Cambodian Business Classifications
There are various Business Classifications available in Cambodia here we help you understand how to classify your business.
Want to start a Cambodian-based business alone?
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You need Sole Proprietorship.
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You wish to own and operate all of the assets of the business.
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As a sole proprietor, you take the entirety of any profits but are also liable for any losses and debts.
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This is a popular option for many small owner-operated businesses (restaurants and bars for example).
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Sole Proprietorship offers some tax advantages. For example, according to legal firm DFDL, sole proprietors whose turnover does not exceed on average $5,000 per month will not be required to pay any tax – be it corporate or patent tax.
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With the recent overhaul of the tax system, and the abolishment of the estimated regime, sole proprietors whose annual turnover exceeds $5,000 per month, on average, will now be required to charge VAT, file monthly and annual tax returns, collect and pay certain withholding taxes and be subjected to tax audits whereas previously they would probably have negotiated their taxes upfront with the tax officer (under the estimated tax regime).
Want to start a Cambodian-based business as a Partner?
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Cambodian based partnerships have two possible options for official classification: The General Partnership and the Limited Partnership:
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A General Partnership is similar to a sole proprietorship, but your business involves two or more people combining their efforts and/or assets.
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You and your partners carry the same legal liabilities when it comes to debts and obligations.
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Partnerships are a popular type of business entity for professionals such as doctors.
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A Limited Partnership, on the other hand, means that one or more of the partners in your business merely contribute capital to the business while the other partners retain the general designation.
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By becoming a limited partner you are liable only to the extent of the capital you have contributed.
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If you are seeking to have, or to be, a silent partner, then a limited partnership may be the most appropriate option for you.
Want to start a Cambodian-based Company?
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A Limited Liability Company offers limited liability for you and your shareholders, which can number up to 30. This classification shall protect you from personal liability for any debts that the business may incur, as it has its own distinct legal identity and exists independently of its shareholders.
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The three types of limited liability companies available are: Private Limited Company, Single Member Limited Company, and Public Limited Company.
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A Private Limited Company is a form of limited company that may have from 2 to 30 shareholders.
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When a Private Limited Company is established by one person, it is known as a “Single Member Limited Company.”
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A Public Limited Company (PLC) is possible also, now that the Cambodian Stock Exchange is operative. A PLC is authorised by law to issue securities (shares) to the public. Before your company can be considered for flotation on the stock exchange, you must show it adheres to various financial and accounting standards, and demonstrate that it has set out the corporate structure in a memorandum and articles of association.
How can my foreign-owned company set up operations in Cambodia?
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Foreign Companies have three possible options for official classification: As a Subsidiary, a Branch Office or a Representative Office:
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Subsidiary is possible only if your business is a limited and locally incorporated company with at least 51% of the shares held by the foreign parent company.
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In order to create a subsidiary, a memorandum and articles of association must be provided thus ensuring the limited liability of the parent company.
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A Branch Office is possible if your business is an extension of the parent company thus maintaining liability with the parent company.
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A branch office may conduct business activities in Cambodia in the sectors in which it is registered.
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It can buy and sell goods, sign contracts, build things, render services, and generally do everything that a regular Khmer business can do.
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In this case the parent company is liable for all the branch’s debts and obligations.
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A Representative Office, on the other hand, offers you a more tentative step into the Cambodian market, allowing investors to test the waters before committing fully.
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A representative office is not allowed to buy and sell goods or offer paid services to customers.
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It can, however, gather information for the parent company and enter into contracts on its behalf; and source but not purchase local goods and services.