Choosing among the types of companies in Nepal is one of the most critical decisions for any foreign business entering the Nepali market. Your choice affects ownership rights, compliance burden, tax exposure, profit repatriation, and scalability. Many international founders rush this step and face restructuring costs later.
This guide gives you the most authoritative, practical, and up-to-date explanation of company types in Nepal, tailored specifically for foreign companies and investors. You will learn what each structure means in practice, when to use it, and how regulators treat foreign ownership.
Nepal welcomes foreign investment, but it is highly structured. Regulators expect clarity on ownership, control, and capital flows. Choosing the wrong entity can delay approvals or restrict operations.
Key reasons structure matters:
Determines foreign ownership eligibility
Controls profit repatriation rights
Defines tax and compliance exposure
Impacts hiring and payroll setup
Affects future fundraising or exit
For most foreign companies, entity selection is not a legal formality. It is a strategic market-entry decision.
Under the Companies Act 2006, Nepal recognizes several business forms. However, not all are suitable for foreign investors.
Sole Proprietorship
Partnership Firm
Private Limited Company
Public Limited Company
Branch Office
Liaison Office
Non-Profit / Not-for-Profit Company
Each structure differs in ownership rules, compliance, and foreign investment eligibility.
A sole proprietorship is owned by a single individual. It is the simplest form of business in Nepal.
No separate legal identity
Owner bears unlimited liability
Minimal registration and reporting
No. Foreign nationals cannot operate a sole proprietorship in Nepal. This structure is reserved for Nepali citizens.
Best for: Local micro-businesses only.
Not suitable for: Foreign companies or investors.
A partnership firm is formed by two or more individuals under a partnership deed.
Shared ownership and liability
Governed by the Partnership Act
Not a separate legal entity
Foreign participation in partnership firms is not permitted. Liability exposure is also a major risk.
Best for: Local professional practices.
Not suitable for: Foreign companies or scalable ventures.
The private limited company is the most widely used structure for both domestic and foreign investors.
Separate legal entity
Limited liability
Flexible shareholding
Recognized under FDI laws
Foreign investors commonly register private limited companies under the Department of Industry.
1–101 shareholders
Minimum paid-up capital depends on sector
Foreign ownership allowed up to 100% in approved sectors
IT and software development
Outsourcing and shared services
Consulting and professional services
Manufacturing and export businesses
This is the default choice for most foreign companies entering Nepal.
A public limited company is designed for large enterprises and capital markets.
Minimum 7 shareholders
Can issue shares to the public
Higher compliance and disclosure
While foreign ownership is legally possible, public companies face:
Extensive regulatory scrutiny
Mandatory governance structures
IPO-related compliance
Best for: Large infrastructure or capital-intensive projects.
Not ideal for: First-time foreign entrants.
A branch office allows a foreign company to operate in Nepal without incorporating a local company.
Extension of the parent company
No separate legal identity
Parent bears full liability
Branch offices are approved by the Nepal Rastra Bank and relevant ministries.
Cannot engage in unrestricted commercial activity
Profit repatriation is tightly controlled
Annual approvals required
Best for: Short-term projects or government contracts.
A liaison office is strictly non-commercial.
Market research
Relationship building
Coordination with head office
No revenue generation
No invoicing
No profit repatriation
Best for: Market testing before full investment.
Non-profit companies are formed for social, educational, or charitable objectives.
Profits cannot be distributed
Subject to sector-specific oversight
Foreign NGOs often register under separate frameworks.
Not suitable for: Commercial foreign investment.
| Company Type | Foreign Ownership | Legal Entity | Profit Repatriation | Compliance Level | Best Use Case |
|---|---|---|---|---|---|
| Sole Proprietorship | ❌ Not allowed | ❌ No | ❌ No | Low | Local micro-business |
| Partnership Firm | ❌ Not allowed | ❌ No | ❌ No | Medium | Local professionals |
| Private Limited Company | ✅ Allowed | ✅ Yes | ✅ Yes | Medium | Most foreign businesses |
| Public Limited Company | ✅ Allowed | ✅ Yes | ✅ Yes | High | Large enterprises |
| Branch Office | ✅ Allowed | ❌ No | Limited | High | Project-based work |
| Liaison Office | ✅ Allowed | ❌ No | ❌ No | Low | Market research |
Foreign companies should choose based on control, risk, and growth plans.
Do you want to generate revenue in Nepal?
Choose a private limited company.
Is this a short-term project?
Consider a branch office.
Are you only testing the market?
A liaison office may suffice.
Do you plan to scale and hire locally?
A private limited company offers flexibility.
Foreign companies must comply with the Foreign Investment and Technology Transfer Act 2019.
Sector-specific approval required
Minimum capital thresholds apply
Repatriation of profits is legally guaranteed
Annual reporting is mandatory
According to official government data, Nepal has seen consistent growth in FDI approvals since 2019, particularly in IT and services sectors.
Avoid these frequent errors:
Choosing a branch instead of a subsidiary
Underestimating compliance timelines
Ignoring sector restrictions
Structuring ownership incorrectly
Early legal and tax structuring saves significant cost later.
For most cases, a private limited company is the best option. It allows foreign ownership, profit repatriation, and operational flexibility.
Yes. In approved sectors, foreign investors can own up to 100% of a Nepali private limited company.
On average, 3–6 weeks, depending on approvals and sector classification.
Yes. Nepal’s laws guarantee profit and capital repatriation subject to tax clearance.
Yes. Registered entities can hire local staff and comply with labor and social security laws.
Understanding the types of companies in Nepal is essential for a smooth and compliant market entry. For most foreign businesses, the private limited company offers the best balance of control, compliance, and scalability.
The right structure reduces risk, accelerates approvals, and protects long-term growth.
Planning to enter Nepal?
Speak with our corporate and FDI specialists to identify the right company structure for your business and avoid costly mistakes.
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