Strong  economic  growth,  low  startup  costs, and  a  wealth  of  untapped   markets   make Cambodia an attractive environment for starting up  a  business.  Many  foreigners  arriving  with no intention  of  becoming an entrepreneur,  find themselves  opening  their  first  business  in  this exciting marketplace.

Whether  you  are  an  experienced  entrepreneur coming  here  to  start  another  venture,  or  are transitioning   to   self-employment  for  the  first time, properly establishing your company in full compliance with the law is crucial. While many
businesses operate  informally,  many  more  have been shut down or encounter ongoing problems from  the  authorities.  Spending   the  time  and money to do everything properly is the only way to avoid potentially insurmountable hassles in the future.

Choice of Legal Entity

Private Limited Company

When establishing a company,  the  first  choice is what legal entity to use. For most ventures, a private  limited  company  (PLC)  is  the  obvious choice. A PLC is a legal entity distinct from its shareholders and directors. It therefore limits the liability of shareholders and directors - they will not be personally liable for the company’s debts.

A PLC can have from two to 30 shareholders. If there  will be only  one  shareholder,  it  is called

a single member  limited company,  with  all  the
Advantages of  a  PLC. The law also allows for public limited companies, though these will only be  established  once  the  Cambodian  Securities Exchange is opened, sometime this year.

Sole Proprietorship

A sole proprietorship  is owned and  operated by a single person  who owns all  its capital and  is entitled to all its profits. Conducting business on your own, without ever formally registering, will be deemed a  sole proprietorship.  All obligations and   liabilities  of  the   proprietorship   are   the sole personal  responsibility  of the  proprietor,  a significant burden and danger.

General & Limited Partnerships

A general partnership  is an agreement  between two or more persons to combine  their property, knowledge or activities to carry on business. This agreement does not need to be formalized, it can arise simply by the partners conducting business together. Like a sole proprietor,  general partners are each personally liable for all of the partnership’s debts and obligations.

A limited partnership  is a contract between  one or more general partners  who run  the  business, and at least one limited partner, who contributes capital.  A limited  partner  is liable only  to  the extent  of  their  capital  contribution,  while  the general partners are personally liable for all debts and obligations.

Limited partnerships must be registered with the Ministry of Commerce, or else it will be deemed a general partnership.

Foreign Subsidiary, Branch &  Representative
Foreign   companies   have  several  options   for entering the Cambodian market. All three must be registered with the Ministry of Commerce.

The first choice is to create a subsidiary  of the foreign  parent.  This  is  a  locally   incorporated limited company with at least 51% of the shares held  by  the  foreign   company.  Its  formation, management,   rights  and   obligations  must   be provided for in the Memorandum and Articles of Association of the limited company.

Second, a branch office can be opened by a foreign company for conducting a particular commercial activity. The branch  office is  the  same entity as the parent company,  and therefore the parent is liable for all the branch’s debts and obligations. It can engage in general business activities, such as buying and selling products.

Finally, a representative office can be  setup, but is only allowed to facilitate the sourcing of local goods and services and to collect information for its parent company. Crucially, it is not allowed to make sales or buy products in Cambodia.

Bank  Account & Deposit
The Ministry of Commerce requires proof  of at least 4 million Riel (approx. US$1,000) deposited in a local authorized bank. Be sure to obtain a bank statement certifying the deposit.

Registering a Private  Limited Company
Private limited companies are registered with the Ministry of Commerce. In response to the initial application, the MOC will prepare and provide the applicant with the official application form.  The applicant  must also submit a Memorandum and Articles of Association, documents which sets out the corporate structure. One can use the MOC’s standard  MAA, or make modifications - though the MOC has the right to review and reject any substantial changes.

The application form and MAA must be  signed by  all  shareholders   and   directors   before  the MOC, a Cambodian lawyer, or  a  Notary Public. It takes around 30 working days to process a new company registration at the MOC, counting from when the  completed application  documents are submitted. The MOC will issue the applicant with a Commercial Registration Certificate, a Certified MAA, and an MOC Business License.

Company Name & Trademark
New businesses should take care in selecting and properly registering the names of the company and of its goods and services. When incorporating the company, the  Ministry of Commerce will reject
any application for a company name that is already registered. To avoid this delay, it is best to request the MOC to check the  uniqueness of the name before submitting the registration documents.

Trademarks   are   registered   separately   at   the Department of Intellectual Property, and give their owner the right to prevent others from using confusingly similar marks.

Choosing a name similar to a registered trademark can be a costly mistake. After investing in signs, advertising,   and   product   packaging,   a   new business can  be forced to change its name  and start   from scratch. Such problems are easily avoided by a requesting a clearance search from the Department of Intellectual Property.

Tax Considerations
The Ministry of Economy and  Finance  (MEF), Department    of   Taxation,    requires   that    all companies registered to do business in Cambodia register  with  the  tax  department   to  obtain  a taxpayer  identification  number  within  fourteen days of opening a business.

Companies  are  generally  subject  to  an  annual business  registration   tax  (the   Patent   Tax),  a Profit  Tax (20%, or  a  Minimum  Tax of 1% of turnover) and VAT charges (10%), as well as the Salary Tax for employees (0%-20%), and a Rental Withholding Tax (10%).   While there is a  20% dividend  withholding tax (basically a  salary or profit tax on the recipient), this is not double taxed.

Labor  Obligations
Upon opening a business, employers must make a  declaration  to  the  Ministry  of  Labor.    This declaration, called the Declaration of the Opening of a Business, must  be made in  writing and be delivered  to  the  Ministry  of  Labor  before  the actual opening of the business.  Employers must also make a  declaration to the Labor Inspector each  time that the business hires or dismisses a worker. This declaration must be made in writing within seven calendar days after the date of hiring or dismissal.

Finally, a new business should take care to obtain all necessary licenses from the relevant ministries. There are dozens of licenses specific to particular business  activities, ranging  from  restaurants  to solid waste management. It is the business owner’s responsibility to obtain the proper licenses, failure to do so can result in fines and even closure of the business.

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