The Law on Commercial Enterprises provides for the following types of companies in Cambodia:

 

Private Limited Company

The most common type of company in Cambodia is the private limited, and a suitable form for startups in general. As the name implies, it provides limited liability for its shareholders and directors.

If there is only one shareholder, then this type of company is known as a “single-member private limited company”, otherwise simply as a private limited company. The maximum number of shareholders is thirty, and there must be at least one director. The shareholders can, with certain restrictions, be entirely Cambodian, entirely foreign, or any combination in between. The minimum startup capital is KHR 4,000,000 (approximately USD 1,000).

Incorporating as a private limited company automatically classifies the business as either a medium or large, depending on income (once a certain threshold of revenue is met) taxpayer. This type of company in Cambodia is suitable for a wide range of business activities, with the notable exception of banking, insurance and financing – which are specifically precluded by law.

 

Public Limited Company

Whereas a private limited company is privately held by a maximum of 30 shareholders, a public limited company can issue shares to the public in order to raise financing, and thus have an unlimited number of shareholders. This is done through an initial public offering (IPO) to list on a stock exchange. Whereas a private limited company can be formed even before a startup begins operations, an IPO and the formation of a public limited company is only for businesses of significant scale and stability.

As a public company can regularly tap the capital markets by selling new shares to the public, it offers the possibility of much greater financing than typically available to a private limited company. An IPO is often one of several exit possibilities for startup founders, as it allows them to cash out their stake in the business and to step back from management, if they so wish.

 

Branch Office

A branch office is a type of company in Cambodia that is essentially a division of another company (whether foreign or local). A branch office does not have a separate legal personality, meaning that the principal company is responsible for all the debts and liabilities of its branches, and owns all their assets. The main reason to create a branch is to simplify and organize the internal accounting and management structure, and is often used by banks. A branch’s managers are appointed by the principal.

 

Representative Office

A representative office is a type of Cambodian company suitable for some foreign businesses, despite being very limited in its activities. Whereas a foreign-owned subsidiary (meaning a private limited company owned by a foreign company) or a branch of the foreign company can conduct a wide range of activities, a representative office is constrained in what it can do.

A representative office is used for the most part to source local goods and services, promotion, marketing, and obtaining business information, on behalf of its foreign owner. It cannot provide services or sell goods itself, but rather these must be contracted for and invoiced in the name of its owner. As they are not engaged in taxable activities in Cambodia, it is a non-taxable entity (other than withholding salary tax for its employees and paying patent tax). As with a branch, a representative office does not have a separate legal personality under Cambodian law.

 

General Partnership

A general partnership is a type of Cambodian company based on an agreement (whether written or implied) between two or more persons to combine their property, knowledge or activities to carry on a business in common with a view to profit. As a general partnership can be implied by a court based on a pattern of behavior, without any partnership agreement being discussed or signed, startup founders can unwittingly find themselves in a general partnership.

This could be the case where two friends develop an app together and split the royalty payments. A general partnership, while arising at the moment of even an implied agreement, only obtains legal personality when it registers in accordance with the Law on Commercial Rules and Register. The registration grants the partnership the right to own property, carry on business, contract and to sue and be sued, all in the name of the partnership rather than in the names of its partners.

Under a general partnership, each partner is jointly and severally liable for all the debts and liabilities of the business. This means that the entire personal assets of each partner can be used to settle the debts and liabilities of the partnership. Until the partnership has revenue over $62,500 annually, no corporate income tax is du (see here for more on tax).

 

Limited Partnership

A limited partnership is essentially a combination of one or more general partners, who are jointly and severally liable for the partnership’s obligations – and one or more limited partners, who are liable only to the extent of their capital contribution. The general partners are solely authorized to administer and legally bind the limited partnership.

A limited partnership must be registered, otherwise it is considered a general partnership without legal personality and the partners who had hoped to limit their liability, are instead general partners with joint and several liability.

 

Sole Proprietorship

A sole proprietorship is essentially a general partnership with only one partner. The proprietor is personally liable for all the obligations for the business. A sole proprietorship has no legal personality of its own. All of the profits of the business belong to the owner, who is allowed complete control and decision-making power. Until the business has revenue over $62,500 annually, no corporate income tax is due.

 

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