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Legal forms of companies

LEGAL FORMS OF COMPANIES

When you intend to establish a company, first of all decide which legal form (type) of the company is the most suitable for the realization of your chosen goals. It is necessary to assess what economic and commercial activity you will engage in ( CLASSIFIER OF TYPES OF ECONOMIC ACTIVITY (EVRK 2nd ed . ) , how many employees will work in the company, how much initial capital will be needed to start the business, etc.

The laws of the Republic of Lithuania provide for the possibility of establishing companies of the following legal forms (types): sole proprietorships, real and limited (trust) partnerships, joint stock, closed joint stock, investment, agricultural, cooperative companies, state and municipal companies. Non-profit organizations can be established in cases where the purpose of the activity is not to make a profit.

Companies are divided into limited and unlimited civil liability companies. Companies with unlimited civil liability are individual companies and partnerships, and companies of all other legal forms (types) are limited liability companies.

Limited liability companies are liable for their obligations only with the assets of the company. Unlimited civil liability companies are responsible for their obligations with the company's assets, and in the event that the company's assets are insufficient, the owner is responsible for the company's obligations in an individual company with his own assets, in a partnership - the true member of the partnership with his assets.

Individual enterprise

If you plan to provide services or undertake other economic and commercial activities that require the work of family members and a small initial capital, you can establish an individual company (IĮ).

The establishment, management, operation, reorganization, liquidation, rights and duties of the owners of these companies are regulated by the Law of 2004. January 1 the Law on Individual Companies of the Republic of Lithuania entered into force.

Only one capable natural person can be the founder of the LLC. The Law on Individual Companies limited the right of the owner of an IĮ to be the owner of another IĮ, because an IĮ is a person with unlimited civil liability and its owner is responsible for the obligations of the company with all his assets.

The founder of the IĮ is considered the owner of the company from its registration. The provisions of the IĀ can provide that the owner can appoint another person as the head of the company. The regulations of the IĮ are the founding document that guides the IĮ in its activities.

IĮ has the following advantages: the company can manage simplified accounting, it does not need to prepare financial statements, it is enough to fill out a tax declaration. The owner of the private enterprise can work in his company alone or with the help of family members, that is, he does not need to hire other employees and conclude employment contracts with them.

The main disadvantage of IĮ is that, having it, it is necessary to assess the risks of economic and commercial activity. IĮ is a legal entity with unlimited civil liability. The assets of the IĮ are not separated from the assets of the company owner. Consequently, the owner of the company is responsible for the obligations of the IĮ with all his assets. Risks related to the quality of the work or services performed, deadlines, suppliers, etc., should be assessed. In case of non-fulfillment of obligations to the customer, the state, social insurance institution or other creditors from the company's assets, the fulfillment of obligations is directed to the owner's assets. IĀ debts cannot be written off. Before registering a company of this legal form, it is necessary to evaluate all the advantages and disadvantages.

The name of the IĮ must contain the words "individuali įmonė" or the abbreviation "IĮ" that defines its legal form.

The Law on Individual Companies establishes that an IĮ can be transformed into a joint-stock company, a closed joint-stock company, as well as into a public institution. The IĮ cannot be reorganized, except in cases where the IĮ is inherited by a person who is the owner of another IĮ and when it is reorganized before 2004. January 1 IĮ was established, which

The Law on Individual Companies establishes that an IĮ can be transformed into a joint-stock company, a closed joint-stock company, as well as into a public institution. The IĮ may not be reorganized, except in cases where the IĮ is inherited by a person who is the owner of another IĮ and when the reorganization takes place before 2004. January 1 an IĮ was established, the owners of which are both spouses.

Individual (personal) companies established before 2004. on January 1, whose name contains the words "personal company", the abbreviation of these words "PI", as well as IĮ, whose legal form is not indicated in their names, since 2004 January 1 are considered sole proprietorships.

Owners of IĮ, having two or more IĮ, until 2005 December 31 These companies must be reorganized into one individual company or, leaving only one individual company, reorganize, transfer or liquidate the others by the method of merger established in the Civil Code.

