How to Start a Business in Bangladesh

Starting a business in Bangladesh can be an exciting venture due to the country’s growing economy, strategic location in South Asia, and large consumer market. Whether you are a local entrepreneur or a foreign investor looking to tap into Bangladesh’s potential, the process involves several steps, from understanding the legal framework to market analysis and choosing the right business structure.

This comprehensive guide will walk you through the essential steps on how to start a business in Bangladesh.

1. Understanding the Market in Bangladesh

Before embarking on any entrepreneurial journey, it’s crucial to understand the market dynamics. Bangladesh is one of the fastest-growing economies in Asia. It boasts a population of over 160 million people, and the government is keen on boosting entrepreneurship and business activities. The country has made significant strides in improving infrastructure, attracting foreign investment, and increasing ease of doing business in recent years.

However, there are certain factors that you need to be aware of:

Consumer Base: Bangladesh’s consumer market is young, with a large proportion of the population being under 30 years old. This demographic is highly connected and increasingly exposed to global trends, making it an attractive market for tech-related businesses, fashion, and other consumer products.
Economic Growth: Bangladesh has experienced robust economic growth over the last decade, particularly in industries such as textiles, garments, agriculture, and ICT (Information & Communication Technology).
Regulations: The regulatory environment has improved, but challenges still exist in terms of bureaucracy, corruption, and a sometimes complex legal framework. You should familiarize yourself with the regulatory landscape before setting up your business.

2. Selecting the Right Business Structure

The first decision in starting a business in Bangladesh is to choose the appropriate legal structure. The most common business structures include:

Sole Proprietorship: This is the simplest form of business, where a single individual owns and manages the business. It’s easy to set up and involves minimal legal requirements, but the owner is personally liable for any debts and obligations.
Partnership: A partnership involves two or more people who jointly own and operate the business. Profits and liabilities are shared among partners. This structure is often preferred when resources and expertise need to be pooled together.
Private Limited Company: This is the most common form of business entity in Bangladesh for larger ventures. A private limited company can be set up with at least two shareholders and requires a minimum paid-up capital. The liability of shareholders is limited to the extent of their shareholding.
Public Limited Company: This structure is used for businesses that plan to raise capital from the public through the issuance of shares. It requires a more complex registration process and is regulated by the Bangladesh Securities and Exchange Commission (BSEC).
Foreign Investment (Joint Venture): If you are a foreign investor, you can either establish a joint venture with a local partner or set up a wholly owned subsidiary in Bangladesh. The Bangladesh Investment Development Authority (BIDA) governs foreign investments and has a dedicated online platform for the registration of foreign investments.

3. Registering Your Business

Once you have selected your business structure, the next step is to register your business with the relevant authorities. Here’s a breakdown of the registration process for different business entities:

Register with the Registrar of Joint Stock Companies and Firms (RJSC): The RJSC is the primary body responsible for the registration of companies in Bangladesh. You need to submit an application along with your company name, memorandum, and articles of association. The process typically takes around 5–7 business days.
Obtain Trade License: A trade license from the local City Corporation or Municipal Corporation is required to operate a business legally in Bangladesh. This license ensures that the business complies with local regulations.
Tax Identification Number (TIN): Every business in Bangladesh must apply for a TIN with the National Board of Revenue (NBR). This is essential for tax purposes and is required to open a bank account and carry out financial transactions.
VAT Registration: If your business generates taxable income above a certain threshold (currently BDT 30 lakh or about USD 35,000), you must register for VAT with the NBR.
Social Security Contributions: Businesses that have employees must register with the relevant labor department to ensure compliance with labor laws and social security requirements.
Foreign Investors: If you are a foreign investor, you need to register your business with the Bangladesh Investment Development Authority (BIDA), which provides investment incentives and facilitates the entry of foreign companies.

4. Opening a Business Bank Account

After registering your business, the next step is to open a business bank account. This is essential for the proper management of finances and ensures compliance with the country’s financial regulations. You’ll need your TIN, trade license, and company registration documents to open the account.

Bangladesh has several banks that offer business accounts, including local and international banks. Some of the prominent ones include:

Dutch-Bangla Bank
BRAC Bank
Standard Chartered Bank
Eastern Bank

Ensure that you have the necessary documentation for smooth processing.

