Understanding the types of companies in Nepal is the first and most important decision foreign companies must make before entering the Nepali market. Nepal offers several legal structures, each designed for different risk profiles, investment sizes, and long-term goals.
Choosing the wrong structure can limit profit repatriation, restrict ownership, or create compliance risks. Choosing the right one can unlock tax efficiency, scalability, and regulatory clarity.
In this guide, you will get a clear, practical comparison of sole proprietorship vs partnership vs company in Nepal, written specifically for foreign founders, investors, and expansion teams.
Before comparing the types of companies in Nepal, it is important to understand why structure matters more for foreign entities.
Your chosen structure directly affects:
Foreign ownership eligibility
FDI approval requirements
Liability exposure
Tax treatment and compliance
Profit repatriation rights
Ability to hire employees and open bank accounts
Nepal’s foreign investment regime is regulated by agencies such as the Department of Industry and the Office of Company Registrar, making compliance non-negotiable.
From a legal and regulatory perspective, the main types of companies in Nepal relevant to foreign companies are:
Sole Proprietorship
Partnership Firm
Company (Private Limited or Public Limited)
Each structure serves a different purpose. Let us break them down one by one.
A sole proprietorship is the simplest business structure in Nepal. The business is owned and operated by a single individual, with no legal distinction between the owner and the business.
Owned by one individual
Minimal registration requirements
No separate legal identity
Owner bears unlimited liability
In practice, foreign nationals cannot operate a sole proprietorship for commercial purposes in Nepal unless explicitly permitted under specific visas or sector-specific approvals.
This structure is generally suitable only for Nepali citizens or very small, local activities.
Easy and inexpensive to set up
Minimal compliance obligations
Full control with the owner
Unlimited personal liability
No FDI eligibility
Not scalable for serious investment
No clear profit repatriation mechanism
Verdict: Sole proprietorships are not recommended for foreign companies planning structured entry into Nepal.
A partnership firm is formed when two or more individuals agree to run a business together under a partnership deed.
Two or more partners
Governed by a partnership agreement
Shared profits and liabilities
Limited regulatory oversight
Foreign participation in partnership firms is highly restricted. In most cases:
Partnerships are allowed only between Nepali nationals
FDI through partnerships is discouraged
Liability remains joint and several
Shared capital and expertise
Simple operational structure
Flexible internal arrangements
Unlimited liability for partners
Weak investor protection
Difficult exit mechanisms
Not preferred under FDI frameworks
Verdict: Partnership firms are rarely suitable for foreign companies seeking long-term or scalable operations.
A company is the most robust and internationally recognized structure among the types of companies in Nepal.
Companies in Nepal are primarily classified into:
Private Limited Company
Public Limited Company
Separate legal entity
Limited liability for shareholders
1 to 101 shareholders
100 percent foreign ownership allowed in permitted sectors
A private limited company is the default choice for foreign investors entering Nepal because it offers:
Clear FDI approval pathway
Asset and liability separation
Strong legal recognition
Easier compliance compared to public companies
Minimum seven shareholders
Ability to raise capital from the public
Higher compliance and disclosure requirements
Mandatory regulatory oversight
Public limited companies are typically used for:
Large infrastructure projects
Banks and financial institutions
Hydropower and manufacturing ventures
For most foreign SMEs and service companies, this structure is unnecessarily complex.
| Criteria | Sole Proprietorship | Partnership Firm | Private Limited Company |
|---|---|---|---|
| Legal identity | No | No | Yes |
| Foreign ownership | Not allowed | Highly restricted | Allowed (FDI) |
| Liability | Unlimited | Unlimited | Limited |
| Scalability | Very low | Low | High |
| Profit repatriation | Not applicable | Complex | Clearly regulated |
| Investor confidence | Very low | Low | High |
This table alone explains why most foreign companies choose the company structure.
For foreign investors comparing the types of companies in Nepal, the answer is clear in most cases.
Market testing only
Liaison or representative presence
Revenue-generating operations
Private limited company with FDI
Large capital projects
Public limited company
When choosing among the types of companies in Nepal, foreign companies must also consider:
Minimum capital thresholds
Sector-specific FDI approvals
Tax registration and PAN/VAT
Employment and social security compliance
Annual audit and filings
Nepal’s regulatory framework is governed by investment, company, labor, and tax laws that require careful structuring from day one.
Foreign companies often struggle in Nepal due to:
Choosing informal structures
Using local nominees incorrectly
Ignoring repatriation rules
Underestimating compliance costs
Avoiding these mistakes starts with choosing the right company type.
The main types of companies in Nepal are sole proprietorships, partnership firms, and companies. Companies are further classified into private and public limited companies.
Yes. Foreigners can own up to 100 percent of a private limited company in Nepal in sectors open to foreign investment.
A private limited company is the most suitable structure for foreign investors due to limited liability, FDI eligibility, and scalability.
In most cases, partnership firms are not suitable for foreign investment due to ownership restrictions and unlimited liability.
Company registration usually takes 2 to 4 weeks, depending on approvals, documentation, and FDI clearance.
Selecting among the types of companies in Nepal is not just a legal formality. It is a strategic decision that affects risk, growth, and profitability.
For foreign companies, the private limited company structure offers the best balance of compliance, control, and commercial flexibility.
If you are planning to enter Nepal, start with the right structure and build on a compliant foundation.
Planning to invest or expand into Nepal?
Book a consultation with our Nepal FDI and company registration experts to choose the right structure and avoid costly mistakes.