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How to Register a Sole Proprietorship in Micronesia

Learn all about the requirements for sole proprietors in Micronesia: the registration process, required documents, as well as the taxation system in the country.

Anja Simic
Written by Anja Simic
August 12, 2021
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The Federated States of Micronesia is a country in the Pacific Ocean, consisting of 607 small islands, divided into four states: Yap, Chuuk, Pohnpei, and Kosrae. The capital city, Palikir, is located on the largest island, Pohnpei. The official language is English, and the currency used is the American dollar. 

The economic activity of the Federated States of Micronesia consists primarily of subsistence agriculture and fishing. The tourist industry has a large potential; however, the lack of adequate facilities slows down the development. This is one of the numerous business opportunities in the FSM. 

Disclaimer: This article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.

Sole proprietorship in Micronesia

A sole proprietorship is a business owned and run by an individual - the owner. It is the most common form for small businesses. The owner is not legally separated from the business. Their liability is unlimited, and they are personally responsible for all assets and debts of the business.

This form is often chosen because it is easy to establish and run. The changing environment can be challenging for large companies, but not for a sole proprietorship. The owner is the only decision-maker, so they can make changes promptly.

The laws do not require local citizens to share ownership in a foreign business.

Before you start operating your sole proprietorship, you have to register with the authorities first. 

The registration process in Micronesia

Unlike companies, sole proprietors don’t have to register a business name and enter the commercial register. They only have to register for tax purposes.

Sole proprietorship registration is done at the Department of Finance and Administration. It is located at P.O.Box PS 158, Palikir, Pohnpei FM 96941.

To submit the application, you need to fill out the Business Registration Form. Hand it over to the officer in charge, and don’t forget to bring your identification documents (ID card, passport, etc.). The authorities will check the application and will inform you if it is accepted. If not, you will go through the process again. In a few days, your business will be registered with the Ministry of Finance, and you will be able to start operating.

The business is automatically registered for tax purposes, and you are obliged to pay them on a regular basis.

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Taxes in Micronesia

Almost every activity carried on for profit is subject to the Business Gross Revenue Tax. The tax rate is $ 80.00 on the first $ 10,000 of gross revenue and 3% on the excess for the calendar year. Businesses with less than $ 2,000 in annual gross revenue are exempt from tax. The tax is paid quarterly.

The Sales Tax Rate (VAT) is calculated at 5% of all services and goods sold.

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