Company Types for Startups in Nepal: What’s the Best Fit

Understanding the types of companies in Nepal is the first critical decision foreign startups must make before entering the Nepali market. Your company structure affects ownership, liability, taxation, compliance, profit repatriation, and long-term scalability.

Nepal has modernised its investment framework through the Companies Act 2006 and Foreign Investment and Technology Transfer Act (FITTA) 2019, making it increasingly attractive for foreign founders, tech startups, and service companies.

This guide provides a practical, founder-focused breakdown of company types in Nepal. It explains which structure fits which business goal and why.

Overview of Business Structures Under Nepal Company Law

Before diving into startups, it helps to understand how Nepal broadly classifies businesses.

Main Legal Forms Recognised in Nepal

• Sole Proprietorship

• Partnership Firm

• Private Limited Company

• Public Limited Company

• Branch Office of a Foreign Company

• Liaison (Representative) Office

Among these, foreign startups almost always choose company-based structures, not personal or partnership models.

Why Structure Matters for Foreign Startups

Choosing the wrong company type can delay approvals or restrict growth.

Key impacts include:

• Eligibility for foreign direct investment (FDI)

• Ability to repatriate profits

• Hiring local staff

• Opening bank accounts

• Compliance cost and timelines

• Exit flexibility

For foreign founders, Private Limited Company, Branch Office, or Liaison Office are usually the only viable options.

Private Limited Company: The Most Popular Startup Structure

What Is a Private Limited Company in Nepal?

A Private Limited Company (Pvt. Ltd.) is a separate legal entity registered with the Office of the Company Registrar under the Companies Act 2006.

It is the default choice for foreign startups.

Key Features

• Minimum shareholders: 1

• Maximum shareholders: 101

• 100 percent foreign ownership allowed (sector-permitting)

• Limited liability protection

• Separate legal identity

Why Startups Prefer This Structure

1. Fully compliant with FITTA 2019

2. Enables profit repatriation

3. Suitable for scaling operations

4. Accepted by banks and regulators

5. Allows local and foreign directors

Typical Use Cases

• SaaS and tech startups

• Outsourcing and IT services

• Fintech and consulting firms

• EdTech, HealthTech, and BPOs

Public Limited Company: For Large-Scale or Regulated Ventures

What Is a Public Limited Company?

A Public Limited Company (PLC) can raise capital from the public and has stricter governance rules.

Key Characteristics

• Minimum shareholders: 7

• No upper limit on shareholders

• Mandatory compliance with SEBON for public issues

• Higher paid-up capital requirements

Is This Suitable for Startups?

For most foreign startups, no.

This structure suits:

• Infrastructure projects

• Banks and insurance companies

• Large manufacturing ventures

Branch Office: Operating as an Extension of a Foreign Company

What Is a Branch Office in Nepal?

A branch office is not a separate legal entity. It is an extension of the foreign parent company registered in Nepal.

Key Features

• 100 percent foreign owned

• Cannot issue shares locally

• Activities limited to parent’s scope

• Governed by parent company law

When a Branch Office Makes Sense

• Contract-based projects

• Engineering or EPC firms

• Short- to medium-term operations

Limitations for Startups

• Restricted business activities

• Higher scrutiny from regulators

• Limited flexibility compared to Pvt. Ltd.

Liaison Office: Market Entry Without Revenue

What Is a Liaison Office?

A liaison office acts only as a representative presence in Nepal.

Permitted Activities

• Market research

• Promotion and branding

• Communication and coordination

Prohibited Activities

• Revenue generation

• Issuing invoices

• Signing commercial contracts

Who Should Choose This?

• Early-stage startups testing the market

• Companies exploring partnerships

• Firms preparing for FDI later

Sole Proprietorship and Partnership: Why Foreigners Avoid Them

Although legally recognised, these structures are not suitable for foreign startups.

Key Reasons

• Foreign ownership restrictions

• Unlimited liability

• No FITTA protection

• Poor scalability

These models are mainly for small, local businesses.

Comparison Table: Best Company Types for Startups in Nepal

Sector-Specific Considerations for Foreign Startups

Technology and SaaS

Private Limited Company is ideal. It supports IP ownership and local hiring.

Consulting and Professional Services

Private Limited or Branch Office depending on contract structure.

Manufacturing and Industrial Projects

Private Limited with FDI approval and industry-specific licenses.

Compliance Snapshot for Foreign-Owned Companies

Foreign startups should be aware of ongoing obligations:

• Annual returns to OCR

• Tax filings under the Income Tax Act 2002

• Audit requirements

• Labour Act and Social Security Fund compliance

• NRB reporting for foreign remittances

How Foreign Direct Investment (FDI) Fits In

FDI in Nepal is governed by the Foreign Investment and Technology Transfer Act 2019.

Minimum FDI Threshold

• NPR 20 million (approx.) for most sectors

Benefits of FDI Registration

• Legal protection for investors

• Guaranteed profit repatriation

• Access to dispute resolution mechanisms

Common Mistakes Foreign Startups Make

• Choosing a liaison office when revenue is planned

• Underestimating compliance costs

• Delaying FDI approval

• Structuring shareholding incorrectly

Avoiding these mistakes saves months.

How to Choose the Best Company Type: A Simple Checklist

Ask yourself:

1. Will we generate revenue in Nepal?

2. Do we need local employees?

3. Is profit repatriation important?

4. Are we testing or scaling?

If the answer is “yes” to most, Private Limited Company is the best fit.

Frequently Asked Questions (People Also Ask)

1. What are the main types of companies in Nepal for foreign startups?

Foreign startups usually choose Private Limited Companies, Branch Offices, or Liaison Offices. Private Limited Companies are the most flexible.

2. Can a foreigner own 100 percent of a company in Nepal?

Yes. Nepal allows 100 percent foreign ownership in many sectors under FITTA 2019.

3. What is the minimum investment for a company in Nepal?

For FDI, the minimum investment is typically NPR 20 million, subject to sector rules.

4. Is a branch office better than a private limited company?

A branch office suits project-based work. Private Limited Companies are better for startups and scaling.

5. How long does company registration in Nepal take?

With proper documentation, registration usually takes 2–4 weeks, excluding FDI approval timelines.

Conclusion: Choosing the Right Types of Companies in Nepal

Selecting the right types of companies in Nepal determines how smoothly your startup enters, operates, and scales. For most foreign founders, a Private Limited Company with FDI approval offers the best balance of control, compliance, and growth.

Nepal’s regulatory framework is investor-friendly when navigated correctly. The key is choosing the right structure from day one.

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