A Step-by-Step Guide to Starting a Business in Bangladesh

Author: Shibli zaman | August 14, 2024

Starting a business in Bangladesh offers incredible opportunities for foreign investors and local entrepreneurs alike, thanks to the country’s growing economy, strategic location, and favorable government policies. However, understanding how to establish a business—whether as a private limited company, public limited company, liaison office, or foreign company—can be complex. This guide will help you navigate the key steps, from market analysis to securing a business license, in compliance with the Companies Act and regulations set forth by the Bangladesh Bank.

Whether you’re an international parent company setting up a liaison office or a foreign investor launching an online business, our guide ensures you understand how to register with the relevant authorities, including Company House, and meet all legal requirements. By following these steps, you’ll be well-equipped to launch a successful business in Bangladesh.

Business Environment in Bangladesh

To start a business in Bangladesh, especially in the context of e-commerce or trade, it’s essential to understand the country’s dynamic business environment. Over the past decade, Bangladesh has seen steady economic growth, positioning it as a prime location for new business ventures and foreign nationals interested in the South Asian market. The government has implemented several initiatives to support company formation and company incorporation, especially for foreign nationals, providing tax incentives, improved infrastructure, and streamlined regulations.

For an online store or e-commerce business, securing the right certifications, such as an Export Registration Certificate (ERC) or Import Registration Certificate (IRC), is crucial. These certifications are part of the proposed company formation process, facilitating both local and international trade. Although Bangladesh offers promising growth potential, entrepreneurs should anticipate challenges, including bureaucratic hurdles, infrastructure constraints, and market competition. Thorough research and strategic planning are essential to overcoming these obstacles and achieving business success in Bangladesh.

Step 1: Conduct Market Research

The first step to launching a business in Bangladesh involves thorough market research. Understanding market trends, customer preferences, and competitors is essential to develop a sustainable business model. Here’s a breakdown of how to conduct market research effectively:

1. Identify Your Target Market: Clearly defining your target market means understanding who your potential customers are, including their age, location, gender, income, and interests. Study their purchasing behaviour and preferences to tailor your offerings. This analysis helps you understand what drives your customers and enables you to create solutions that align with their needs, increasing your chances of success.
2. Analyze the Competition: Understanding your competition provides valuable insights into market standards and customer expectations. Assess competitors’ strengths, weaknesses, pricing, and promotional tactics to identify gaps your business can fill. This analysis allows you to create unique selling points, establish competitive pricing, and design marketing strategies that resonate with customers and differentiate you.
3. Assess Market Demand: Evaluating market demand ensures there’s an audience ready to buy your product or service. Use surveys, focus groups, and interviews to gather direct feedback from potential customers, confirming the viability of your idea. By assessing demand early, you can refine your offerings to meet customer needs better and minimize the risk of launching an untested product.

Step 2: Develop a Business Plan

Creating a detailed business plan is crucial in starting a business in Bangladesh. Here’s an outline of essential sections to include:

1. Executive Summary: Provide a snapshot of your business, covering its mission, vision, and key objectives. This section should concisely highlight your venture’s purpose, its unique value, and key strengths and challenges. This will give potential stakeholders an overview of your goals and approach to the market.
2. Market Analysis: Present insights from your market research, including details on target demographics, customer demand, and the competitive landscape. Identify the needs of your target audience and trends that may affect your business. This analysis should clarify your positioning and any advantages you have over competitors.
3. Business Structure: Explain the legal structure you’ve chosen, such as a sole proprietorship, partnership, or limited liability company. Discuss why this structure best meets your business needs, addressing factors like management, liability, and taxation. This will clarify your business’s operational and legal setup.
4. Products or Services: Describe your offerings, emphasizing what makes them unique or innovative. Explain how they fulfil market demands and differentiate your business in the industry. Clearly outline the features, benefits, and anticipated impact on your target audience.
5. Marketing and Sales Strategy: Detail your strategy for reaching and engaging your target market, covering pricing, promotion, and sales methods. Include distribution channels and customer acquisition tactics that align with your brand and budget. This section should outline how you’ll build customer relationships and drive sales.
6. Financial Projections: Provide projected revenue, expenses, and profit margins, along with an overview of funding needs and potential financing sources. Financial projections should demonstrate the business’s sustainability and growth potential, giving investors insight into the expected return on investment.
7. Operational Plan: Outline the day-to-day operations, including production, logistics, and supply chain management. Please specify the location of your business, the equipment required, and the technology needed to run it efficiently. This section should give an overview of how you plan to effectively deliver products or services to customers.

