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 185 economies. The most recent round of data collection was completed in June 2012.

Compare Ethiopia to 184 other economies.

YearNew business densityNumber of new limited liability companies
2009 0.031,327

  • Standardized Company

  • Legal Form: Private Limited Company (PLC)
  • Paid in Minimum Capital Requirement: ETB 15,000
  • City: Addis Ababa

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No. Procedure Time to Complete Associated Costs
1 Check the company name for uniqueness

Checking for the uniqueness of the company name is mandatory according to Article 19 of the Proclamation 67/1997. The search is conducted at the Ministry of Trade and Industry. The party completes a simple form and hands it over to the agent at window #1. The service is fully computerized and the search is quick. A Letter of Recommendation (LR) will be given by the agent andmust be attached to the Memorandum and Articles of Association for authentication. The following names are rejected:

• Same name in the same field are not accepted
• Names which are antagonistic to moral issues
• Names advertising like “fastest way to transfer money” “Best services in town” such adjectives are not accepted

Evidence of capital deposit is not required for private limited companies. However, the memorandum of association should show that “the capital is fully paid” in cash or in kind. In practice, as long as the memorandum of association indicates that “the capital is fully paid,” demonstration of actual payment is not required.

1 day no charge
2 Authentication of the company documents and of the lease agreement at the office of registration of Acts and documents

According to Proclamation 334/2003, Article 5, the Memorandum and Articles of Associations must be authenticated. The party will deposit the documents and will be given an appointment for the next day. This office will check the following:

• In case of contribution in kind, this office will verify that the value stated in the Memorandum is correct
• Stamp duty is a flat rate of 350 ETB (Proclamation 110/1998). Payment of stamp duty is done in the same office where the documents are being registered in the books prior to its authentication. All partners are required to sign in front of the public Notary
The Office of the registration of Acts and Documents serves mainly to provide notary public services. The applicants 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. The applicants sign the documents in front of an officer, and pay a stamp duty of ETB 350 and another service charges of 10 ETB ( 4 copies of Memorandom of Association).
A lease agreement may also be authentified. In this case, there is an additional cost of 0.1% of the lease value.
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 effected.
1 day no charge
5 Register and obtain the Commercial registration certificate

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, its required in practice.
2-3 days ETB 100
7 Register with Ethiopian Inland Revenue Authority and Customs 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 registred, the Tax Identification Number (TIN) is provided along with the VAT certificate.
2 days no charge
8 Obtain business license

The applicant presents Principal Registration and proof of the new Tax Identification Number obtained 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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