Types of Companies in Nepal Which One Is Right for You

Company registration in Nepal is often the first strategic decision a foreign investor makes when entering the Nepali market. The type of company you choose affects everything. Ownership rights. Tax exposure. Repatriation of profits. Compliance workload. Long-term scalability.

Nepal welcomes foreign investment under a clear legal framework. However, many international founders struggle to identify which company structure best fits their goals. This guide solves that problem.

By the end of this article, you will understand every legally recognised company type in Nepal. You will also know exactly which structure works best for your business model.

Why Company Type Matters in Company Registration in Nepal

When foreign companies register in Nepal, the legal structure determines:

• Eligibility for foreign direct investment approval

• Minimum capital thresholds

• Shareholding flexibility

• Regulatory approvals required

• Tax and compliance obligations

• Exit and repatriation options

Under the Companies Act, 2006, Foreign Investment and Technology Transfer Act (FITTA) 2019, and Industrial Enterprises Act, 2020, Nepal recognises multiple company forms. Each serves a distinct purpose.

Choosing the wrong one leads to delays, restructuring costs, and regulatory risk.

Overview of Company Types in Nepal

Nepal legally recognises the following business entities:

1. Private Limited Company

2. Public Limited Company

3. Branch Office

4. Liaison Office

5. Partnership Firm

6. Sole Proprietorship

7. Non-Profit Company

Not all are suitable for foreign companies. Let’s break them down clearly.

1. Private Limited Company in Nepal (Most Popular Option)

What Is a Private Limited Company?

A Private Limited Company is the most common structure for company registration in Nepal by foreign investors. It is a separate legal entity with limited liability.

Key Features

• Minimum shareholders: 1

• Maximum shareholders: 101

• Foreign ownership: Up to 100% (subject to sector approval)

• Liability limited to share capital

• Profit repatriation permitted

Why Foreign Companies Prefer It

A Private Limited Company allows full commercial operations. It is ideal for long-term investment and hiring local employees.

Common use cases:

• IT and software development

• Outsourcing and shared services

• Consulting and professional services

• Manufacturing and trading

Legal Basis

• Companies Act, 2006

• FITTA, 2019

• Industrial Enterprises Act, 2020

2. Public Limited Company in Nepal

What Is a Public Limited Company?

A Public Limited Company can offer shares to the public and list on the Nepal Stock Exchange.

Key Features

• Minimum shareholders: 7

• No maximum shareholder limit

• Higher compliance burden

• Mandatory public disclosures

Suitability for Foreign Investors

This structure is rarely used for initial market entry. It suits large-scale infrastructure, banking, insurance, or hydropower projects.

Foreign investment is allowed but closely regulated by sector-specific laws.

3. Branch Office in Nepal

What Is a Branch Office?

A Branch Office is an extension of a foreign parent company. It is not a separate legal entity.

Key Features

• 100% owned by the foreign parent

• Allowed to generate revenue

• Parent company bears full liability

• Requires industry-specific approval

When a Branch Office Makes Sense

Branch offices are suitable for:

• Engineering and construction contracts

• Infrastructure projects

• Short-to-medium-term operations

However, compliance oversight is strict, and exit flexibility is limited.

4. Liaison Office in Nepal (Representative Office)

What Is a Liaison Office?

A Liaison Office acts as a non-commercial presence. It cannot earn income in Nepal.

Key Features

• No revenue-generating activities allowed

• Funded entirely by the parent company

• Limited operational scope

Typical Use Cases

• Market research

• Partner coordination

• Brand presence

• Regulatory liaison

Liaison offices are ideal for testing the market before full company registration in Nepal.

5. Partnership Firm in Nepal

Overview

A Partnership Firm is governed by the Partnership Act, 2020 (Nepal).

Key Limitations for Foreigners

• Foreign investment is generally not permitted

• Partners have unlimited liability

• Not recognised under FITTA for FDI

This structure is not recommended for foreign companies.

