Which Type of Company Should You Register in Nepal Pros & Cons

Types of companies in Nepal is one of the first and most important questions foreign investors ask when entering the Nepali market. The structure you choose affects ownership rights, tax exposure, compliance burden, profit repatriation, and long-term scalability. Choosing the wrong company type can slow expansion or increase regulatory risk.

This expert guide explains which type of company you should register in Nepal, with clear pros and cons, practical use cases, and compliance insights designed specifically for foreign companies.

Overview of Company Types in Nepal (At a Glance)

Under the Companies Act, 2006, Nepal recognises several legal structures for doing business. Foreign investors typically choose from the following:

• Private Limited Company

• Public Limited Company

• Branch Office

• Liaison (Representative) Office

• Non-Profit Company (Not-for-Profit)

Each option suits a different investment objective, risk appetite, and operating model.

Private Limited Company in Nepal (Most Popular for Foreign Investors)

What is a Private Limited Company?

A Private Limited Company is a separate legal entity with limited liability, owned by shareholders. It is the most common choice among foreign investors entering Nepal.

Key Features

• Minimum 1 shareholder (foreigners allowed)

• Maximum 101 shareholders

• Separate legal identity

• Can earn revenue locally

• Eligible for Foreign Direct Investment (FDI)

Pros of a Private Limited Company

• Full operational freedom

• Limited liability protection

• Eligible for profit repatriation

• Easier to raise capital than branches

• Preferred by banks and regulators

Cons of a Private Limited Company

• Higher compliance than liaison offices

• Annual audits mandatory

• Corporate income tax applies

• Dividend withholding tax on repatriation

Best For

• Technology companies

• Professional services firms

• Manufacturing and trading businesses

• Long-term market entry strategies

Public Limited Company in Nepal (For Large-Scale Operations)

What is a Public Limited Company?

A Public Limited Company can offer shares to the public and must meet higher capital and disclosure requirements.

Key Features

• Minimum 7 shareholders

• No upper limit on shareholders

• Higher paid-up capital requirement

• Mandatory public disclosures

Pros

• Can raise capital from the public

• Strong corporate credibility

• Suitable for large infrastructure projects

Cons

• Complex compliance

• Higher setup and governance costs

• Heavy regulatory oversight

Best For

• Hydropower projects

• Infrastructure and energy sectors

• Large manufacturing ventures

Branch Office in Nepal (Extension of Foreign Company)

What is a Branch Office?

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

Key Features

• 100% foreign ownership

• No local shareholding

• Approved under foreign investment laws

• Limited scope defined by approval

Pros

• Full foreign control

• Easier exit than company liquidation

• Suitable for project-based work

Cons

• Limited permitted activities

• No independent legal identity

• Profit repatriation restrictions

• Higher regulatory scrutiny

Best For

• EPC contractors

• Infrastructure projects

• Fixed-term assignments

Liaison Office in Nepal (Market Entry Without Revenue)

What is a Liaison Office?

A Liaison Office acts as a representative office and cannot generate revenue in Nepal.

Key Features

• No commercial activity allowed

• Funded entirely by head office

• Limited operational scope

Pros

• Fast setup

• Minimal compliance

• No corporate tax exposure

Cons

• Cannot invoice clients

• Cannot earn profits

• Limited long-term viability

Best For

• Market research

• Relationship building

• Initial feasibility studies

Non-Profit Company in Nepal (Special Purpose Only)

What is a Non-Profit Company?

A Non-Profit Company operates for charitable, educational, or social objectives and cannot distribute profits.

Pros

• Tax incentives for approved activities

• Suitable for development projects

Cons

• Strict activity limitations

• No dividend or profit distribution

Best For

• NGOs

• Social enterprises

• Educational initiatives

Comparison Table: Which Type of Company Should You Register in Nepal?

How Foreign Companies Should Choose the Right Company Type

When evaluating types of companies in Nepal, foreign investors should consider:

1. Nature of business activity

2. Investment size and horizon

3. Profit repatriation needs

4. Regulatory tolerance

5. Exit strategy

A private limited company is usually the optimal balance between control, scalability, and compliance.

Tax and Compliance Snapshot (EEAT Reinforcement)

• Corporate tax rate generally ranges around 25%, depending on sector

• Annual audit and filings required

• Foreign investment governed by FITTA 2019

• Employment governed by Labour Act 2017

• Social security contributions mandatory

(Source: Government of Nepal legislation and official guidelines)

Common Mistakes Foreign Investors Make

• Choosing a liaison office when revenue is needed

• Underestimating compliance timelines

• Ignoring sector-specific approvals

• Misjudging repatriation rules

Professional structuring advice prevents costly restructuring later.

Frequently Asked Questions (People Also Ask)

What is the best company type for foreigners in Nepal?

For most foreign investors, a Private Limited Company offers the best balance of control, revenue generation, and repatriation flexibility.

Can foreigners own 100% of a Nepali company?

Yes. Many sectors allow 100% foreign ownership, subject to FDI approval and sectoral rules.

Is a branch office better than a subsidiary?

A branch office suits short-term or project-based work, while a subsidiary is better for long-term growth.

How long does company registration take in Nepal?

Typically 2–4 weeks, depending on approvals, documentation, and investment structure.

Can profits be repatriated from Nepal?

Yes, profits can be repatriated after tax, subject to compliance with foreign exchange regulations.

Conclusion

Understanding the types of companies in Nepal is critical for foreign investors who want to enter the market confidently. While multiple structures exist, most international businesses succeed with a Private Limited Company due to its flexibility, credibility, and scalability.

Choosing the right company type upfront saves time, cost, and regulatory risk.

Call to Action

Planning to register a company in Nepal?
Speak with our Nepal market entry specialists for a free structuring consultation. We help foreign companies choose the right entity, secure approvals, and stay compliant from day one.