Private Firm Registration Act, 2014 (1958)

The Private Firm Registration Act, 2014 in Nepal outlines the legal procedures and requirements for registering private firms and partnerships, governing their formation, operation, and dissolution.

How to form a private firm/sole proprietorship?

Register: Entrepreneurs have the option to commence their business endeavors by registering a Sole Proprietorship/Private Firm, which grants the firm a trading name under the Private Firm Registration Act, 2014 (1958).

Who can form a private firm/sole proprietorship?

In a Sole Proprietorship, the business is exclusively owned and managed by a single person. These types of firms are commonly adopted by individuals engaged in trading activities (such as retailers, shops, and importers of goods) as well as professional service providers like lawyers and accountants.

What are the features of a private firm/sole proprietorship?

No legal identity: There is no distinct legal entity, the identity of the proprietor is the identity of the private firm. 

Liability: The Private Firm carries unlimited liability and so does the proprietor


Advantages of sole trading:

  • Autonomy: You have complete control over your business as the sole proprietor.
  • Profits: You retain all the profits generated by the business.
  • Low Start-up Costs: The initial investment required to start a sole trading business is typically minimal.
  • Privacy: Sole trading offers maximum privacy as there is no requirement to disclose financial information publicly.
  • Simple Operation: Establishing and operating a sole trading business is straightforward and involves minimal complexity.
  • Flexibility: Changing your legal structure in response to changing circumstances is relatively easy.
  • Easy Closure: If needed, winding up your business as a sole trader can be done without significant hurdles.


Disadvantages of sole trading:

  • Unlimited Liability: As a sole trader, there is no legal distinction between your personal and business assets, which means you have unlimited liability for business debts.
  • Limited Capital: Sole traders may face challenges in raising capital compared to larger business structures.
  • Sole Decision-making: All responsibilities for making day-to-day business decisions rest solely on your shoulders.
  • Employee Retention: Attracting and retaining high-caliber employees can be difficult for sole traders due to the limited resources and benefits they can offer.
  • Limited Time Off: Taking vacations or time off can be challenging as the success and operations of the business heavily rely on your presence.
  • Individual Taxation: As a sole trader, you are taxed as an individual, which can have implications for your personal finances.
  • Limited Lifespan: Sole trading businesses may have a limited lifespan, as they heavily rely on the individual proprietor and face potential challenges with succession planning.



An entrepreneur can cancel the registration of any kind of Sole Proprietorship in one of the following two ways – 

(a) voluntary cancellation, and (b) cancellation by the Regulatory Authorities. 

(a) Voluntary Cancellation 

The voluntary cancellation of international trading-related Sole Proprietorships is done at 

 the Department of Commerce, Supplies and Consumer Protection (“DOCSCP”) . The procedure for such cancellation is as follows:

Steps Procedure Remarks
Log in to the online user ID at DOCSCP. The entrepreneur must create a user ID at DOCSCP or log in with the already existing user ID.
Locate the ‘Cancellation’ tab after logging into the DOCSCP’s online portal and click on the ‘Cancellation’ tab.  After requesting cancellationl, the webpage will require the entrepreneur to provide certain details and documents related to the entrepreneur and the Sole Proprietorship.
Save the details in the webpage. After this step, the request for cancellation will be forwarded. After that, the DOCSCP will require the entrepreneur to be present at the DOCSCP to complete the finalization procedure of cancellation. 

Before cancellation of the Sole Proprietorship, the DOSCSP will check whether there are any pending fees, fines or penalties to be paid by such Sole Proprietorship.

Cancellation of the Sole Proprietorship by the DOCSCP. DOCSCP will then cancel the registration of such Sole Proprietorship and update its registry accordingly. The DOCSCP will also notify other concerned government authorities about the cancellation of such Sole Proprietorship. 

The following documents need to be submitted during the course of cancellation of registration of Sole Proprietorships at DOCSCP: 

S.N. Documents
1. Original sole proprietorship registration certificate.
2. Personal attendance of the entrepreneur along with his/her original citizenship certificate/card.
3. Copy of certificate of PAN/VAT registration
4. Tax clearance certificate of the previous FY.
5. Audit Report (if the capital is more than NPR 50,00,000).
6. Deed of approval of the coparceners after the death of the entrepreneur.
7. Relationship verification and death registration document (in case of death of the entrepreneur).

(b) Cancellation of Registration by Government Authorities 

Apart from voluntary cancellation, the Regulatory Authorities have the power to cancel the registration of the sole proprietorship on the following grounds: 

S.N.  Grounds of Cancellation 
1.  If a Sole Proprietorship fails to affect the renewal of the firm within the prescribed period. 
2.  If it is found that a Sole Proprietorship has been already registered which has the same objectives in the name of the same person. 
3.  If a Sole Proprietorship fails to submit the particulars sought by the Regulatory Authorities within the prescribed period. 
4.  If an industry-related Sole Proprietorship closes down the business with or without providing information of such closure to the Regulatory Authority. 
5.  If an industry related Sole Proprietorship fails to renew within the prescribed period from the expiry of the validity period to renew the firm 


even if the Sole Proprietorship is renewed in such a manner, if such Sole Proprietorship fails to submit a written progress report on works relating to the construction of a factory, purchase of machinery equipment or tools, and other acts as may be required for the establishment and operation of the sole proprietorship as per the terms mentioned in the approval given to such Sole Proprietorship. 

6.  If a Sole Proprietorship does any activity contrary to the Private Firm Registration Act or the Private Firm Registration Rules 

Before canceling the registration of the firms on the aforementioned grounds, the Regulatory Authority will provide such sole proprietorship with a reasonable opportunity for submitting a clarification. If any sole proprietorship is canceled in such a manner as aforementioned, such entrepreneurs will be barred from registering another sole proprietorship having the same objectives as the previous one.