5. Understanding Business Taxes

Understanding and complying with the tax system in Bangladesh is crucial for your business’s long-term success. The key taxes that businesses need to be aware of are:

Corporate Income Tax: The corporate income tax rate in Bangladesh ranges from 25% to 40% depending on the business type and whether the company is a listed company.
Value Added Tax (VAT): The standard VAT rate in Bangladesh is 15%, although some businesses may qualify for exemptions.
Withholding Tax: Bangladesh imposes a withholding tax on a variety of payments, including dividends, interest, and royalties.
Custom Duties: If your business involves importing goods, you’ll need to be aware of Bangladesh’s customs duties. The duty varies depending on the product and is governed by the National Board of Revenue.

It’s recommended to consult a tax consultant to ensure that your business complies with all tax obligations and to benefit from available tax incentives, especially if you are a foreign investor.

6. Choosing a Location

The location of your business is a crucial decision. Urban areas like Dhaka and Chittagong are key commercial hubs, while smaller towns may offer more affordable operational costs. Consider the following factors when selecting a location:

Accessibility: Ensure that your location is easily accessible to customers, suppliers, and employees.
Business Environment: Major cities offer better infrastructure, connectivity, and access to resources, but they also come with higher costs. In contrast, smaller towns may have lower operational expenses but fewer facilities.
Target Market: If your business targets consumers in Dhaka, you may need a presence there. However, if you’re focusing on agriculture or manufacturing, rural areas may be more suitable.

7. Obtaining Licenses and Permits

In addition to the standard business registration, certain industries require special licenses and permits. For example:

Food and Beverage Industry: If you’re planning to start a restaurant, food processing, or beverage company, you will need a food safety license from the Bangladesh Food Safety Authority.
Construction and Real Estate: If your business deals with construction or real estate development, you need to apply for various environmental and building permits from the concerned authorities.
Health and Pharmaceuticals: If you’re in the healthcare or pharmaceutical industry, you will need approval from the Directorate General of Drug Administration (DGDA).

8. Hiring Employees

If your business requires employees, you must comply with Bangladesh’s labor laws, which are governed by the Bangladesh Labor Act. The key considerations include:

Minimum Wage: The minimum wage in Bangladesh depends on the industry and is revised regularly.
Employee Benefits: Employers are required to provide benefits like social security, paid leave, and other mandatory benefits as per the law.
Workplace Safety: Ensure that your workplace adheres to safety and health regulations to avoid legal complications.
Foreign Employees: If you intend to hire foreign employees, you need to obtain work permits and ensure compliance with immigration laws.

9. Marketing and Promoting Your Business

Once your business is set up, you need to focus on marketing and building your customer base. Digital marketing is especially important in Bangladesh due to the high penetration of smartphones and internet access.

Online Presence: Establish a website, use social media platforms (Facebook, Instagram, LinkedIn), and leverage online marketplaces for selling products.
Advertising: Television, print media, and radio still have a significant impact on reaching a large audience. Invest in local advertising methods suited to your target market.
Networking: Join local business chambers like the Dhaka Chamber of Commerce & Industry (DCCI) or Bangladesh Women Chamber of Commerce and Industry (BWCCI) to network with other entrepreneurs.

10. Navigating Challenges

While Bangladesh offers a promising market, there are challenges to consider, such as:

Bureaucracy: Dealing with bureaucratic red tape can slow down your business registration and licensing process. Patience and persistence are key.
Corruption: Corruption can sometimes be a barrier to business success. It’s advisable to work with trusted professionals to avoid such issues.
Infrastructure: While Bangladesh is improving its infrastructure, power outages, and transport issues may still arise, especially in rural areas.
Cultural Sensitivity: Understanding the local culture, traditions, and business etiquette is crucial when establishing relationships and conducting business in Bangladesh.

Conclusion

Starting a business in Bangladesh presents exciting opportunities for growth, especially with the country’s expanding consumer base, economic growth, and business-friendly reforms. However, it’s important to thoroughly research the market, follow the legal processes, and comply with tax and labor regulations. With careful planning and the right resources, you can successfully establish and grow your business in Bangladesh.