IĮ, in the name of which both spouses are indicated as owners, until 2004 December 31 must make a decision regarding the owner of the company or reorganize an individual company into a joint-stock company, a closed joint-stock company, a public institution or a business partnership, reorganize by dividing into two individual companies, transfer an individual company or liquidate it.

Economic community

If the efforts and funds of one person are not enough to start a business and commercial activity and you need to use business partners, you can establish a business partnership.

The advantages of a business partnership are as follows: a business partnership does not need to employ employees according to employment contracts, it can be staffed by real members of the business partnership on the basis of a joint venture agreement, the business partnership can manage simplified accounting, laws do not regulate the minimum equity capital of a business partnership. However, when establishing a company of this legal form (type), it is necessary to assess the economic risk and take into account the fact that the partnership is a legal entity with unlimited civil liability and its assets are not separated from the assets of its members.

Business partnerships can be of two legal forms (types): true business partnerships (TŪB) and limited (trust) business partnerships (KŪB).

The establishment, reorganization, liquidation, management and operation of business partnerships, the rights and duties of members are regulated by the Law on Business Partnerships of the Republic of Lithuania and the joint activity agreement establishing both TŪB and KŪB.

A partnership is a company established by the joint activity agreement of several natural or legal persons, as well as natural and legal persons, to carry out commercial and economic activities under the common name of the company, after combining their assets into joint partial ownership. At least one of its members must be named in the name of TÜB. The name of KŪB must include at least one full member and the words "limited partnership" or their abbreviation "KŪB".

An economic partnership must have at least 2 and no more than 20 members. State government, management and state control institutions, courts cannot be a member of an economic partnership. State and municipal companies cannot be members of TŪB, but these companies can be limited members of KŪB.

TÜB consists of real members acting on behalf of the company. According to TÜB's obligations, its members are jointly and severally liable for all their assets. TÜB is not responsible for the obligations of its members that are not related to the community's assets.

KŪB consists of full members and limited partners acting in the common name of the company, KŪB must have at least one full member and at least one limited member. The property of the limited partnership is separated from the property of the limited partners, but not separated from the property of the real members. For the obligations of KŪB, its real members are jointly and severally liable with all their assets, and limited partners - only with the part of their assets that was transferred to KŪB according to the contract.

Joint and several liability of members means that a creditor of a business partnership can direct his claims both to the property of the business partnership and to the property of any of its members or several of its members.

The foundation for the establishment and operation of a joint venture is a joint venture agreement. It must include: the name of the business partnership, its objectives, full members and limited partners, their rights and obligations, the shares of real members and limited partners in the common property, the procedure for withdrawing money from the cash register, rules for the distribution of income and losses, withdrawal and removal of full members and limited partners and the conditions and procedure for admission of new members to it, rules for the management of the association and the management of its affairs, persons authorized to represent the association and their powers, the procedure for adopting resolutions and other provisions that do not contradict the laws. Therefore, persons setting up a business partnership should prepare this contract well. The joint activity agreement is approved by a notary.

The real members of the community participate in the management of the economic partnership. Each real member of the business partnership has the right to represent the partnership and resolve matters of management, use and disposal of its assets. In the adoption of resolutions, the real member has one vote, regardless of the size of his share in the common property.

The limited partners do not participate in the management of the partnership, that is, they do not have the right to represent the partnership and participate in the adoption of resolutions regarding the partnership's activities, except in cases where such participation is provided for in the joint venture agreement.

the small community

A small partnership is a private legal entity with limited liability. This means that the members are not responsible for the unfulfilled obligations of the small partnership with their property. A small partnership can be established by no more than 10 natural persons (there can also be one founder). The small community can carry out any activity not prohibited by law. More:LINK and LINK

Joint-stock company and closed joint-stock company

In order to engage in activities related to greater economic risk, it is better to choose a legal entity with limited civil liability - a joint-stock company (AB) or a closed joint-stock company (UAB), i.e. those legal forms (types) of companies that are responsible for their obligations only to their own (companies) wealth The company's shareholder, if the planned business fails, risks only the assets he contributes to the company.

