How to Register a Business in Sri Lanka: The Definitive Guide 2021

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If you’re wondering how to register a business in Sri Lanka, this is the only guide you need to read.

By the time you finish reading this post, you’re going to have answers to the following questions.

Why read this post?

There are multiple ways to register a business in Sri Lanka (sole-proprietorships, partnerships, and private limited) and there are plenty of other guides to learn how to register a business in Sri Lanka.

So why should you read this guide?

Because none of the other guides cover all the options in one post. They just teach you how to set up a business in Sri Lanka.

But that’s not very helpful for someone who’s trying to weigh the pros and cons of different options.

What you need is a guide that can help you to figure out what’s the best option for YOU.

That’s what you’re going to get in this post.

First, you’re going to learn the different ways to register a company in Sri Lanka. Then I’m going to help you out to select the best option that suits YOU.

Let’s jump right in.

Is it mandatory to register your business in Sri Lanka?

Here’s a question I get asked a lot.

Nishan, can I run my business without registering it? The answer isn’t simple.

There are thousands of Sri Lankans who conduct business without any kind of business registration.

To set up a Facebook page or even a website for your business, you don’t need a business registration.

Even to sell a product or service and get paid, you don’t necessarily need a business registration.

But your business will not be considered as a “business” under Sri Lankan law.

So technically, it won’t be a business. Get it?

Would I recommend you to do business without a business registration? No.

Here’ why.

Why should you register your business?

Yes, you can create a Facebook page or even a website without a business registration. But there are so many things that you cannot do without any kind of registration.

Imagine you want to open a bank account under your business name. You can’t do that without a valid business registration.

Let’s say you want to get a payment gateway to accept online payments. No one will offer you a payment gateway without a business registration.

Whatever income you earn will be considered your personal income. It won’t be your business income unless your business is registered.

Imagine you want to register as an importer or an exporter. Then you need a business registration.

What if you want to become a distributor for a local or a foreign brand? No company will deal with a person. They would want to work with a registered business.

These are some of the reasons why you need to register your business in Sri Lanka.

The moment you register your business; it is accepted as a business under the law of Sri Lanka. Until you register your business, you can go on telling people that it’s a business but no one will accept it legally.

So if you ever think about starting a business, keep in mind that you need to register it. There’s no other way.

Different types of business registration in Sri Lanka

There are 3 types of business registrations in Sri Lanka.

  • Sole-proprietorship
  • Partnership
  • Private limited

First, let’s learn about them. At the end of this post, I’ll help you figure out what’s the best option for your business.

Sole-proprietorship

A sole-proprietorship is a one-man or a one-woman business. There can be only one owner. That’s why it’s called a sole-proprietorship.

How to register a sole-proprietorship business in Sri Lanka?

Registering a sole-proprietorship is simple.

Step 1 – Visit the relevant provincial council and collect the forms

Visit the relevant provincial council (based on your address) and inform them that you would like to register a business as a sole-proprietorship. Then they will give you a bunch of forms.

Step 2 – Fill and prepare the documents

These are the documents you need for a sole-proprietorship registration in Sri Lanka.

  1. Application form
  2. Graama Niladhari certification (This has to be certified by the divisional secretariat)
  3. A copy of your NIC
  4. Business premises ownership documents (You have to provide one of the below documents)
    1. Deed – If the premises is owned by you
    2. Lease agreement – If the premises is rented by you
    3. Consent letter – If the premises is owned by a family member (like your father)
  5. Varipanam assessment notice
  6. Affidavit confirming the initial capital of the business
  7. Other documents based on your business (Based on the nature of your business, there can be other documents that you need to provide. Here’s a list of such documents based on the nature of your business

Documents based on the nature of your business

  • Ayurvedic related dispensary, hospital, storage, planting and manufacturing – Provincial Ayurvedic Commissioner’s certification
  • Gems and jewelry related – Recommendation from Gem and Jewelry Authority in Sri Lanka
  • Vocational businesses – You need to provide relevant certifications you have received from an acceptable instate or authority
  • Tobacco related business – Recommendation from Excise Department of Sri Lanka
  • Pharmacy – Certification from Sri Lanka Medical Council
  • Consultancy – Certificates related to your consultancy practice
  • Nursery – Provincial Nursery Directors recommendation
  • Day care centers – Recommendation from an Early Childhood Development Assistant who’s employed in your divisional secretariat
  • Gas station – Recommendation from Central Environment Authority and Ceylon Petroleum Corporation
  • Polythene, paint, plastic and acid related business – Recommendation from Central Environment Authority
  • Wood related business – Recommendation from Forest department
  • Printing business – Recommendation from Department of National Archives
  • Rooms, guest houses, spas – Report from Police division and Divisional secretariat
  • Animal farms – Recommendation from District Veterinarian
  • Food related business – Recommendation from Public Health Inspector
  • Pesticides, fertilizer related business – Recommendation from Department of Agriculture
  • Agency or distribution business – Certification of the relevant agency

Step 3 – Submit the forms with relevant fee

Once the documents are ready, you can submit them to the provincial council with the relevant fee.

