Company Registration in Sri Lanka – A Step by Step Guide (Private Limited Entity)

Why should you register your company?

When you begin to pursue your dreams of starting a business, it’s important to make sure that you’ve got all your bases covered. 

Registering your company is by far one of the most important and basic steps of starting your own business. 

Why is that? Well, when you register your company, it gets its own legal identity. 

This means that your business is now completely separate from all your personal assets. 

Now, even if your business has to close down and pay off large debts at some point in the future, gets sued or has other horrible and unforeseen financial losses, you wouldn’t have to sell off or lose your personal assets (eg: land, house, valuable belongings) to settle any of these issues. 

Since your company has been registered, it will be considered as an entity that’s separate from you; because of this you nor your family will have to suffer personal consequences brought on by the business. 

So, even though there’s several other advantages of registering a company – the protection of both yours and your family’s assets might be the most important.

Advantages of registering a company

When you first start a business or if you already have an unregistered business, the business’s name automatically becomes the name of the person or entity that owns it. However, if you want to name your company something else, you’ll have to register it right-away. 

Once you start registering your business, you can choose to register it as ‘Doing Business As’ (DBA); also called a ‘trade name’ or ‘assumed name.’ This will allow you to name your company however you see fit. 

By doing this, you guarantee the protection of your unique business name. This also helps you;

• Obtain licenses and permits. 
• Register with the Inland Revenue Department and Tax Authorities.
• When you open a bank account and opt for bank facilities for business requirements.
• Establish brand identity when carrying out marketing activities. 

There are a few types of legal entities that you can choose to register your business as. In this article, we’re going to talk about how you can get registered as a ‘Private Limited Company.’

A Private Limited Company is a privately held company for small businesses. You need a minimum of two employees, one shareholder and one director to start one of these. The number of owners a Pvt Ltd Company can have is also capped at 50.

Private Limited Companies are great because they limit the risks of owning a business and it provides the company owners and their personal assets legal protection.

Unlike Public Limited Companies, PVT LTD Companies can’t trade their company stock on the stock market. You can also impose restrictions on ownership to protect your business from hostile takeovers. 

So, how can you register a Private Limited Company? Let’s take a look!

Step 01 – Obtain approval for your business name 

How do you find a unique name for your company? Well, once you have a couple of business name ideas in mind, you can easily search through the Department of the Registrar of Companies’ website to check whether your company name has already been taken or not. 

If the search results don’t show any companies with the same name, you’re all set. In-case there’s already another business with the same name as yours, it’s always safe to have one or two alternative names on hand. You can also check if your company name is available here.

In addition to this, we recommend that you reserve a domain name that’s identical or at least closely related to your company’s registered name. 

Personally, we use Lankahost to buy all our .lk domain names. If you want an international domain and hosting, Godaddy is a pretty great place to get one too. 

When you’ve decided on a business name, you can reserve it with the Registrar of Companies until you’re ready to go ahead with the company registration. Once you make a business name reservation, it’s valid for three months. The company name reservation will cost you Rs. 2,000 + VAT 8%.

Step 02 – Submit company registration forms 

After you’ve gotten approval for your company name, you have to submit a few forms to the DRC (Department of the Registrar of Companies). We’ve gone ahead and attached the forms to make it easier for you.

• Form 1 – Company Registration (Rs. 5,290 with VAT 15%).
• Form 18 – Consent and Certificate of Director (Rs. 2,645 with VAT 15%).
• Form 19 – Consent and Certificate of Secretary/Secretaries (Rs. 2,645 with VAT 15%).

Remember that every form must be either printed or typewritten (according to section 475). The DRC will not accept handwritten forms.

Important additional information: How to chose the right company secretary

Step 03 – Submit Articles of Association 

A company can either;

1.  Adopt the standard set of Articles of Association in Table A of the Companies Act of Sri Lanka

Or

2. Draft its own Articles of Association. 

You must submit 2 copies of the documents. 

This will cost you Rs. 2,000 + VAT 8%. 

Useful reading: How to draft your Articles of Association

Step 04 – Give public notice of incorporation 

After you’ve completed the previous steps, it’s finally time to notice the public of your company’s incorporation. 

You can do this by publishing your company’s formation on a small blurb in the local papers (this is how it’s usually done).

This public notice should include;

1. Company registration number 
2. Name of the company
3. Registered office address of the company 

This has to be published on at least one issue of a Gazette as well as on at least one issue of a daily newspaper in all three languages (Sinhala, Tamil and English). 

Last but not least, this newspaper announcement has to circulate within the area of the business. 

After you’ve completed all of these steps, you’ll receive a business registration certificate in two to three weeks.

Get started with Simplebooks! 

Hey, we’re Simplebooks – a registered corporate secretary. 

This means that Simplebooks is capable of registering your company for you.

While you’re here, make sure to check out pricing options to see what fits your business!

By the way, the Government has recently introduced “eROC” (e – Registrar of Companies). 

With this service, you can register your business online!

Take a look at our step by step guide on how you can register your business online.

What’s next after registering your business? 

1. Post registration compliance 

Registering your company is only step one of running a legally compliant business in Sri Lanka. There are a few other legal processes you need to follow afterwards. Some of these include;

• Opening a tax file 
• Maintain book-keeping records of company transactions
• Auditing and paying tax
• Taking care of EPF/ETF requirements of the employees you hire

2. Open a tax file 

• As a registered company in Sri Lanka, it’s very important to open a tax file and have your taxes in order. If you fail to pay your yearly taxes or avoid them altogether, the government will see this as an offense and take legal action against you.
• You can register and open a tax file either through the post or you can do it online. 
• 1st April – 31st March is considered to be the fiscal year or financial year of Sri Lankan businesses. 
• If you’re a newly registered company in Sri Lanka, you have to open a tax file 30 days after the end of your first financial year. 

3. Maintain bookkeeping records 

• It’s very important to maintain your bookkeeping records in order! We’ve written an entire blog post on it. You can read it here.

4. Compute tax and file tax returns 

• As a company, you have to pay your taxes on or before the 30th of September every year. 
• After you’ve paid your taxes, you need to file your tax returns on or before the 30th of November. 
• We’ve posted an entire blog post dedicated to Income tax that you can read here.
• The percentage of Corporate Income Tax (CIT) that you have to pay to the government will change depending on the type of business you run. 
• For example: if you run a Small and Medium Enterprise (SME), you’ll have to pay 14% CIT. If you run a large scale business, your CIT will be 28% and if you run a liquor or tobacco business, your CIT will be 40%.

We recommend you speak to your company secretary or hire a professional service like Simplebooks.

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