This is a list of the business structures in Cambodia.
The first thing to do when you are considering setting up a company is selecting the right business entity and there are various separate and non-separate legal entities you can choose from in Cambodia.
Let’s see what the types of entities are.
What are the types of business entities in Cambodia?
The business entities in Cambodia are:
- Sole proprietorship
- Partnership
- General partnership
- Limited partnership
- Limited liability company
- Private limited liability company
- Single-member private limited company
- Public limited company
- Foreign business entities
- Representative office
- Branch office
- Subsidiary
Entity 1: Sole proprietorship
A sole proprietorship in Cambodia is owned and operated by one person. The single-owner owns all capital and profits. However, the sole proprietorship is not a separate legal entity, and the owner will be personally liable for any debts.
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Entity 2: Partnership
Partnerships are common for local and small businesses, and are favoured as business entities by accountants, doctors and lawyers.
There are two types of partnerships, the general partnership and limited partnership.
2.1 General partnership
Stated in article 8 of the Law on Commercial Enterprises (LCE), a general partnership is a contract between two or more persons who combine their property, activities or knowledge to conduct business to generate profit.
The general partnership has a legal personality separate from the partners. The general partnership will have legal personality upon registration with the Law on Commercial Rules and Registers and will be entitled to the following rights:
- To carry on business in its own name
- To enter contracts in its own name
- To own movable and immovable property in its own name
- To sue and be sued in its own name
The name of the partnership must include the name of one or more partners, and General Partnership or GP must be at the end of the name or below it.
A general partnership is considered to have Cambodian nationality if:
- The general partnership has a place of business and a registered office in Cambodia
- More than 51% of the recorded ownership interest is held by natural or legal persons of Cambodian nationality
A manager must be appointed to manage the affairs of the general partnership. In the case of more than one manager, each manager must act separately unless stated differently in the contract.
2.2 Limited partnership
A limited partnership is a contract between one or more general partners who are the sole persons authorised to administer and bind the partnership, and one or more limited partners who are bound to contribute to the capital of the company, according to article 64.
The term for the limited partnership is 99 years, but it may be extended. It must be registered with the Ministry of Commerce, otherwise it will be considered as a general partnership.
The name of the limited partnership must include the name of one or more general partners and Limited Partnership or LP at the end or below the name.
The liability of the limited partner is limited to the amount of money he/she contributed, while the general partners are liable for the debts of the partnership to third parties.
Limited partners are not entitled to:
- Manage the partnership
- Negotiate business on behalf of the limited partnership
- Act as agents for the partnership
- Allow his/her name to be used
Limited partners can examine reports and progress of the partnership and provide advisory opinions on the management of the partnership.
Entity 3: Limited liability company
The limited liability company (LLC) is the most common business entity in Cambodia. The LLC can be 100% Cambodian-owned, 100% foreign-owned or a combination of Cambodian and foreign shareholdings. The LLC can have between 1 to 30 shareholders.
There are three types of LLCs, which are:
- Private limited company
- Single-member private limited company
- Public limited company
3.1 Private limited company
A private limited company must have between 2 and 30 shareholders and requires a minimum of one director who can be either a local or foreigner.
The private limited company cannot issue shares or securities to the public, and may have one or more restrictions on the transfer of each class of its shares.
The private limited company is a separate legal entity and will not be personally liable for the company’s debts. The minimum share capital for setting up a private limited company is KHR 4 million.
The company name must include the words Private Limited Company or Ltd at the end of the name.
3.2 Single-member private limited company
The single-member private limited company is a private limited company that has one person or entity as the shareholder and a minimum of one person as the director. The single-member private limited company can be converted to a private limited company upon the shareholder’s approval to increase company shareholders.
3.3 Public limited company
A public limited company can issue shares and securities to the public. The name must include Public Limited Company or Plc at the end of the company name.
It requires a minimum of three directors and at least two or more shareholders. Banks, insurance companies and finance companies must register as public limited companies.
Entity 4: Foreign business entities in Cambodia
Stipulated in the LCE, a foreign business is a legal person formed under the laws of a foreign country having a place of business in, and doing business in Cambodia.
There are three types of foreign business entities in Cambodia:
- Representative office
- Branch office
- Subsidiary
4.1 Representative office
Foreigners can set up a representative office to gain presence in the Cambodian market and promote the products and services of the foreign parent company.
The representative office cannot engage in trade or provide services, sell, purchase, manufacture, process or construct in Cambodia.
Representative offices are permitted to perform the following activities:
- Contacting customers and introducing customers to the parent company
- Researching commercial information and providing information to the parent company
- Conducting market research
- Market goods at trade fairs and exhibit samples and goods in offices or trade fairs
- Rent an office and employ local staff
- Enter contracts with local customers on behalf of the parent company
The name of the office must be the same as the parent company and have the words Commercial Representative office or Commercial Relations Office in front or above the name.
4.2 Branch office
The branch office is not a separate legal entity from the foreign parent company; therefore, the parent company is liable for the branch’s debts and obligations.
Branches can conduct commercial activities, such as buying and selling products, and can engage in manufacturing, processing and construction. The branch name can be the same as the parent company and must have the words Branch above or in front of the name.
The branch office cannot engage in any Qualifying Investment Projects (QIP) for which tax incentives are available. To qualify for the QIP incentives, you must have a company incorporated in Cambodia.
4.3 Subsidiary
A subsidiary is a foreign company in Cambodia with at least 51% of the shares held by the foreign parent company. The subsidiary is a separate legal entity from the parent company, and can be set up as a partnership or limited company. Subsidiaries can conduct business the same as local companies except for activities that are prohibited to foreigners, such as owning land.
Conclusion
Before deciding on the type of business entity in Cambodia, you should find out which type of entity is the most suitable for your business. Outlined above are the descriptions and characteristics of each entity in Cambodia.
Do not hesitate to contact Acclime if you need help choosing an entity and guidance in the setup process.
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