How to register your business in Sri Lanka.
It is a good practice to register your business before it is late. There is a late fee from your local authorities if you leave it for too long.
Let the fine aside, neither banks, nor any organization will recognize you as a valid business entity without the business registration. Even if you run your business totally online there are lots of advantages when running it as a registered business.
Situations where you need the business registration.
*To apply for a credit card.
*To apply for a bank loan.
*To battle law suits. ( Beleive me this is a possibility no matter how clean you are.)
*To impress your in laws :D
This post has been written with the assumption that your only source of income is from the online/ offline business you are running.
I know lot of sri lankans who run web hosting, web developing, web marketing businesses never register their businesses. And most of the people who are running offline services businesses also forget this fact. If you come here from a google search, ” How to register a business in Sri Lanka” , the following is written solely for you.
There are 3 Types of practical entities you can start.
1. A sole trade business. – You are the only owner of the business.
2. A partnership – Ownership can be between 2-20 partners.
3. A private limited company – Refer your old “business studies” notes.
When you are first starting out, it is better to go with a sole trade or partnership type of business. In order to register your business, you need to go to your ” Provincial company Registration Authority”. For western province , it is located at Union place near Nawaloka Hospital.
For a sole trade, the registration fee is just Rs 500/= and you can get it within a day If you pay Rs1000/=. Otherwise they will mail you the registration within 2 weeks.
How To open a business account in Sri Lanka.
Once you have a business registration certificate in your hand, the next important step is to open a business account with a commercial bank. If you have to prove your income in any situation, ( To get a credit card, Apply for a bank loan.) your bank statements will come in to your rescue.
To open a business account also known as a current account, most of the banks require you to meet the bank branch manager directly. So do not waste your time with banking assistances and go to the person who you should meet.
If you are running an online business you might have to think of ways to explain the business plan to your bank manger. In Sri Lanka most of the people are not familiar with the concept yet.
I did not have to go through the trouble as I am running a offline business together with my web sites. But do not worry, they are good people and will listen to you. After all, they need your business.
I almost forgot, you need at least Rs 50,000 to open a current account in Sri Lanka. I do not know whether any bank has lower their minimum requirement but when I had to check last year , the minimum was in 50k to 100k range.
Once you have opened a business account, do not just leave it there. Financial Institutions make decisions based on the amount of transactions you have done and on the value of them. Consider this as a salary sheet. This is all you have as a legal document to prove your income. Do not go and ask for a loan with a blank bank statement. Just because you are running a registered business, no one will believe your earning capacity unless you have numbers to prove it.
So try to do all your business transactions through your bank accounts. Even pay your utility bills through this. Give your buddies cheques and get cash. Or vice a versa. Don’t tell anyone that you learn it here :D
How to apply for a Credit Card in Sri Lanka.
Once you have 3 bank statements with good numbers in it, you can apply for a credit card. The application form says that your business registration should be at least 2 years old but I have never seen anyone having problems if you have good numbers in your bank statement. I got my first credit card soon after I finish my A/L’s.
I do not know the exact situation behind Seylan bank at the moment. But one thing I know is they are super fast in approving your credit card. I have CC’s with 3 banks but Seylan service has been the best so far.
Keep Accounts in your start up business.
There are many small business accounting packages available. This is a very important factor for any business. I am not going to write the benefits of having a proper accounting system but keep in mind that it is a must. If you find it difficult to maintain accounts by yourself or if you do not have enough money to hire someone, at least keep records of your income and expenses. File all your invoices received and issued.
At the year end you can go to a small audit firm and ask them to prepare audited financial accounts for you. Do not worry; It will not cost you much. But the benefits are endless. Any bank will accept these audited financial accounts as a valid proof of your income.
Open an Income tax file.
Don’t put a face now! Having a income tax file is a great advantage. They are not going to rip you off. Most of the bad things you heard are spreaded by people who has never paid a single cent as income tax.
After deducting all the tax allowed expenses you do not have to pay a considerable amount anyway. You can get assistance from a tax adviser for a very small fee to determine how much you have to pay.
When you applying for a bank loan If you have a income tax file under your name the whole process will be much easier for you. They do not care whether you pay Rs 5000 or Rs 500000 as tax. But they will know that you are a credible person with a sound income.
In this article we have talked about how to start a business in Sri Lanka. The basic details regarding how to register your business?, how to open a business account?, How to apply for a credit card? And other areas related to small businesses in Sri Lanka have been briefly discussed. If you have further questions do not hesitate to ask them here at the comments section. I will do my best to answer them ASAP.
If you are determined to do something, yet do not know where to start, I always advice to start a internet business. It will only cost you few thousand rupees and you can use the earnings as a capital to start a solid offline venture. I know few dozen people who has successfully done it. Why not you?
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