything properly is the only way Exchange is opened, sometime this year. to avoid potentially insurmountable hassles in the future. Sole Proprietorship A sole proprietorship is owned and operated by a single person, who owns alll its capital and is Choice of Legal Entity entitled to all its prots. Conducting business on your own, without ever formally registering, will Private Limited Company be deemed a sole proprietorship. All obligations When establishing a company, the rst choice and liabilities of the proprietorship are the is what legal entity to use. For most ventures, a sole personal responsibility of the proprietor, a private limited company (PLC) is the obvious signicant burden and danger. choice. A PLC is a legal entity distinct from its General & Limited Partnerships shareholders and directors. It therefore limits the liability of shareholders and directors - they will A general partnership is an agreement between not be personally liable for the company?s debts. two or more persons to combine their property, knowledge or activities to carry on business. is A PLC can have from two to 30 shareholders. If agreement does not need to be formalized, it can there will be only one shareholder, it is called arise simply by the partners conducting business together. Like a sole proprietor, general partners NEW BUSINESS TO-DO LIST: are each personally liable for all of the partnership?s debts and obligations. ? Open a bank account and deposit the required amount A limited partnership is a contract between one or more general partners who run the business, ? Check the uniqueness of the company and at least one limited partner, who contributes name, and register any trademarks No 64, St 111 capital. A limited partner is liable only to the ? Incorporate with the Ministry of PO Box 172 extent of their capital contribution, while the Commerce general partners are personally liable for all debts Phnom Penh and obligations. ? Obtain a Tax Identification Number and Cambodia pay the Patent Tax Limited partnerships must be registered with the +855 23 217 510 Ministry of Commerce, or else it will be deemed a ? Make the declaration to the Ministry of +855 23 212 740 general partnership. Labor +855 23 212 840 Foreign Subsidiary, Branch & Representative ? Obtain all licenses necessary for the Oces business activities info@bnglegal.com Foreign companies have several options for www.bnglegal.com entering the Cambodian market. All three must be BNG Legal 2010 Establishing a Business in Cambodia Page 1 registered with the Ministry of Commerce. any application for a company name that is already registered. To avoid this delay, it is best to request e rst choice is to create a subsidiary of the the MOC check the uniqueness of the name at foreign parent. is is a locally incorporated before submitting the registration documents. limited company with at least 51% of the shares held by the foreign company. Its formation, Trademarks are registered separately at the management, rights and obligations must be Department of Intellectual Property, and give provided for in the memorandum and articles of their owner the right to prevent others from using association of the limited company. confusingly similar marks. Second, a branch oce can be opened by a foreign Choosing a name similar to a registered trademark ABOUT US company for conducting a particular commercial can be a costly mistake. Aer investing in signs, activity. e branch oce is the same entity as advertising, and product packaging, a new BNG Legal is a leading Cambodian the parent company, and therefore the parent is business can be forced to change its name and law rm providing comprehensive liable for all the branch?s debts and obligations. It start from scratch. Such problems are easily legal services to foreign and local can engage in general business activities, such as avoided by a requesting a clearance search from clients. buying and selling products. the Department of Intellectual Property. Registered with the Bar Association Finally, a representative oce can be setup, but of the Kingdom of Cambodia, is only allowed to facilitate the sourcing of local our legal professionals combine goods and services and to collect information for Tax Considerations international standards with local its parent company. Crucially, it is not allowed to expertise. make sales or buy products in Cambodia. e Ministry of Economy and Finance (MEF), We dierentiate ourselves by Department of Taxation, requires that all coupling a deep understanding of companies registered to do business in Cambodia the local business environment with Bank Account & Deposit register with the tax department to obtain a international professionalism and taxpayer identication number within fourteen integrity. e Ministry of Commerce requires proof of at days of opening a business. least 4 million Riel (approx. US$1,000) deposited We facilitate business, investment Companies are generally subject to an annual in a local authorized bank. Be sure to obtain a bank and trade between Cambodia business registration tax (the Patent Tax), a statement certifying the deposit. and the rest of the world through Profit Tax (20%, or a Minimum Tax of 1% or innovative and cost-eective legal turnover) and VAT charges (10%), as well as the services. Salary Tax for employees (0%-20%), and a Rental Registering a Private Limited Withholding Tax (10%). While there is a 20% Superior knowledge of local Company dividend withholding tax (basically a salary or protocol, local procedure, and local prot tax on the recipient), this is not double taxed. people is necessary for any business Private limited companies are registered with the to succeed in Cambodia. Ministry of Commerce. In response to the initial Conduc application, the MOC will prepare and provide the ting daily business in Labor Obligations Cambodia, BNG Lega applicant with the ocial application form. e l is up to da applicant must also submit a Memorandum and te with the newest procedures Upon opening a business, employers must make and requiremen Articles of Association, documents which sets out ts, helping clients a declaration to the Ministry of Labor. is ecien the corporate structure. One can use the MOC?s tly and successfully complete declaration, called the Declaration of the Opening any pro standard MAA, or make modications - though ject. of a Business, must be made in writing and be the MOC has the right to review and reject any delivered to the Ministry of Labor before the substantial changes. actual opening of the business. Employers must e application form and MAA must be signed also make a declaration to the Labor Inspector by all shareholders and directors before the each time that the business hires or dismisses a MOC, a Cambodian lawyer, or a Notary Public. worker. is declaration must be made in writing It takes around 30 working days to process a new within seven calendar days aer the date of hiring company registration at the MOC, counting from or dismissal. No 64, St 111 when the completed application documents are PO Box 172 submitted. The MOC will issue the applicant with Phnom Penh a Commercial Registration Certicate, a Certied Licensing MAA, and an MOC Business License. Cambodia Finally, a new business should take care to obtain +855 23 217 510 all necessary licenses from the relevant ministries. Compan ere are dozens of licenses specic to particular +855 23 212 740 y Name & Trademark business activities,, ranging from restaurants to +855 23 212 840 New businesses should take care in selecting and solid waste management. It is the business owner?s properly registering the names of the company and responsibility to obtain the proper licenses, failure info@bnglegal.com of its goods and services. When incorporating the to do so can result in nes and even the closure of www.bnglegal.com company, the Ministry of Commerce will reject the business. BNG Legal 2010 Establishing a Business in Cambodia Page 2