Business entities in Ethiopia
Since 2003, Healy Consultants provides our Clients with the best corporate structures for doing business in Ethiopia. There are different ways to start operations in Ethiopia, the most common being through the setup of an Ethiopian limited liability company (LLC). Alternatively, entrepreneurs may also establish a public limited company (SC) for larger investments. Foreign legal entities may also set up branch offices or representation in form of a liaison office.
The Ethiopia limited liability company (LLC)
- The Ethiopia LLC is the preferred legal entity used by entrepreneurs setting up businesses in Ethiopia. A limited liability company requires at least 1 director and 2 shareholders who can either be individuals or legal entities. The director and shareholder can be of any nationality and must not be resident in Ethiopia. A minimum paid-up share capital of US$750 is also required to complete the incorporation process;
- At least 3 auditors must be appointed if the limited liability company has more than 20 shareholders. The entity name must also include the words “Private Limited Company” at the end.
The Ethiopia public limited company (SC)
- The Ethiopia SC requires at least 5 shareholder and 3 directors who can either be individuals or corporate bodies to be incorporated. The directors and shareholders can be of any nationality and must not be resident in Ethiopia. A public limited company requires a share capital of US$2,500 at incorporation;
- A public limited company must appoint at least 1 statutory auditor at incorporation. The auditor can either be an individual or a legal entity.
The Ethiopia branch
The Ethiopia Commercial Law allows foreign companies looking to establish businesses in Ethiopia to open branch offices in the country. The branch office must seek approval from the Ethiopian Investment Commission before commencing operations in Ethiopia. At least 1 director of any nationality must be appointed to be the legal representative of the branch office in Ethiopia.
The Ethiopia liaison office
This entity must first seek approval from Ministry of Trade and Industry before establishment. An Ethiopia representative office is not considered a legal entity and is not allowed to conduct commercial activities in Ethiopia. A liaison office must appoint at least one director to represent the company in Ethiopia. This entity may only engage in i) promotional activities ii) marketing of products and services for their parent company within Ethiopia.
Comparison table between Ethiopia business entities
|LLC||PLC||Branch office||Rep office|
|Also known as:||PLC||SC||Branch||Liaison office|
|How long to set the company up?||5 weeks||6 weeks||7 weeks||6 weeks|
|How long to open company bank account?||5 weeks||5 weeks||5 weeks||5 weeks|
|Wholly foreign owned?||Yes||Yes||Yes||Yes|
|File annual tax return?||Yes||Yes||Yes||No|
|Tax registration certificate required?||Yes||Yes||Yes||No|
|Recommended corporate bank account?||United Bank||Bank of Abyssinia||Commercial Bank of Ethiopia||Dashen Bank|
|Does our Client need to travel?||No||No||No||No|
|Resident director required?||No||No||No||No|
|Resident shareholder required?||No||No||No||No|
|Minimum directors allowed?||1||3||1||1|
|Tax identification code (TIN) needed?||Yes||Yes||Yes||No|
|Corporate shareholders allowed?||Yes||Yes||Yes||Yes|
|Corporate director(s) allowed?||Yes||Yes||Yes||Yes|
|Ethiopia corporate tax rate?||30%||30%||30%||0%|
|Annual financial statements required?||Yes||Yes||Yes||No|
|Statutory audit required?||No||Yes||No||No|
|Regulated by?||Ministry of Trade||Ministry of Trade||Ministry of Trade||Ministry of Trade|
|Allowed to issue sales invoices?||Yes||Yes||Yes||No|
|Allowed to sign contracts?||Yes||Yes||Yes||No|
|Allowed to import and export goods?||Yes||Yes||Yes||No|
|Can rent an office space in Ethiopia?||Yes||Yes||Yes||Yes|
|Can buy Ethiopia property?||Yes||Yes||Yes||No|
|Can own equity in other Ethiopia companies?||Yes||Yes||Yes||No|
|Total Ethiopia business setup costs in Yr. 1||US$14,800||US$16,800||US$15,000||US$14,050|
|Subsequent annual costs (incl. accounting and tax fee)||US$7,200||US$9,200||US$7,200||US$1,400|
|Sample engagement invoice|