A thorough business plan will guide your venture and help attract stakeholders by showcasing your preparedness and strategy for success.

Step 3: Choose a Business Structure

An appropriate business structure is crucial for any new venture in Bangladesh, as it influences your legal responsibilities, tax obligations, and control over business decisions.

1. Partnership: Partnerships can either be general or limited. In a limited partnership, some partners have limited liability, meaning they are only liable for the amount they’ve invested. These limited partners typically don’t engage in daily business management, making this structure beneficial for specific financial roles.
2. Limited Liability Company (LLC): An LLC protects its owners’ personal assets, shielding them from business debts and liabilities. This structure is ideal for larger enterprises or businesses aiming to attract foreign investors, as it provides a formal setup with limited financial risk for its shareholders.
3. Joint Venture: A joint venture involves two or more parties combining resources for a specific project or business activity. It’s often chosen for temporary projects or partnerships between local and foreign businesses, allowing companies to share expertise and resources while minimizing long-term commitment.

Step 4: Register Your Business

Once you’ve selected your business structure, the next step to starting a business in Bangladesh is to register it with the relevant authorities.

1. Sole Proprietorship Registration: For a sole proprietorship, secure a Trade License from your local City Corporation or Municipal Office. Additionally, you may need to register for VAT (Value Added Tax) and obtain a Tax Identification Number (TIN) through the National Board of Revenue (NBR).
2. Partnership Registration: Partnerships in Bangladesh must be registered with the Registrar of Joint Stock Companies and Firms (RJSC). You will need to submit a Partnership Deed outlining the partnership terms, including profit-sharing and each partner’s responsibilities.
3. Limited Liability Company (LLC) Registration: To register an LLC, submit required documents, such as the Memorandum of Association and Articles of Association, to the RJSC. Additionally, obtain a Trade License, VAT registration, and a TIN for complete compliance.
4. Joint Venture Registration: Register with the RJSC and the Bangladesh Investment Development Authority (BIDA) for joint ventures, particularly with foreign investment. Submit a Joint Venture Agreement with the MoA and AoA to formalize the partnership.

Step 5: Obtain Necessary Licenses and Permits

Depending on the nature of your business, you may need to obtain additional licenses and permits to operate legally in Bangladesh. This is a crucial step in starting a business in Bangladesh to ensure compliance with local regulations.

1. Trade License: The local City Corporation or Municipal Office issues a trade license, which must be renewed annually.
2. VAT Registration: If your business’s annual turnover exceeds a certain threshold, you must register for VAT with the NBR. VAT registration is mandatory for manufacturing, import/export businesses, and certain services.
3. Environmental Clearance: If your business involves activities that may impact the environment, such as manufacturing or construction, you must get an Environmental Clearance Certificate from the Department of Environment (DoE).
4. Industry-Specific Licenses: Certain industries, like pharmaceuticals, food processing, and telecommunications, require specific licenses or permits. Check with the relevant regulatory authorities to determine what licenses your business may need.

Step 6: Open a Business Bank Account

Opening a business bank account is crucial in setting up your business in Bangladesh. This dedicated account helps streamline financial management by enabling easy tracking of income and expenses. It also establishes financial credibility, which is beneficial when dealing with customers and suppliers. A separate account ensures transparency and simplifies your accounting and tax reporting processes.