Sole-proprietorship registration fees in Sri Lanka

One of the best things about registering your business as a sole-proprietorship in Sri Lanka is the low registration fees. Here’s how it works.

Initial capital investment is less than Rs.300,000 – Registration fee is Rs.500

Initial capital investment is Rs.300,001– Rs.500,000 – Registration fee is Rs.1000

Initial capital investment is more than Rs.500,000 –  Registration fee is Rs.2500

Advantages of registering as a sole-proprietorship in Sri Lanka

  • The registration process is simple.
  • You don’t have to spend a lot on registration fees.
  • You can open a bank account name under your business name.
  • You have total control over your business. That includes decision-making and the right to all the profit earn by the business.
  • Closing your business is easy.

Disadvantages of registering as a sole-proprietorship in Sri Lanka

  • Any income you earn will be considered your personal income. You’re liable to pay taxes under your name for any business profit.
  • You can’t bring in investors because your business is a one-person business.
  • Difficult to get bank loans and other funding.
  • Unlimited liability – In case of bankruptcy, you’ll have to bring in your personal assets to settle your business obligations.
  • The business ends with the death of the owner. There’s no long-term continuity of the business.

Can you register a sole-proprietorship on your own?

Yes. Registering a sole-proprietorship in Sri Lanka is a simple process. All you have to do is walk into your relevant provincial council and they will guide you on how to do this.

If you don’t want to do this on your own, you can always hire a company for a fee. I will recommend some of them at the end of this post.

But you don’t necessarily need to hire anyone. You can do this on your own.

Is sole-proprietorship the right option for you?

Read till the end to find out my recommendation.

Partnership

A partnership is a business between two or more people.

How to register a partnership in Sri Lanka?

Registering a partnership is very similar to registering a sole-proprietorship business in Sri Lanka.

Step 1 – Visit the relevant provincial council and collect the forms

Visit the relevant provincial council (based on your address) and inform them that you would like to register a business as a partnership. Then they will give you a bunch of forms.

Step 2 – Fill and prepare the documents

These are the documents you need for a sole-proprietorship registration in Sri Lanka.

  1. Application form
  2. Graama Niladhari certification (This has to be certified by the divisional secretariat)
  3. Copies of NICs
  4. Business premises ownership documents (You have to provide one of the below documents)
    1. Deed – If the premises is owned by you
    2. Lease agreement – If the premises is rented by you
    3. Consent letter – If the premises is owned by a family member (like your father)
  5. Partnership agreement (if available)
  6. Affidavit confirming the initial capital of the business
  7. Other documents based on your business (Based on the nature of your business, there can be other documents that you need to provide. Here’s a list of such documents based on the nature of your business

Documents based on the nature of your business

  • Ayurvedic related dispensary, hospital, storage, planting and manufacturing – Provincial Ayurvedic Commissioner’s certification
  • Gems and jewelry related – Recommendation from Gem and Jewelry Authority in Sri Lanka
  • Vocational businesses – You need to provide relevant certifications you have received from an acceptable instate or authority
  • Tobacco related business – Recommendation from Excise Department of Sri Lanka
  • Pharmacy – Certification from Sri Lanka Medical Council
  • Consultancy – Certificates related to your consultancy practice
  • Nursery – Provincial Nursery Directors recommendation
  • Day care centers – Recommendation from an Early Childhood Development Assistant who’s employed in your divisional secretariat
  • Gas station – Recommendation from Central Environment Authority and Ceylon Petroleum Corporation
  • Polythene, paint, plastic and acid related business – Recommendation from Central Environment Authority
  • Wood related business – Recommendation from Forest department
  • Printing business – Recommendation from Department of National Archives
  • Rooms, guest houses, spas – Report from Police division and Divisional secretariat
  • Animal farms – Recommendation from District Veterinarian
  • Food related business – Recommendation from Public Health Inspector
  • Pesticides, fertilizer related business – Recommendation from Department of Agriculture
  • Agency or distribution business – Certification of the relevant agency

Step 3 – Submit the forms with relevant fees

Once the documents are ready, you can submit them to the provincial council with the relevant fees.

Partnership registration fees in Sri Lanka

One of the best things about registering your business as a partnership in Sri Lanka is the low registration fees. Here’s how it works.

Initial capital investment is less than Rs.300,000 – Registration fee is Rs.500

Initial capital investment is Rs.300,001– Rs.500,000 – Registration fee is Rs.1000

Initial capital investment is more than Rs.500,000 –  Registration fee is Rs.2500

Advantages of registering your business as a partnership in Sri Lanka

  • Registration process is simple.

