How to register your business start-up
With the recent pandemic induced boost to the “gig economy”, we’re seeing a large set of new entrants, freelancers and entrepreneurs entering almost every industry in Sri Lanka.
Unsure whether you should register your business or brand because you’re concerned about taxes? A daunting registration process? Or you’re just more comfortable being a freelancer? The short answer is – always register your business.
Why register your business or brand?
- This legitimises your business/ brand
- Allows you to accept online payments through a registered company bank account
- This aids in approval for any kind of loan, whether business, home or personal as banks require companies to be registered for at least a year, in order to aid processing these loan requests
- Tax laws are actually not designed to take money away from you
- The process is to register is actually not that daunting
- It doesn’t really cost too much to register
Private limited or sole proprietorship?
In a Private Limited Company, the liability of a shareholder is limited to the extent of capital invested in the Company as it is a separate legal entity. A private limited company or an LLP limit the liability of Directors for company debts unless
- A director has signed a personal guarantee
- If you dispose of company assets below market value
- If Directors are overpaid creating an overdrawn Director’s loan
- Accepting money for goods or services, that you are aware will not be delivered due to planned insolvency.
For various reasons, many business owners opt for sole proprietorship due to
- More control of your business
- A simplified and less expensive business organisation
- Minimal reporting requirements
- Simplified tax reporting
Step one: Business Name
The first step (besides having figured out what sort of a business, service or product you are going to offer to the market) is to choose your business or brand name – in fact, maybe have a few options, and check whether this name is available via https://eroc.drc.gov.lk/home/search. Once you are satisfied that your intended company/ brand name is available you can then begin gathering the required information to register your business.
Bonus Tip – Make sure to buy a domain name identical to the company or brand name you have selected and confirmed as available. You can use sites like Godaddy and onlydomains.com for this.
Step two: Register on e-roc
To access the other parts of the process you can create a login also via the same site – for free – to begin the process to register your company or brand.
Bonus Tip – you can actually do a name search during this stage too and if it isn’t available the system will let you know to try a different name.
Step Three: Reserve your company name
Login to your created account, and navigate to the application page to reserve your company or brand name, filling out a short form and clicking submit.
All sections are compulsory to be filled out and include sections such as your full name, address and postal/ zip code, NIC number, registered address, Director names and contact details, etc.
Step Four: The Finer Details
As you move through the online form, you will arrive at the option to download Form 1 (Registration of a Company) and Form 18 (Consent and Certificate of Director) that needs to be filled digitally, downloaded, signed and scanned for submission.
Step Five: Payments
The entire process mentioned above should cost you less than LKR 10,000/- approx. and can be paid for using a credit or debit card online.
Step Six: Gazette Notice
This step cannot be completed online and requires you to provide public notice of incorporation in at least one issue of the Gazette, in an English, Sinhala and Tamil Newspaper – circulating in the area of business.
This public notice should include the company registration number, registered office address and the name of the company.
Step Seven: TIN Registration
Although many believe that this is an optional part of registering your business – you are legally required to register for your business tax number within the first year of registering your business, this form too can be downloaded via the e-roc website and Inland Revenue will issue your tax certificate shortly thereafter.
Bonus Tip – Does the process seem a little complicated? There are in fact, several Company Secretaries, that charge between LKR 30,000/- – LKR 50,000/- (including providing secretarial services for a year) to do the above for you and go through the technicalities of registering your business and getting you all your final documents.
Once your business is registered these are the items you should receive
- Business registration certificate
- Company seal
- Director Stamp
- Article of Association
- TIN certificate