Ethiotime1
What do you need to start a business in Ethiopia? Let’s assume you have garnered enough capital to start some kind of business in Ethiopia and you do not know where to start. We believe that any potential businessperson who wants to start business in Ethiopia should be well informed of the existing regulations, procedures, incentives, potential partners. This way errors and potential losses can be minimized.
2Merkato can serve as a launch pad to start a business in Ethiopia as it attempts to answer frequently asked questions related to starting a business in Ethiopia. A new Commercial Code has been voted into law since 25 March 2021 and the article takes into consideration the new Commercial Code.
- Do I need to register and obtain license to do business in Ethiopia?
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Who can be regarded as a domestic investor, a foreign investor?
- Can I engage in import/ export business in Ethiopia?
Do I need to register and obtain license to do business in Ethiopia?
Yes. It is prohibited to engage in any commercial activity unless registered in a Commercial register; and according to Proclamation No. 980/2016 (and its amendment 1150/2019), no person shall engage in business activity without acquiring business license. The Proclamation further stipulates no person is allowed to obtain any kind of business license without first being registered in the commercial register and acquiring commercial registration certificate. A business organization would attain legal personality upon its’ registration in the commercial register. The commercial registration and business license is regulated by the Ministry of Trade and Industry or other relevant government organs that are vested with such power.
Note that, engaging in a business activity without commercial registration and a business license has serious repercussions.
For a detailed answer please check our article on Business Licensing and Registration Procedures in Ethiopia.
Do I need to have a Trade Name and Trade Mark?
Not necessarily. Although a trade name is one of the entries of a principal registration as provided for under Article 105 of the Commercial Code, principal registration shall be made without waiting for the registration of a trade name under Proclamation No. 980/2016. If there is no name registered, the business is referred by name of the owner in Sole Proprietorship business form or the name of the Private Limited Company or the Share Company.
Please note that there is a difference between business name and trade name.
Business Name: “name of business” means a name that is used by a business organization for commercial registration and by which such business organization is recognized as a legal person by the registering office or third party;
Trade Name: “Trade Name” means a name that a given business person uses for his business or known by the society as such;
For a detailed answer please check our pages Business Licensing and Registration Procedures in Ethiopia and Trademark Registration and Protection in Ethiopia page.
What are the main business forms/ types in Ethiopia?
Some of the main types and more common business forms/ types in Ethiopia:
- A sole business person: the business is owned by one person. Some of the advantages are: it’s easier to start and close.
- Partnership: the business is owned by at least two persons through a partnership agreement. There are various forms of partnerships such as general partnership, limited partnership, limited liability partnership and joint venture.
- Private Limited Company: This form of business organization is whose capital is fully-paid up during formation. In this form of business organization, members are, as a principle, liable to the extent of their contribution. A PLC can be formed by a minimum of 2 and a maximum of 50 persons.
- Share Company: This form of business organization is whose capital is fixed by share and fully subscribed. In this form, liabilities are only met by the assets of the company. Share Company can be formed by a minimum of 5 persons. Generally, a minimum capital of Br. 50,000 is needed to set up a Share Company. The minimum price a single share can have is Br. 10.
- One-Person Company: This new form of business organization is recognized under the new Commercial Code. This form of business organization is owned by one-person who, as a principle, is not personally liable for the liabilities of the company.
Who can be regarded as a domestic investor, a foreign investor?
The current investment law considers among others the following investors as domestic investors:
- An Ethiopian National;
- An enterprise incorporated in Ethiopia and wholly owned by Ethiopian national;
- The government;
- A public enterprise;
- A cooperative society established as per the relevant law;
- A foreign national or foreign enterprise treated as domestic investor as per the relevant law or international treaty ratified by Ethiopia (e.g. foreign nationals of Ethiopian origin); and
- An enterprise incorporated in Ethiopia jointly between any of the investors specified above.
At the same time, the investment law regards the following as a foreign investor:
- A foreign national;
- An enterprise in which a foreign national has an ownership stake;
- An enterprise incorporated outside the Ethiopia by an investor;
- An enterprise established jointly by any of the above investors; and
- An Ethiopian permanently residing abroad and preferring treatment as a foreign investor.
Is there an incentive for investors in Ethiopia?
Yes. There are three forms of incentives. The first is fiscal incentives which are exemptions from customs duty and exemption from various taxes. The other is non-fiscal incentive, such as the supplier’s credit and the remittance of foreign currency by foreign Investors. The third form of incentives are financial incentives in which the government provides either grants or ―direct subsidies which may cover the entire or substantial part of capital, production or marketing costs in relation to the project grant.
For a detailed answer, please check page Investment Incentives in Ethiopia.
As a businessperson (or entity), do I need to be registered as a taxpayer, what are the tax regulations and procedures in Ethiopia?
Yes, every business person or entity should be registered to pay tax and must obtain a taxpayer’s identification number (TIN). For a detailed analysis check our Tax page.
Who can be my potential business partners in Ethiopia?
We have a list of more than 10000 businesses in Ethiopia assembled and sorted in categories, sub categories etc. Please check our Business Directory.
How can I find information on tenders/bids in Ethiopia? How do I participate in a tender/ bid in Ethiopia?
You can find information on tenders/ bids in Ethiopia on our tender page. The guidelines to participate in a tender/bid in Ethiopia are found HERE and HERE for Foreign Suppliers.
Can I engage in import/ export business in Ethiopia?
Yes and no. That depends on the type of import/ export business you want to engage in and whether you’re a domestic investor or a foreign one. Generally, foreigners are not allowed to engage in import/export trade activities. They can only import raw materials if they have a manufacturing setup in Ethiopia or export their products.
Please check our Import and Export, Investment ,and Investment Incentives pages.
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