Disadvantages of registering your business as a partnership in Sri Lanka

  • Unlimited liability – Partners have to bring in their personal assets to settle obligations and debts of the partnership.
  • Any income earned by partners will be considered as personal income. Each partner is liable to pay taxes under their name for any business profit.
  • The partnership will cease to exist if one partner dies or leaves the partnership.
  • High potential for conflict and difficulty of resolving.

Can you register a partnership on your own?

Yes. Registering a sole-proprietorship in Sri Lanka is a simple process. All you have to do is walk into your relevant provincial council and they will guide you on how to do this.

If you don’t want to do this on your own, you can always hire a company for a fee. I will recommend some of them at the end of this post.

But you don’t necessarily need to hire anyone. You can do this on your own.

Is partnership the right option for you?

Keep reading till the end to find out my recommendation.

Private limited

A private limited is a legal entity that is separate from the owners. Once you register your business as a private limited, it becomes its own person.

The owner(s) will not be liable if the company bankrupts. That means you don’t have to bring in your personal assets to settle business obligations and debt.

How to register a private limited company in Sri Lanka?

The Department of the Registrar of Companies has the authority for registering private limited companies in Sri Lanka.

Registering your business as a private limited wasn’t easy a while ago.

But recently ROC (Registrar of Companies) introduced an online registration portal. These are the steps you need to follow. (You can find a detailed guide of the below steps here.)

Step 1 – Searching for your company name

The first thing is making sure that your company name is available. Visit this link and search to see if the name is available.

Step 2 – Creating an account on eRoc

Next, you need to create an account. It’s pretty straightforward. Visit this link and click Login. Then register as a new user.

Step 3 – Name reservation

Once your account is created, you need to reserve your company name. To reserve a company name, you need to pay a total of Rs.2300.

Step 4 – Beginning the Incorporation process

Once your company name is approved, you can begin the company registration process. The first step in the incorporation process is adding the relevant stakeholders of your company.

Step 5 – Adding directors

The next step is adding directors to your company. You can add one or more directors to your company.

Step 6 – Adding a company secretary

Every company needs a company secretary. That’s just the way it is. A company secretary’s job is to make sure that the company complies with the statutory requirement.

You can’t register a company without a company secretary. Company secretaries

What if you don’t know any company secretaries? Read till the end and I’ll give you my recommendation.

Step 7 – Adding shareholders

The next step is adding the shareholders and the percentage each shareholder owns from the company.

Step 8 – Downloading the documents

Once you finish the previous steps, you will be prompted to download the following forms.

Form 1 – Company registration (Rs.4000 + VAT 8%)

Form 18 – Consent of the directors (Rs.2000 + VAT 8%)

Form 19 – Consent of the company secretary (Rs.2000 + VAT 8%)

Step 9 – Uploading documents

Once you’ve completed the above forms, the next step is uploading them to the eRoc portal.

There’s also one other document called the Articles of Association that you need to upload. The Articles of Association is a document that highlights what your company is and how your company is going to operate.

While there are ways you can draft your articles of association, I wouldn’t recommend it. Read till the end to find out why.

Step 10 – Making the payment

Once you have submitted all the documents, the next step is making the final payment. Those are the fees for the above forms I mentioned (Form 1, Form 18, Form 19).

Step 11 – Give public notice of the company incorporation

The final step is announcing to the world that your company exists. You can do this by publishing a notice in a newspaper in all 3 languages (Sinhala, Tamil, and English).

Advantages of registering your business as a private limited in Sri Lanka

  • Limited liability – Once you register a business as a private limited, it becomes its own personality. In case of bankruptcy and other obligations, the “company” is liable. Not the owners of the company.
  • Investor friendly – Investors prefer private limited companies because they promise a long life. A private limited does not end at the death of an owner like in sole-proprietorships or partnerships
  • Funding your business is easier – Since most lending agents and investors prefer private limited companies, funding your business is going to be easier when compared with sole-proprietorships/partnerships
  • Easy to register as an importer or exporter
  • Higher credibility – Private limited companies are considered as “real” businesses in Sri Lanka

Disadvantages of registering your business as a private limited in Sri Lanka

  • Registration cost is comparatively higher
  • Legal compliance is higher – When you register your business as a private limited, there are a couple of things that you need to do every year like auditing your accounts, filing annual returns, etc.

Can you register a private limited on your own?

Yes. You can register a private limited company on your own. With the online registration portal, things are much easier now than it was before.

But do I recommend doing it on your own? Not really.

While you can technically register your business on your own, it’s not a simple process.

For starters, there are so many documents to worry about. There’s the Articles of Association. Then you need a Shareholders’ Agreement.

Next, you need a company secretary to act on behalf of your company. You need their services when it comes to opening bank accounts, submitting annual returns, etc.

