LECTURE 1

Setting Up the Business

Export-Import Theory, Practices, and Procedures
Belay Seyoum
3rd Edition (or newer)
Chapter 4 and
Internet Sources

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EMBA Program, Fall 2020 Dept. of International Business
Lecture Overview
• Mode of Entry in International Business
• Export and Import Defined
• Ownership Structures
• Business Start-Up Procedures
• List of Related and Supporting Organizations

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Entry Modes in International Business
Exporting (Importing)

Licensing

Franchising
Entry
Modes Strategic Alliances

Joint Ventures

Wholly Owned Subsidiary

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EMBA Program, Fall 2020 Dept. of International Business
Entry Modes in International Business

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EMBA Program, Fall 2020 Dept. of International Business
Exporting
• Exporting is the activities of selling goods, services or knowledge
across national boundaries in a legitimate way for the purpose of
realizing foreign earnings

Country B

Country A Country C

Country D

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Importing
• Importing involves activities of bringing goods or services into one
country from another in a legal way to meet local demand or earn
profit through re-sell locally

Country B

Country A Country C

Country D

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EMBA Program, Fall 2020 Dept. of International Business
Exporting (Importing)
• Advantages
• It avoids the costs of establishing local manufacturing operations
• It helps the firm achieve experience curve and location economies
• Disadvantages
• There may be another lower-cost manufacturing locations
• High transport costs and tariffs can make it uneconomical
• Agents in a foreign country may not act in exporter’s best interest

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EMBA Program, Fall 2020 Dept. of International Business
Ownership Structures
Forms of
Ownership

Sole Limited Liability

Partnership Corporations
Proprietorship Companies

General
S Corporations
Partnership

Limited
C Corporations
Partnership

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EMBA Program, Fall 2020 Dept. of International Business
Sole Proprietorship
Advantages Disadvantages
• They are easy to organize and • Risk of unlimited liability
simple to control • Limited access to capital
• More flexible to manage formation
• Subject to minimum • Limited skills required for
government regulations export-import business
• No separate tax is imposed to
business

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EMBA Program, Fall 2020 Dept. of International Business
Partnerships
• Associations of two/more persons
• Share management responsibility for profit
• Written agreements between partner is not required but desired
• It’s a legal entity for some limited purposes
• No separate tax liability for the business
• Partners are personally liable for debts
• It’s a relationship of trust and loyalty

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EMBA Program, Fall 2020 Dept. of International Business
Advantages of Partnerships
• Partners could bring complementary assets
• More capital than sole proprietorship
• Combinations of skills from different partners
• Pool of skills increased by wave of time
• No separate tax is imposed to business
• Limited partners are useful for contributing
capital when needed for export-import business

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EMBA Program, Fall 2020 Dept. of International Business
Disadvantages of Partnerships
• Potential exists for conflict among partners
• Only general partners are capable of making decisions for business
operations and hence are subject to unlimited liability of business
activities
• Dissolve when a partner is died or loose
the ability to operate business operation

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EMBA Program, Fall 2020 Dept. of International Business
Corporations
• Separate Legal Entity and limited liability
• Incorporated and run by the laws of the state
• Perform certain rights and obligations
• Formation is expensive and time consuming
• Directors and officers must be within duty
of obedience and duty of care

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EMBA Program, Fall 2020 Dept. of International Business
Corporations
Advantages Disadvantages
• Limited liability • Double taxation
• Free transferability of shares • Corporate entity might be
• Perpetual existence disregarded
• Ability to raise additional capital • Non-separation of corporate and
by selling shares in the personal affairs
corporation • Corporations used to defraud
others/similar

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EMBA Program, Fall 2020 Dept. of International Business
Lets Start Business
• To do a good business in Bangladesh you need
• Decision to do business
• Select an appropriate type of business
• Decide the ownership structure
• Selection of the name of the business
• Select location of office/Industrial plot
• Legal formalities, trade license/ registration

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EMBA Program, Fall 2020 Dept. of International Business
Business or Trade Name
• Sole proprietorship/partnerships
• They can operate under their own name
• Or must be registered in local authority when operated under a name of
fiction
• Corporations
• They are always required to be registered
• Trade name must be consistent with articles of
incorporations and company purposes

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EMBA Program, Fall 2020 Dept. of International Business
Trade License
• To start a business trade license is must
• Every trade license contains following,
1. Serial no, date of issue, name of person(s)
2. The nature of the profession
3. The place or location (headquarter)
4. Amount of tax realized from the profession
5. Details of management
6. Validity period

