Company Formation in Mongolia
Updated on Thursday 04th July 2024
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Mongolia's economy has primarily been based on livestock and agriculture, but also on mineral reserves, such as coal, gold or copper which form a big part of the industrial production. Due to these particularities, many foreign investors choose to set up companies in Mongolia. For further information and counselling on the process of starting a business in this country, do not hesitate to address our agents.
Types of legal entities in Mongolia
In order to establish a company in Mongolia a foreign investor must first choose a legal structure. The main types of companies available in this country are: the limited liability company (LLC), the open or closed joint stock company (JSC) and the partnerships.
The foreign entrepreneur can also decide on creating a representative office or a branch for a parent-company overseas; the difference between these structures is that the first is not allowed to operate commercial activities. The requirements for opening a limited liability company, which is the most chosen type of company in Mongolia, are as follows:
- minimum one shareholder;
- at least one director;
- a minimum share capital of $100,000.
The characteristics of the limited liability company in Mongolia
Opening a company in Mongolia as a limited liability company (LLC) means that the investors will have to abide by the rules of the Legal Entities Registration Law (the country’s domestic law on the registration of businesses). The LLC is a company type that is set up for commercial purposes, therefore it’s intended to make a profit out of its activities.
Thus, it is liable for taxation in Mongolia, in accordance with the lax laws applicable in this country. The company’s investors are known as shareholders, who can establish the company by choosing a trading name of their preference. However, the name has to respect the legislation in Mongolia and has to be unique at a national level.
Depending on the business activities carried out, the founders may be required to apply for business permits and licenses. Our consultants in company formation in Mongolia can advise on the sectors that require the issuance of special permits.
The company can be set up for an unlimited amount of time, but the investors can decide on this matter upon the incorporation. The main advantage of this structure, which is why it is so popular in Mongolia and elsewhere, its that the founders benefit from limited liability for the company’s debts, limited to their capital participation.
When it comes to its operations, please know that all the corporate financial documents must be maintained as per the accounting legislation available here and that such documents must be submitted with the tax authorities. The LLC can be liable for various tax benefits, regardless if the investors are local or foreigners.
How long does it take to register an LLC in Mongolia?
The incorporation of a legal entity in Mongolia may vary from one structure to another, and this can also influence the amount of time required from the moment of drawing the incorporation documents until the local institutions issue their approval. According to the Investment and Trade Agency of Mongolia, for the registration of an LLC, the following apply:
- 2-3 business days (the subscription of the company’s share capital);
- maximum 10 days (the registration with the Legal Entities Registration Office - LERO);
- 1-2 business days (obtaining the company’s seal);
- up to 4 weeks (setting up a bank account).
The set up of a bank account can vary from one bank to another, due to the internal procedures of the bank. For corporate entities, the set up of the account usually takes a longer amount of time, and the same applies for an offshore bank account.
Although the process of offshore company formation usually is simpler than in the case of onshore jurisdictions, the bank formalities can take up to several weeks regardless of he country.
Company registration steps in Mongolia
First you need to choose a name for your company and reserve it, after you have checked its uniqueness with at the LERO (Legal Entities Registration Office). The second step of the company registration process in Mongolia is paying the registration fee at a commercial bank. Then you have to register your company as a taxpayer, a procedure that is also done with at LERO.
In order to incorporate your company in Mongolia you will need to submit several documents at LERO and some of these are: an application form, the company's charter, receipts of the registration fee, copies of the IDs of the shareholders, etc. For more information about the necessary papers or other procedures, our company formation specialists are at your disposal.
You also need to apply for a Social Security Code at the District Social Insurance Department. Last, but not least, for the company formation process in Mongolia, your company must acquire a seal request from LERO and ultimately make a seal. For this step you need to submit a copy of the company's state registration certificate.
The company registration process in Mongolia cannot will not take more than a few weeks. When forming a company in Mongolia you should ask a team of company incorporation specialists for advice. Thus, feel free to ask our agents for counsel, as they have an extensive experience in establishing other types of business entities as well, in Mongolia or in other countries of the world.