And there are things like getting a TIN (Tax Identification Number) and other compliance stuff that you need to do annually.

If you’re not familiar with the process, you might miss certain things. And it will take a long time for you to figure these things on your own.

That’s why I recommend going with a company that provides company registration services in Sri Lanka. They will also act as your company secretary. Trust me on this one. The trouble is not worth it.

I will recommend some companies at the end so you don’t have to worry.

Things to consider before selecting the best option for you

To get to the answer, there are a couple of things you need to consider first.

How serious are you about starting a business?

This is the first question you need to answer. Everything depends on how serious are you about starting your business.

Is your business going to be your future?

What if you’re not so sure about your business idea? Do you want to test your idea before going all-in?

Or is it a side-hustle to make some extra money while working for someone full-time?

There are no right or wrong answers here. It’s completely up to you. Once you know how serious you’re about starting a business, move to the next point.

What is the nature of your business?

What are you planning to start?

Is it a manufacturing or trading business? Are you planning to import products from international suppliers for credit? Do you have plans to export your products?

Are you planning to offer a service? Is it going to be a freelance business where you work alone? Or are you planning to hire more employees?

Is it an online business or do you need a physical place? Are you planning to start a restaurant?

The type of business registration depends on what your business is.

How are you going to fund your business?

Next, you need to consider funding. How much money do you need to start your business? Do you have it? If not, how are you going to fund it?

Are you planning to raise money through Angel investors or Venture Capital? Are you planning to borrow money from banks?

You need to have answers to these questions.

Ownership of your business

Who are the owners of your business? Is it going to be just you for the foreseeable future? Or will there be multiple shareholders?

Do you plan to get your family on board as owners?

Future potential of your business

Where do you see your business in the next 5 years? Do you see 20 people working for you? Do you see it becoming a multimillion mammoth in your industry? Do you see it expanding rapidly?

Or will it be a small business that you and a small team would run?

My recommendation

Now that you know what to consider, let’s decide what’s the best option for you.

But before that, let’s look at what Morpheus had to say to Neo.

I can only show you the door. You’re the one that has to walk through it.

My recommendations are only a guideline. It’s up to you to select the best option.

Hopefully, I have made it easier for you.

Keeping that in mind…

When should you register as a sole-proprietorship?

These are the instances (not exclusive) where you can choose to register as a sole-proprietorship.

  • If your business is a small one-person operation for the foreseeable future
  • If you’re not so serious about your business idea but you still need a business registration to get started
  • If you’re not planning to get outside funding
  • If your business is going to be a side-hustle while you work full-time
  • If you’re not intending to import or export and scale your business
  • If a sole-proprietorship business registration is enough to operate your business without any limitations (at least in the beginning)
  • If you don’t have a lot of money for business registration

When should you register as a partnership?

Partnerships are my least favorite option. There’s a high probability of conflicts in partnerships and resolving them is going to be very hard.

Choose this option only if you cannot register your business as a private limited.

  • If there’s more than one owner to the business
  • If family members are owners of the business
  • If there’s high trust and integrity among the owners

When should you register as a private limited?

If your needs do not match the criteria to register as a sole-proprietorship, this the best option you have.

These are the instances where you should register your business as a private limited.

  • If there’s more than one owner to the business
  • If you want to avoid unlimited liability
  • If you’re serious and all-in for the long-term
  • If you’re planning to import or export (you can import and export as a sole-proprietorship or a partnership but there can be limitations)
  • If you’re planning to get outside funding
  • If you want your business to be around even after you’re gone
  • If you have plans to scale your business
  • If you’re looking for more structure in your business

Business registration companies in Sri Lanka

If you’re planning to register your business as a private limited, here’s a list of business registration companies in Sri Lanka.

Keep in mind that every company listed here basically provides the same service for different prices.

Apart from the usual business registration, you need the following things.

  • TIN certificate – Every private limited in Sri Lanka has to get a TIN (Tax Identification Number) as soon as you register your business. You can get it from the IRS (Inland Revenue Department). IRS do not charge a fee for this. It’s completely free. Some business registration provides this service in their packages while other may not.
  • Company embossed seal – I have a company embossed seal but I haven’t used it since I incorporated my company. Nevertheless, it’s good to have this.
  • Director seal – You need this basically for everything. Make sure to get this.
  • Company secretary – Every private limited needs a company secretary. Most business registration companies provide company secretarial services for a fee. Usually it ranges from Rs.1000 per month to higher.

Talk to couple of these companies and compare their offering. Then you’ll be able to select easily.

Now it’s your turn

Do you have a question about registering your business? Add a comment below and let me know. Also, make sure to add your email address and subscribe to my newsletter if you don’t want to miss great posts like this.

I write about starting your business, investing, personal finance and much more.

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