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EMBA Program, Fall 2020 Dept. of International Business
Trade License

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EMBA Program, Fall 2020 Dept. of International Business
Trade License
Conditions for obtaining a new trade license
1. In case of general trade license
• Attested copy of rent receipt/agreement
• The copy of the holding tax payment receipt
2. In case of industries: everything in SL. no. 1 &
• No objection declaration on the surrounding
• Location map
• Copy of fire certificate
• Declaration on a 150/- taka stump for obeying DCC rules
• Three copy of passport size photo

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EMBA Program, Fall 2020 Dept. of International Business
Trade License
Conditions for obtaining a new trade license
3. In case of Clinic/Private Hospital- permission from Director General
Health
4. In case of limited company
• Memorandum of article
• Certificate of incorporation
5. In case of Printing Press & Residential Hotel
• Permission from Deputy Commissioner (DC)

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EMBA Program, Fall 2020 Dept. of International Business
Trade License
Conditions for obtaining a new trade license
6. In case of Recruitment Agency
• License from Manpower Export Bureau
7. Incase of Arms and Ammunition- Copy of Arms license
8. In case of Drug & Narcotics – Drug/Narcotics license
9. In case of Travailing Agency- Approval from Civil Aviation Authority

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To Open a Bank Account
1. An application in the prescribed form
2. Two passport size photograph
3. Attested copy of Trade License
4. Certificate of Incorporation from JSC
5. In case of public limited company, documents for details of an authorized
person for bank account
6. Membership Certificate from government approved association that
related with business type
7. Reference by an account holder of same branch

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EMBA Program, Fall 2020 Dept. of International Business
Account Certificate

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EMBA Program, Fall 2020 Dept. of International Business
Tax Identification Number (TIN)
• To obtain a TIN, one have to submit following documents along with
an application
1. Application in a prescribed form
2. Two copies of attested passport size photograph
3. Trade license
4. Bank solvency certificate
5. Incorporation certificate along with memorandum and article of association

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EMBA Program, Fall 2020 Dept. of International Business
TIN

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Certificate of VAT Registration
• Mandatory for businesses with annual sale price of between tk. 50
lakh and tk. 3 crore
• Required
1. Application in a prescribed form
2. Trade License
3. Import Registration Certificate (IRC)
4. Export Registration Certificate (ERC)
5. Layout Plan of the Factory
6. Certificate of incorporation
7. House rent deed/ ownership documents

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EMBA Program, Fall 2020 Dept. of International Business
Certificate of
VAT Registration

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EMBA Program, Fall 2020 Dept. of International Business
Membership of a Business Association/ Forum
• Need a membership to apply for ERC,IRC etc.
• Required
1. Application in a prescribed form
2. A copy of trade license
3. Income taxation certificate with TIN
4. Bank Solvency Certificate
5. Memorandum and articles of association
6. Entrance fee and Annual Subscription fees
7. Bonded warehouse license in case of 100% export

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EMBA Program, Fall 2020 Dept. of International Business
Import Registration Certificate (IRC) &
Export Registration Certificate (ERC)
• To get IRC/ ERC following are required
1. Application in a prescribed form
2. Trade License
3. Treasury Chalan of the deposit of specific fees
4. Bank Solvency Certificate
5. Membership Certificate of a chamber
6. Memorandum and articles of association
7. Registration with board of investment

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EMBA Program, Fall 2020 Dept. of International Business
Import Registration Certificate (IRC) &
Export Registration Certificate (ERC)

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EMBA Program, Fall 2020 Dept. of International Business
List of Related and Supporting Organizations
• World Trade Organization (WTO)
• World Customs Organization (WCO)
• Ministry of Commerce
• Ministry of Industries
• National Board of Revenue (NBR)
• Registrar of Joint Stock Companies And Firms (RJSC)
• Bangladesh Investment Development Authority (BIDA)

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EMBA Program, Fall 2020 Dept. of International Business
List of Related and Supporting Organizations (2)
• International Bank/ Local Bank with International Connection
• Pre-Shipment Inspection Companies
• Clearing and Forwarding (C&F) Agents
• Insurance Companies
• Securities Agencies
• Transportation Agencies
• Business Association/Forum etc.

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EMBA Program, Fall 2020 Dept. of International Business
 End of Lecture 1
* All clipart, image and graphics are sourced from Google webpage

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EMBA Program, Fall 2020 Dept. of International Business