6. Sole Proprietorship in Nepal

Overview

A Sole Proprietorship is owned by one individual.

Why It Does Not Work for Foreign Companies

• Foreign nationals cannot register sole proprietorships

• Unlimited personal liability

• No FDI recognition

This option is unsuitable for company registration in Nepal by foreigners.

7. Non-Profit Company in Nepal

What Is a Non-Profit Company?

A Non-Profit Company is registered under Section 166 of the Companies Act, 2006.

Key Features

• Cannot distribute profits

• Suitable for NGOs and social enterprises

• Requires Social Welfare Council approval

Foreign NGOs commonly use this structure but it is not meant for commercial activity.

Comparison Table: Which Company Type Is Right for You?

How to Choose the Right Company Type in Nepal

When advising foreign investors on company registration in Nepal, we use a simple framework.

Ask These Questions

1. Will you generate revenue in Nepal?

2. Do you need limited liability protection?

3. Is this a long-term or short-term presence?

4. Will you hire local employees?

5. Do you plan to repatriate profits?

Practical Guidance

• Choose Private Limited Company for most commercial activities

• Choose Liaison Office for market exploration

• Choose Branch Office for contract-based operations

Capital Requirements for Foreign Company Registration in Nepal

Under FITTA 2019, the minimum foreign investment threshold is:

• NPR 20 million per foreign investor

This applies to Private Limited Companies with foreign ownership.

There is no statutory minimum capital for liaison offices, but operational budgets must be justified.

Compliance and Tax Implications by Company Type

Corporate Income Tax

• Standard corporate tax rate: 25%

• Certain industries enjoy concessional rates

Withholding Tax

• Dividends: 5%

• Interest and service fees: Varies

Ongoing Compliance Includes

• Annual tax filing

• Audit by a registered Nepali auditor

• Company renewals

• FDI reporting to Nepal Rastra Bank

Common Mistakes Foreign Companies Make

• Choosing a liaison office when revenue is required

• Underestimating compliance workload

• Ignoring sector-specific FDI restrictions

• Structuring without exit planning

Avoiding these mistakes saves months of rework.

Company Registration in Nepal for Foreign Companies Step by Step

Here is a simplified view of the process:

1. Company name reservation

2. FDI approval from Department of Industry

3. Company incorporation at OCR

4. PAN and VAT registration

5. Bank account and capital injection

6. Industry-specific licenses

Each step varies by company type.

Why Professional Guidance Matters

Nepal’s regulatory ecosystem involves multiple authorities:

• Office of Company Registrar

• Department of Industry

• Nepal Rastra Bank

• Inland Revenue Department

Misalignment between approvals causes delays. A coordinated approach ensures smooth company registration in Nepal.

Call to Action: Get Expert Help Choosing the Right Company Type

Choosing the right structure is the foundation of successful market entry.

If you are planning company registration in Nepal, speak with specialists who understand foreign investment, compliance, and long-term structuring.

👉 Book a free consultation to evaluate the best company type for your business goals.

Frequently Asked Questions (People Also Ask)

Can a foreigner own 100% of a company in Nepal?

Yes. Foreigners can own up to 100% of a Private Limited Company, subject to sector approval under FITTA 2019.

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

A Private Limited Company is the most flexible and widely used structure for foreign investors.

Is a branch office better than a subsidiary in Nepal?

A branch office suits short-term projects. A subsidiary offers limited liability and easier scaling.

Can a liaison office earn income in Nepal?

No. Liaison offices are strictly non-commercial and cannot generate revenue.

What is the minimum investment for company registration in Nepal?

The minimum foreign investment is NPR 20 million per investor for FDI-approved companies.

Conclusion: Making the Right Choice for Company Registration in Nepal

Company registration in Nepal is not one-size-fits-all. The right company type depends on your investment horizon, risk appetite, and operational needs.

For most foreign companies, a Private Limited Company delivers the best balance of control, compliance, and growth potential.

Make the decision strategically. Get it right from day one.