Starting a business in Sri Lanka is exciting, but it can also feel complicated if you are new to the process. The legal steps are clear, but they must be followed carefully to avoid problems later on. Below, we walk you through the main stages, with simple explanations to help you understand how the system works.
Choosing the Right Business Structure
The very first decision is what type of business you want to set up. Sri Lanka recognizes several forms:
- Sole Proprietorship is simple and easy, but the owner is personally responsible for debts.
- Partnership allows two or more people to run the business together, sharing both profits and liabilities.
- Private Limited Company is the most popular choice for small and medium businesses since it limits personal liability.
- Public Limited Company is usually for larger businesses, especially if they plan to raise money from the public.
Most entrepreneurs prefer the Private Limited option because it offers credibility and protection while still being manageable.
Registering the Company Name
Every company must have a unique name. This is done through the Registrar of Companies. You submit your chosen name online, pay a small fee, and wait for approval. Once accepted, that name is reserved for three months while you complete the rest of the process.
Preparing the Articles of Association
Think of the Articles of Association as the company’s rulebook. It explains how decisions are made, what powers directors have, and how shareholders’ rights are protected. You can use the standard version provided under Sri Lanka’s Companies Act or prepare a customized one with legal help if you want more flexibility.
Incorporation and Legal Recognition
With your documents ready, you apply to the Registrar of Companies for incorporation. This includes forms about the company, its directors, and its secretary, along with the Articles of Association. When the Registrar accepts everything, you will receive a Certificate of Incorporation. That piece of paper is the official proof that your company legally exists.
At this stage, you must also appoint at least one director and a company secretary. A director can be foreign, but at least one must be resident in Sri Lanka.
Tax and Regulatory Registrations
Once incorporated, your company must register with the Inland Revenue Department to get a Tax Identification Number. Depending on your business activities, you may also need to register for VAT or other tax schemes.
Certain industries require special licenses. For example:
- Tourism operators must register with the Tourism Development Authority.
- Importers and exporters need approval from Sri Lanka Customs.
- Restaurants and food businesses must comply with public health regulations.
Banking and Employment Obligations
Every company should have a dedicated corporate bank account. Banks will ask for your incorporation certificate and board resolution to open it. If you are bringing in foreign capital, approval from the Central Bank may also be required.
If you hire staff, you must register with the Employees Provident Fund and Employees Trust Fund. Labour laws also cover working hours, leave, and termination, so compliance here is important from day one.
Ongoing Compliance
Starting the business is only the beginning. To stay compliant, companies must file annual returns with the Registrar of Companies, prepare audited financial statements, and notify the authorities of any changes in directors, shareholders, or office addresses.
Final Thoughts
While the process may seem formal, starting a business in Sri Lanka is straightforward if you take it step by step. The key is choosing the right structure, getting your registrations right, and staying compliant with tax and labour rules. With these foundations in place, you will be ready to grow your business with confidence.
At Wijesinghe Chambers, we guide entrepreneurs and investors through every stage from incorporation to compliance so that you can focus on building your business knowing the legal side is in safe hands.