1. Choose a Bank: When selecting a bank, consider one that offers services specifically geared toward business accounts. Look for reputable banks with business-oriented features like online banking, international transaction options, and competitive fees. A sound banking partner can make day-to-day financial management smoother and give your business access to valuable tools and services.
2. Required Documents:

To open a business bank account, you’ll need to provide specific documentation:

• Business Registration Certificate: This may include your Trade License, company registration, or any other proof of business registration.
• Tax Identification Number (TIN) Certificate: This document validates your business’s compliance with tax regulations.
• Memorandum and Articles of Association (MoA and AoA): Required for Limited Liability Companies (LLCs), these documents outline your company’s structure and governing principles. 
• Partnership Deed: This document defines each partner’s role and responsibilities if your business operates as a partnership.
• Identification Documents: Bring identification, such as a passport or national ID, for the business owner or directors to verify their identity and establish trustworthiness.

Step 7: Hire Employees

If your business plan requires additional staff, your next step in starting a business in Bangladesh is to recruit employees. The country offers a vast and varied labor force, encompassing skilled professionals and general laborer’s.

1. Recruitment Process: To find suitable employees, post job openings across multiple channels like job portals, social media, and through recruitment agencies. Conduct thorough interviews and assessments to ensure you select candidates who best fit your business needs.
2. Legal Requirements: Ensure compliance with Bangladeshi labor laws, which govern minimum wage standards, work hours, and employee benefits. Additionally, create a safe and healthy work environment as mandated by law, safeguarding the welfare of your workforce.
3. Employment Contracts: Prepare employment contracts detailing the terms of the job, including roles, salary, benefits, and conditions for termination. Both parties, the employer and employee, should sign these agreements to confirm mutual understanding and acceptance.

Step 8: Set Up Accounting and Taxation Systems

Proper accounting and taxation practices are vital for your business’s financial health. Setting up these systems is a key aspect of starting a business in Bangladesh.

1. Accounting System: A solid accounting system is essential for effectively managing your business finances. It should help you track all income, expenses, and transactions, clearly showing your financial health. This foundation supports better financial decision-making and operational efficiency.
2. Taxation: Ensuring tax compliance is crucial for legal and financial stability. Your business must meet corporate income tax, VAT, and payroll tax requirements. Timely filing of tax returns can help you avoid penalties and maintain a clean legal record.
3. Financial Reporting: Regular financial reporting is vital for transparency and informed decision-making. Prepare essential reports like balance sheets, cash flow, and income statements. These documents allow you to monitor your business’s financial performance and are instrumental in strategic planning and growth.

Step 9: Launch Your Business

After following the essential steps, you’re ready to launch your business in Bangladesh. This phase involves engaging in marketing efforts, attracting your target customers, and officially beginning operations.

1. Marketing and Promotion: Combine online and offline marketing approaches to build awareness of your products or services. Leverage social media platforms, paid advertisements, and public relations to reach potential customers, ensuring your brand is recognizable and trusted.
2. Customer Service: Deliver excellent customer service to earn customer trust and loyalty. Ensure your employees are trained to handle inquiries, complaints, and feedback professionally, creating positive experiences that lead to word-of-mouth promotion and repeat customers. A well-served customer is likely to be a loyal advocate.
3. Monitor and Adjust: Regularly track key performance metrics such as sales, customer satisfaction, and overall financial health. Be ready to refine strategies in response to market trends, customer feedback, and operational challenges. Adapting to change is essential to sustainable growth and long-term success.

Conclusion

Starting a business in Bangladesh offers significant opportunities for local entrepreneurs and foreign investors alike. The country’s expanding economy, rising consumer demand, and strategic location within South Asia make it an attractive choice for business formation. However, establishing a business here requires careful planning, from understanding legal requirements to navigating financial processes such as foreign loan acquisition and bank account opening.

This guide provides a comprehensive roadmap for launching a business in Bangladesh, whether you’re a sole proprietor, forming a subsidiary company, or establishing another type of legal entity. It covers essential steps like acquiring a TIN certificate, registering your business with Form XII, and securing necessary documentation for foreign ownership. For foreign nationals, the guide details compliance with regulatory requirements to operate successfully in the Bangladeshi market.

Bangladesh’s business environment is also well-suited for digital marketing and e-commerce businesses. Entrepreneurs looking to tap into these sectors can leverage the country’s increasing internet penetration to connect with a growing consumer base. By following this guide, business owners can set up their ventures effectively and capitalize on the region’s dynamic business ecosystem, paving the way for long-term success and sustainable growth.

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