FAQs About Company Types in Nepal (For Beginners)

If you are exploring South Asia, Types of companies in Nepal is one of the first topics you must master. Nepal welcomes foreign investment, but only through specific legal structures. Each option carries different ownership rules, compliance burdens, tax exposure, and repatriation rights.

This beginner-friendly guide explains company structures in Nepal clearly and practically. It is written for foreign founders, CFOs, and expansion teams who want certainty before committing capital.

By the end, you will know which company type fits your business goals and how to move forward safely.

Why Choosing the Right Company Type in Nepal Matters

Foreign companies often focus on speed. In Nepal, structure matters more than speed.

Choosing the wrong company type can lead to:

• Rejected FDI approvals
• Inability to hire staff
• Profit repatriation delays
• Regulatory penalties

The correct structure protects your capital, IP, and long-term growth.

Legal Framework Governing Company Types in Nepal

Business entities in Nepal are regulated under national commercial and investment laws. Foreign companies mainly interact with:

• The Companies Act, 2006
• Foreign Investment and Technology Transfer Act (FITTA), 2019
• Industrial Enterprises Act, 2020
• Income Tax Act, 2002

Registrations and approvals are handled by the Department of Industry, the Office of Company Registrar, and Nepal Rastra Bank.

Types of Companies in Nepal (Overview for Foreign Investors)

Nepal legally recognizes several business forms. However, only a few are suitable for foreign ownership.

Here is the full landscape.

1. Private Limited Company in Nepal

A Private Limited Company is the most common structure for foreign investors.

Key features

• Separate legal entity
• Limited liability for shareholders
• Can be 100 percent foreign-owned (sector permitting)
• Minimum one shareholder
• No public share issuance

This is the default structure for startups, tech firms, service providers, and outsourcing operations.

Best for

• Long-term operations
• Hiring local teams
• Revenue generation inside Nepal

2. Public Limited Company in Nepal

A Public Limited Company is designed for large-scale ventures.

Key features

• Minimum seven shareholders
• Mandatory board governance
• Eligible to issue public shares
• Higher compliance burden

Foreign investors rarely use this structure unless required by sector rules.

Best for

• Infrastructure
• Banking and insurance
• Hydropower projects

3. Branch Office of a Foreign Company

A branch office is an extension of the foreign parent company.

Key features

• No separate legal personality
• Parent company bears full liability
• Allowed only for approved activities
• Cannot freely trade

Best for

• Government contracts
• Large infrastructure execution
• Project-based presence

4. Liaison (Representative) Office in Nepal

A liaison office is the most restricted structure.

What it can do

• Market research
• Relationship building
• Coordination with partners

What it cannot do

• Earn revenue
• Sign commercial contracts
• Hire staff freely

This structure is often misunderstood.

5. Partnership Firm in Nepal

Partnership firms exist but are not suitable for foreign investors.

Limitations

• Unlimited liability
• No FDI eligibility
• Weak credibility for international operations

Foreign companies should avoid this structure.

6. Sole Proprietorship in Nepal

This structure is strictly for Nepali citizens.

Foreign ownership is not allowed.

Comparison Table: Choosing the Right Company Type in Nepal

Types of Companies in Nepal for Foreign Direct Investment (FDI)

Foreign Direct Investment is permitted only through specific structures.

FDI-eligible company types

1. Private Limited Company

2. Public Limited Company

3. Branch Office (restricted)

Liaison offices are not considered FDI entities.

Minimum FDI threshold is NPR 20 million under current regulations.

Sector Restrictions Foreign Companies Must Know

Not all sectors are open to foreign investors.

Restricted or prohibited areas include:

• Small retail trading
• Personal services
• Local courier services
• Certain agriculture activities

Always verify sector eligibility before incorporation.

Compliance Obligations After Company Registration

Once incorporated, foreign-owned companies must comply with:

• Annual financial audits
• Income tax filings
• Withholding tax deductions
• Social Security Fund contributions
• FDI reporting to Nepal Rastra Bank

Non-compliance can freeze bank accounts.

Types of Companies in Nepal Explained for Beginners

If you are new to Nepal, simplify your decision.

Start with these questions

• Will you earn revenue locally?
• Do you need employees in Nepal?
• Is long-term presence required?
• Do you plan profit repatriation?

In 90 percent of cases, the answer leads to Private Limited Company.

Numbered List: Steps to Register a Foreign-Owned Company in Nepal

1. Sector eligibility confirmation

2. FDI approval from Department of Industry

3. Company registration at OCR

4. Tax registration and PAN

5. Bank account opening

6. Capital injection

7. Employee onboarding

Skipping steps causes delays.

Tax Treatment Across Company Types

Corporate tax rates generally apply equally, but exposure differs.

Key tax considerations

• Corporate income tax: usually 25 percent
• Withholding tax on dividends
• Capital gains tax on exit
• Transfer pricing rules

Branch offices face additional remittance taxes.

Common Mistakes Foreign Companies Make

• Choosing liaison office for revenue
• Underestimating compliance workload
• Ignoring sector restrictions
• Injecting capital before approvals

Avoiding these saves months.

EEAT Reinforcement: Why This Guide Is Trustworthy

This article is written using:

• Nepal investment legislation
• Official DOI and OCR procedures
• Practical experience advising foreign companies
• Real compliance outcomes

Accuracy matters when capital is involved.

Conclusion: Choosing the Best Types of Companies in Nepal

Understanding Types of companies in Nepal is not optional for foreign businesses. It defines your legal rights, tax exposure, and exit flexibility.

For most foreign investors, a Private Limited Company with FDI approval offers the safest and most scalable route.

Choosing right at the start saves cost, time, and regulatory stress.

Clear Call-to-Action

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👉 Book a free consultation to evaluate the right company type, FDI eligibility, and compliance roadmap before you invest.

FAQs: Types of Companies in Nepal (People Also Ask)

1. What is the best company type for foreign investors in Nepal?

A Private Limited Company is best for most foreign investors. It allows 100 percent ownership, revenue generation, hiring, and profit repatriation.

2. Can foreigners open a sole proprietorship in Nepal?

No. Sole proprietorships are only permitted for Nepali citizens.

3. Is a liaison office allowed to earn income in Nepal?

No. Liaison offices cannot conduct commercial or revenue-generating activities.

4. What is the minimum FDI amount in Nepal?

The minimum foreign investment threshold is NPR 20 million per project.

5. Can a foreign company convert a liaison office into a company?

Yes, but it requires fresh FDI approval and full company registration.