Sole proprietorship, partnership or company? Choosing a business structure in the Maldives

One of the first decisions when starting a business in the Maldives is which legal structure to use. The choice affects who can own the business, whether your personal savings are at risk if things go wrong, how you are taxed, and how easy it is to bring in partners or investors later. This guide compares the main options available on the government Business Portal and explains which suits common situations.

The main structures at a glance

• Sole proprietorship: one Maldivian owner, simple and inexpensive, with unlimited personal liability.
• Partnership: two or more owners sharing the business under a partnership agreement.
• Private company: a separate legal entity owned by one or more shareholders, with limited liability.
• Public company: a company whose shares can be offered to the public, used by large businesses.
• Cooperative society: a member-owned organisation, often used in fisheries, agriculture and community enterprises.

Most small businesses choose between a sole proprietorship and a private company, so this guide focuses on those, with a section on partnerships.

Sole proprietorships

Who can use it

A sole proprietorship is the simplest way to run a business, but it is only open to Maldivian citizens aged 18 or over. Foreigners cannot register one.

How it works

The business and the owner are legally the same. The owner signs contracts, holds licences and is responsible for all debts personally. There are no shareholders, directors or company secretary, and the paperwork is light. Registration is done through the Business Portal with an eFaas login, or in person at the Ministry of Economic Development and Trade in Malé. The process is quick, typically a matter of days, and the fee is low compared with a company. Registrations are reported to be valid for five years before they need renewing.

Advantages

• Quick and inexpensive to register and maintain.
• Full control: decisions are yours alone.
• Minimal formalities: no board meetings, share registers or company filings.

Disadvantages

• Unlimited personal liability. If the business cannot pay its debts, creditors can pursue your personal assets, including savings and property.
• Harder to bring in partners or investors, because there are no shares to issue.
• Less credibility for larger contracts. Some clients, banks and government tenders prefer or require a company.
• The business is tied to you. It cannot easily be sold or passed on as a going concern.

Good for

Freelancers, home businesses, small shops, tutors, tour guides and other low-risk businesses run by one Maldivian owner, especially when testing an idea.

Private companies

Who can use it

Anyone can be a shareholder in a private company, although foreign shareholders need foreign investment approval first. Under the Companies Act 2023, which took effect on 1 January 2024, a private company can have a single shareholder. Every company must have at least one director who is resident in the Maldives, and the company secretary should not be a director.

How it works

A company is a separate legal person. It owns its assets, signs contracts in its own name and is responsible for its own debts. Shareholders own the company; directors run it. Profits belong to the company until they are paid out, for example as dividends or salaries.

Advantages

• Limited liability. As a general rule, shareholders risk only what they have invested in the company. (Directors can still be personally liable for misconduct, and banks often ask for personal guarantees on loans.)
• Easy to share ownership: new investors can buy shares, and founders can agree clear rights in the company constitution.
• More credibility with banks, larger clients and tender processes.
• Continuity: the company continues even if shareholders change.
• The required vehicle for most foreign investment.

Disadvantages

• More formalities: registers of shareholders, directors and beneficial owners, records of decisions, and annual filings with the Registrar of Companies.
• Higher setup and running costs, including accounting.
• Rules on how money can be taken out of the company.

Good for

Businesses with more than one owner, anything with significant financial risk (construction, tourism, import trading), businesses seeking investment or bank finance, and all foreign-owned businesses. Our step-by-step guide explains how to register a company.

Partnerships

A partnership is two or more people carrying on a business together with a view to profit. It suits professional practices and small joint businesses where the owners want to work together without forming a company. The key points to consider:

• Write a partnership agreement. It should cover how much each partner contributes, how profits and losses are shared, who makes which decisions, and what happens if a partner wants to leave.
• Understand liability. In a general partnership, partners can be personally liable for the business's debts, so the same risk applies as with a sole proprietorship, multiplied by your partners' decisions.
• Foreign partners trigger the foreign investment rules, just as with a company.

Many people who start as partners eventually move to a company to limit their personal risk.

Tax differences

The Maldives taxes individuals and businesses under the Income Tax Act. A sole proprietor's business profit is taxed as their personal income, while a company is taxed on its own profits, and money the owners take out (as salary or dividends) has its own treatment. Both may also need to register for GST depending on the type of business and turnover. Tax should not be the only reason for choosing a structure, but it is worth asking an accountant to compare the options for your expected income.

Three examples

Aisha, a home baker in Hulhumalé

Aisha sells cakes from home through social media and a few cafés. Her costs are low, she works alone, and the main risk is a bad batch. A sole proprietorship lets her register quickly, open a business bank account and supply cafés with proper invoices. If she later opens a shop with a lease and staff, she can move the business into a company.

Three friends opening a dive centre

Three Maldivian friends plan a dive centre on a local island. They will lease premises, buy boats and equipment, take bookings from tourists and employ instructors. The business carries real risk, including accidents, equipment loans and seasonal cash flow, and has several owners. A private company with a clear constitution and shareholders' agreement suits them: liability is limited, each friend's share is recorded, and a bank is more likely to finance the boat. Because they will supply tourism services, they will also need tourism registration and GST registration.

A foreign investor building a guesthouse

A foreign investor wants to build and run a guesthouse with a Maldivian partner. Foreigners cannot use a sole proprietorship, so the route is foreign investment approval followed by a private company, with the partners' rights set out in a shareholders' agreement and the land held under a lease reviewed by a lawyer.

Costs to budget for

Whichever structure you choose, budget for more than the registration fee:

• government registration and name reservation fees (check the current schedule on the Business Portal);
• licences and permits for your activity;
• accounting and bookkeeping, which is higher for companies because of annual filings;
• legal fees for a company constitution, shareholders' or partnership agreement, if needed; and
• bank account fees and minimum balances.

Spending a little on a proper agreement at the start is usually much cheaper than resolving a disagreement between owners later.

A simple way to decide

1. Are any owners foreign? If yes, plan for a company with foreign investment approval.
2. Could the business create large debts or claims? Think about leases, supplier credit, customer injuries, construction defects. If yes, a company's limited liability is valuable.
3. Will there be more than one owner, now or later? A company makes ownership clearer and easier to change.
4. Do you need bank finance, investors or government contracts? A company is usually expected.
5. Is it a small, low-risk business run by one Maldivian owner? A sole proprietorship is often the sensible place to start.

Changing structure later

Your first choice does not have to be permanent. A common path is to start as a sole proprietorship and incorporate a company once the business grows, takes on staff or brings in a partner. Bear in mind that a company is a new legal entity: licences, leases, supplier accounts, bank accounts and tax registrations generally need to be transferred or applied for again, so plan the switch for a quiet period.

Registering your chosen structure

All of these structures are registered through the Business Portal at business.egov.mv, which also lets you search the business registry to check that your chosen name is available. You will need an eFaas account to apply online. After registration, remember the next steps: tax registration with MIRA, any licences your activity needs, a business bank account, and employer registration if you will hire staff.