Partnership vs Limited Company in Bangladesh: Which One is Right for You?

Starting a business is one of the most exciting decisions you can make—but it also comes with crucial choices. In Bangladesh, entrepreneurs often wonder whether to register as a Partnership or a Limited Company. Both structures are popular, but they serve different purposes depending on your business size, risk appetite, and long-term vision.

This guide explains each option in detail, compares their pros and cons, and helps you decide the best fit for your business journey.

Understanding Partnership in Bangladesh

A partnership is a business where two or more people join together, share responsibilities, and divide profits. In Bangladesh, partnerships are governed by the Partnership Act 1932. Unlike a company, a partnership is not considered a separate legal entity—meaning the partners themselves are directly responsible for the business.

Key Features of a Partnership

• Minimum 2 partners, maximum 20 partners allowed.

• Easy to set up—usually through a partnership deed and Trade License.

• Profits and losses are shared as per the agreement.

Advantages of a Partnership

• Simple formation – less paperwork compared to a company.

• Lower cost – setup fees are minimal.

• Direct control – partners can manage daily operations without corporate layers.

Disadvantages of a Partnership

• Unlimited liability – personal assets may be used to pay off debts.

• Conflicts among partners – disagreements can harm business continuity.

• Limited access to capital – investors and banks often hesitate to fund partnerships.

Understanding Limited Company in Bangladesh

A Limited Company is a separate legal entity formed under the Companies Act 1994. It is registered with the Registrar of Joint Stock Companies and Firms (RJSC). This structure gives your business a legal identity independent of its owners (shareholders).

Types of Limited Companies

• Private Limited Company (Ltd.) – Most common for startups and SMEs. Requires 2–50 shareholders.

• Public Limited Company (PLC) – Suitable for large businesses aiming to raise capital from the public.

Advantages of a Limited Company

• Limited liability – shareholders’ personal wealth is protected.

• Better access to funding – venture capitalists, angel investors, and banks prefer registered companies.

• Professional credibility – improves trust with clients, suppliers, and foreign investors.

Disadvantages of a Limited Company

• More complex setup – requires name clearance, Memorandum & Articles of Association, and RJSC registration.

• Ongoing compliance – annual returns, audits, and filings are mandatory.

• Higher costs – legal, accounting, and registration fees are involved.

Partnership vs Limited Company: Quick Comparison

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Which One Should You Choose?

• Choose Partnership if:

  • You’re starting a small business with close friends/family.

  • You want minimal paperwork and costs.

  • You don’t plan to seek large investments.

• Choose Limited Company if:

  • You want to raise investment and scale quickly.

  • You want to protect your personal assets.

  • You aim for long-term business credibility and growth.

Real-Life Example in Bangladesh

• Partnership Example: Two friends open a tailoring shop in Chattogram. They share costs, run the shop themselves, and split profits. This works because the scale is small and personal trust is high.

• Limited Company Example: A group of young entrepreneurs launch a tech startup in Dhaka. They need funding, want to work with corporate clients, and plan to expand nationwide. Registering as a private limited company gives them credibility and protection.

The choice between a Partnership and a Limited Company depends on your business goals. A partnership is simple, cost-effective, and ideal for small businesses. A limited company, on the other hand, offers legal protection, credibility, and better growth opportunities.

Before deciding, consider:

• Your budget.

• Risk tolerance.

• Long-term vision.

If you want to test the waters, start with a partnership. But if your goal is expansion and investment, a limited company is the smarter choice in Bangladesh’s fast-growing economy.

FAQs

1. Can I convert a partnership into a limited company in Bangladesh?
No. Partnerships cannot be directly converted—you must dissolve the partnership and form a new company.

2. What’s the minimum capital for a Limited Company?
There is no fixed minimum, but typically Tk. 1,000,000 is suggested for practical operations.

3. Which is better for foreign investment?
A Limited Company is mandatory for attracting foreign investors.

4. Do partnerships need RJSC registration?
No, but registration of the partnership deed with RJSC is recommended for legal protection.