How to Start Business with Little Capital in Ethiopia

If you want to know how to start business with little capital in Ethiopia, it is very much simple. All you need to do is keep your head down and learn some of the big ideas and steps lined out for the process. This article has been groomed towards this direction just for you.

To start a business in Ethiopia, you must obtain a business license. This is according to commercial registration and business licensing proclamation. The ministry of trade and industry provides its services through an online system known as the Online trade registration and licensing system to ease the registration process.

Acquiring a business license requires you to first register within the central commercial register and trade name register. Registering in the commercial register has to be done at a place where the head offices of the business are situated.

To open a business in Ethiopia, you have to apply for the Ethiopian business and investment license from the Ethiopian Investment Commission. The commission provides information regarding investment promotion incentives. As earlier said, to allow your business to operate publicly and legally, you have to first register with the Ministry of Trade and Industry. This helps you get a Tax Identification Number from the Ethiopian Customs Commission under the Ministry of Revenue.

A report from World Bank’s doing business 2022 says that starting a new business in Ethiopia takes 32 days. So the first and foremost step of registering and doing business in Ethiopia is identifying the type of business you intend to run.

Forms of Business in Ethiopia

  • A sole proprietorship; is a business owned and operated by a single person.
  • A partnership; is a type of business owned and operated by at least two people through a partnership agreement or a memorandum of understanding. Partnerships include; limited partnership, an ordinary partnership, general partnership and more.
  • Private limited company; this can be formed and owned by a minimum of two people and a maximum of 50 people.
  • Share company; this is a business that a minimum of 5people can own. The minimum required capital to set up a share company in Ethiopia is Br.50,000. The minimum price for every single share is usually Br.10. To set up a bank, insurance company, and other businesses in that line, the minimum capital required is 500,000,000 ETB.

How to Start Business with Little Capital in Ethiopia

In simple terms, we have made you see the reality of starting business in Ethiopia through the necessity of registering the business. Below then are some of the things to do in the system of how to start business with little capital in Ethiopia:

Requirements for registering a sole proprietorship business in Ethiopia

  • Taxpayer’s Identification Number (Article 9 of the proclamation)

  • Obligations are not blocked after the publication of the commercial register

  • The application letter for commercial registration has to be submitted before the commencement date of commercial activity by satisfying a prescribed form and attaching documents specified under the regulations and directives issued to implement the proclamation.

Requirements for Business organizations

Owners of the business have to apply to the registering office and verify that no one else has used the business organization’s name. This has to be done before signing the memorandum of understanding and the articles of association.

  • After obtaining verification, the business owners have to sign an MOU and articles of association at the documents authentication and registration agency.

  • Acquiring a Tax Identification Number

  • Application for commercial registration and submitting before the commencement date of commercial activity by filling the prescribed form and attaching documents mentioned under the regulations and directives issued to implement the proclamation (article 219-226 of the code).

Read Also: 5 Importance of Having Business License

Registration requirements for a foreign business/ company in Ethiopia

To run a foreign company in Ethiopia, you must go through these procedures;

  • Reserving a unique company name and authenticating a company’s international name

  • Authenticating company documents and office lease agreements at the authentication and registration office under the Ministry of justice

  • Acquiring a Tax identification Number

  • Registration and acquisition of commercial registration certificate from the Ministry of Trade and Industry

  • Getting a company seal

  • Registering the company and employees with a private organization employee’s pension fund

  • Registering with Ethiopian Revenue Authority for VAT

  • Advertising the trade name in a nationwide newspaper

  • Setting aside a unique trade name

  • Acquiring a business license from the Ministry of Trade and Industry

  • Installment of cash registration machine (for businesses that generate 500,000 Birr as the annual revenue).

Establishing a business branch in Ethiopia

To establish a branch business in Ethiopia, a representation or project office must have these requirements;

  • A notarized copy of the registration of a parent business/ company in the country of origin

  • A copy of the MOU and Articles of Association from the mother country or country of origin

  • An authenticated decision of the mother company’s board of directors or similarly authorized body to establish a branch in Ethiopia. Activities of the branch, individuals appointed by the parent company to act on its behalf must be indicated and the capital allocated for its operations.

  • Authenticated power of attorney given by authorized organ of a company for permanent representative in Ethiopia.

  • A letter of financial reference from the company/business’s bank

  • A notice published in a local newspaper announcing the establishment of a branch company in Ethiopia

Obtaining a business/ company license in Ethiopia

By law and according to proclamation No.980/2016, no person shall engage in any business activity without acquiring a business license.

Requirements for acquiring a business license include;

  • Filled and signed application form

  • Certificate of commercial registration

  • Photocopies of identification card or valid passport

  • Passport size photographs of the manager taken in the last six months

  • Original copies of memorandum and articles of association

  • Certificate of competence

  • The exact address of the head office and branch offices of the business

  • A bank statement showing the capital of the business organization

It could take you 30 minutes to one hour to complete the commercial registration. To register a company name could take you 25 minutes, while acquiring a business license takes closely 30 minutes to one hour. Name clearance may take about 30 days.

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