Ethiopia

Starting a Business in

Ethiopia

Below is a detailed summary of the bureaucratic and legal hurdles faced by entrepreneurs wishing to incorporate and register a new firm in Ethiopia. It examines the procedures, time and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy's per-capita gross national income.

This information was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 189 economies. The most recent round of data collection was completed in June 2013.

Compare Ethiopia to 188 other economies.

  • Standardized Company

  • Legal Form: Private Limited Company (PLC)
  • Paid in Minimum Capital Requirement: ETB 15,000
  • City: Addis Ababa
No. Procedure Time to Complete Associated Costs
1 Reserve a unique company name

Checking whether the name of the Company fulfills the requirements of Article 24 of the Commercial Registration and Business Licensing Proclamation No. 686/2010 is mandatory. The search is conducted at the Ministry of Trade and Industry. The entrepreneur completes a simple form, proposing 5 different company names, and submits it to the agent at window No. 1. The service is fully computerized and the search is quick. A Letter of Recommendation (LR) will be given by the agent and must be attached to the Memorandum and Articles of Association for authentication.

The requirements of a company name are as follows:
a) is not identical or misleadingly similar to the trade names previously registered; or
b) is not misleading other business persons and the society, in spite of the fact that it is not previously registered; or
c) the part of the trade name desired to be owned solely by the applicant is not a descriptive or a generic or a common name; or
d) that the trade name is not represented only by numbers; or
e) is not similar to the names of public bodies or public enterprises; or
f) is not similar to the name of any political party or labor union or any other association or aid organization; or
g) a proper authorization has been obtained to use as trade names the names of renowned people or leaders of countries, if the name is so represented; or
h) the trade name of the business operated by a sole business person indicates the type of business carried on; or
i) is not among trade names well known in other countries or is not the one that has international recognition, unless an authorization by the owner to use it has been secured, even though not registered as a trade name in Ethiopia; or
j) is not submitted by adding prefix or suffix to an already registered trade name; or
k) where the trade name is an acronym that it is meaningful or is representative of the name of the applicant or where it is composed of the names of the members of a business organization that it contains the beginning letters of the members; or
l) where it is intended to use the names of countries as trade names of business organizations, that citizens coming from the countries are establishing the business organizations; or
m) where it is intended to use a trade name of a business organization or a sole business person registered in another country as a trade name of a business organization or a business of an individual business person, that an authorization is obtained and that the same is authenticated in Ethiopia; or
n) does not have similar reading sound with an already registered trade name; or
o) is not contrary to morality or public order

1 day no charge
2 Authentication of the company documents and the lease agreement at the Documents Authentication and Registration Office (DARO)

Article 11 (1) (e) of Commercial Registration and Business Licensing Proclamation No. 686/2010, the Memorandum and Articles of Associations must be authenticated. The entrepreneur deposits the documents at DARO and will be given an appointment for the next day. The Documents Authentication and Registration Office verifies the in-kind contribution stated in the Memorandum. The partners appear in person at the appointed date, with an original copy of their letter of appointment (power of attorney) and a valid identity card. The officer checks the validity of the documents, the authenticity of the signatures, and the genuineness of the identity cards. All partners sign the documents before the notary public and pay a stamp duty flat fee of ETB 350, as well as a service charge of ETB 10 for 4 copies of the Memorandum of Association. Payment is done in the same office where the documents are being registered in the books.
An authenticated lease agreement for the office premises of the company is a mandatory requirement as well. An additional fee of 0.1% of the lease is payable for the lease agreement authentication.
2 days ETB 390
3 Submit documents and obtain a letter from the Commercial Registry to open a bank account

The applicant presents the Memorandum and Articles of Association, relevant IDs and power of attorney (if done through one) in order to obtain a letter from the Commercial Registry addressed to a chosen commercial bank so that an account may be opened under the new company name.
1 day no charge
4 Open a bank account

A bank account has to be opened and the minimum capital requirement has to be deposited. Upon presentation of the letter from the Commercial Registry, the applicant opens a bank account under the new company name and deposits the capital. The bank provides the applicant with a confirmation letter stating that the deposit has been affected.
1 day no charge
5 Register and obtain the commercial registration certificate

Evidence of capital deposit is required for private limited companies. This requirement is imposed by the Article 11 (3) of the Commercial Registration and Business licensing Proclamation No. 686/2010, issued in 2010 and entered into force immediately after publication. Under this Article, the applicant needs to submit a bank statement that the capital of the business organization to be contributed in cash has been deposited and all appropriate documents relating to contribution in kind.
Once the applicant submits the proof of deposit, a Commercial Registration Certificate (also commonly referred to as the ‘Principal Registration’) is issued to the applicant. The applicant registers the Memorandum and Articles of Association. After reviewing the documents, including the lease agreement, the Commercial register delivers a registration certificate and the appropriate license. Payment is done at the same time.
1 day ETB 80
6 Make a company seal

While the law does not specifically require a company to have a seal, it is required and commonly used in practice.
2-3 days ETB 100
7 Register with Ethiopian Revenue and Customs Authority for income tax and VAT

A newly established firm must register for income tax, payable at the end of the company’s fiscal year, and pay municipal and license renewal fees and withholding taxes on their employees. Once registered, the Tax Identification Number (TIN) is provided along with the VAT certificate.
2 days no charge
8 Obtain a business license

The applicant presents Principal Registration, proof of the new Tax Identification Number obtained, a certificate of competence in the field of commercial activity in which the applicant is seeking a business license (indicated under Article 32 Sub-article 8 of the Commercial Registration and Business Licensing Proclamation No. 686/2010), and pays the relevant fees. The Business License is usually issued on the same day these documents are submitted.
1 day ETB 80
9 Install a cash registration machine

Pursuant to the Council of Ministers Regulations No. 139/2007 ‘To Provide for the Obligatory Use of Sales Register Machines’, all businesses must purchase and install a sales register machine in order to comply with VAT tax obligations. The machines are available at certified supplier locations around Addis Ababa. Once the machine is brought to the company offices, it must be properly installed and set up so that it is linked to the Tax Administration system.
1-5 days ETB 5,000-10,000

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