Forms of Business Ownership in Cambodia
What Form of Business Ownership is right for you?
Forms of Business Ownership in Cambodia
The Cambodia Ministry of Commerce promulgated the Law on Commercial Enterprises, which defines the different forms of Business Ownership. An online registration platform had also been launched to make it easier for new businesses to register.
There are four types of Business Ownership in Cambodia. You must understand which business model is suitable for your investment, as well as the advantages of each kind.
Also read: Foreign Property Ownership in Cambodia
The sole proprietorship pertains to a single individual who invested 100% of the capital and has the right to everything about the company. In this type of ownership, there is no line between the owner and the business. All obligations and liabilities fall on the owner while the business is operating. Similarly, the owner receives all income generated from the company.
A partnership is a type of ownership ideal for two or more individuals who want to set-up a business together. There are two subtypes:
- General Partnership – in this type, the partners share responsibility for the daily operations and share liabilities on all debts and obligations.
- Limited Partnership – requires one general partner authorized to administer the Partnership. There should also be one limited partner who contributed to the capital and liable only up to the amount of their share in the capital.
While a company is harder to put up and more expensive than sole proprietorship and Partnership, the advantage is that it gives limited liability to its members.
To set up a company, the Law on Commercial Enterprises requires a capital divided by at least 1,000 shares – at a minimum of $1 per share. A $10,000 minimum capital deposited in a local bank account is required to meet the requirement of commercial incorporation.
Companies also have two subtypes, private and public limited.
- Private Limited Company – is a type of company where 2-30 individuals own exclusive shares to the company that they cannot sell to the general public. Only Banking, Insurance, and Financial Institutions can operate in Cambodia.
- Public Limited Company – is a company that has more than 30 shareholders and is legally allowed to issue securities and sell shares.
Foreign companies with operations in other parts of the world can invest in the country by setting up a Representative Office. They can also choose to open a Branch Office, or Subsidiary.
- Representative Office has no legal personality, but it still needs to be registered with the Ministry of Commerce. A representative office cannot be used to conduct operations and derive income on trade. Their role is limited to the following activities:
- Introduce customers to the principal company
- Conduct market research
- Organize trade fairs to market products
- Rent an office and employ staff
- Enter contracts with local clients on behalf of the principal company
- Branch – A branch is an office opened to conduct specific activities in the country for the parent company. Unlike a representative office, a branch office can undertake commercial operations similar to a local business. That includes purchasing and selling goods, provide professional services, and generate income from its operations. The only limitation is to engage in activities prohibited for foreigners such as buy/own land and other properties.
- Subsidiary – This type of company can engage in any activity open to foreign investors. It can be a limited liability company or Partnership, completely separate from its parent company, and up to 51% of shares held by foreigners.
All types of business need to be registered on the month that it is established and within 15 days before starting operations.
It is essential to know the structure of each form of business ownership in Cambodia and understand its differences. Each form has its advantages and disadvantages in complexity, ease of setup, cost, liability and management and it can be overwhelming sometimes but with proper resources and help from the industry experts, you’ll be on your way to a successful business ownership.