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; we will review the article as soon as it has been printed.)
- Do I need to register and obtain license to do business in Ethiopia?
- Can I engage in import/ export 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, 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. It is upon registration that business organizations will have legal personality. 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.
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.
For a detailed answer please check our pages Business Licensing and Registration Procedures in Ethiopia and Trademark Registration and Protection in Ethiopia page.
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 ordinary partnership, general partnership and limited partnership.
- Private Limited Company: Can be formed by a minimum of 2 and a maximum of 50 persons. It is advantageous for high profit making businesses and it can be managed in a structured way, but it's difficult to close the business. Liabilities will be limited to the shares raised by the shareholders.
- Share Company: Can be formed by a minimum of 5 persons. 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.
The current investment laws have a rule that a Domestic investor is an Ethiopian or Ethiopian origin having the Ethiopian Origin ID card. Ethiopian origin investors can invest as doemstic investor or foreign investors. A Foreign investor is a foreigner or an enterprise owned by foreign nationals, having invested foreign capital 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 incentives, 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). However, each person or entity will have only one TIN. For a detailed analysis check our Tax page.
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?
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 in participating in trading activities. They can import raw materials if they have a manufacturing setup in Ethiopia or export their products.