The establishment, reorganization and liquidation, management and activity, rights and duties of shareholders of joint stock and closed joint stock companies are regulated by the Law on Joint Stock Companies of the Republic of Lithuania .

When discussing the provisions applicable to AB and UAB, the term "company" is used.

The law on joint-stock companies establishes the common and distinguishing features of AB and UAB - the method of establishment and capital formation, requirements for founders and shareholders, management and control bodies. The founders of the company can be natural and legal persons from the Republic of Lithuania and other countries.

A company is a company whose authorized capital is divided into parts called shares. The company is a legal entity with limited civil liability. The assets of the company are separated from the assets of the shareholders. According to its obligations, it is liable with its assets. According to the company's obligations, the shareholders are only responsible for the amount that they must pay for the shares.

When establishing AB and UAB, individuals combine their funds (capital) for joint activities.

The authorized capital of AB cannot be less than 40 thousand. euros. Its shares can be distributed and traded publicly, in accordance with the legal acts regulating the public circulation of securities.

The authorized capital of UAB cannot be less than 2.5 thousand. euros. UAB shares cannot be distributed or traded publicly.

Since AB has the right to distribute shares publicly, it has the right to use various means of information and to sell its shares to any natural or legal person. The law strictly limits the distribution of UAB shares, thereby narrowing its potential sources of funds (capital).

The founders of the company conclude the company's founding agreement (if the founder is one, he signs the founding deed). This agreement gives the right to open a savings account of the established company in a bank registered in the Republic of Lithuania and, upon establishment of the AB, to register shares with the Securities Commission.

The shares of the established company are signed by the founders of the company. When all the initial contributions for the shares have been paid, the founders must convene a founding meeting prior to the registration of the company. The founding meeting approves the founding report of the joint-stock company, appoints an audit firm, elects the members of the company's management bodies, and resolves other issues within the competence of the general meeting of shareholders. After the founding meeting, the company is registered in the Register of Legal Entities. From the date of registration, the company is established and acquires the rights of a legal entity.

The law on joint-stock companies establishes that, when establishing a company, initial contributions for subscribed shares are paid only in cash to the cumulative account of the company being established. The funds in this account can be used by the company only after its registration.

Shareholders of the company may be natural and legal persons of the Republic of Lithuania or other states who have purchased at least one share of the company in accordance with the procedure established by law. Each shareholder in the company has such rights as are granted to him by the shares of the company owned by him.

The company's activities are guided by the articles of association, which are the main legal document.

The company's management bodies are the general meeting of shareholders, the supervisory board, the board and the head of administration. The mandatory management bodies of AB are the general meeting of shareholders, the head of administration and at least one collegial management body - the supervisory board or the board. The mandatory management bodies of UAB are the general meeting of shareholders and the head of administration. The supervisory board and the board of UAB may not be formed.

The essential characteristic of AB and UAB management is that the owners of AB or UAB assets have as much influence as they own the assets (shares) of the company. The most important decisions, including the formation of management bodies, are made by shareholders by voting, and the number of votes of each of them depends on the number of shares held.

AB and UAB manage accounting according to the binary system, which requires detailed knowledge of accounting and employees with appropriate qualifications. After the end of the financial year, before the ordinary general meeting of shareholders in all joint-stock companies, the audit company elected by the general meeting of shareholders must check the financial reporting.

In closed joint-stock companies, an audit must be performed if they meet at least two of the following conditions:

  • sales revenue exceeds 3.5 million euros during the reporting financial year;

  • the average number of registered employees during the reporting financial year is at least 50;

  • The amount of assets presented in the balance sheet exceeds 1.8 million. euros.

Cooperative company

Cooperative company (KB) - a company established by natural and/or legal persons in accordance with the procedure established by law, intended to meet the economic, social and cultural needs of its members. Its members contribute funds to form capital, share risks and benefits among themselves according to the turnover of goods and services of members with this company and actively participate in the management of KB.

KB is a legal entity with limited civil liability. The property of KB is separated from the property of its members. KB is liable for its obligations only with its assets. According to the obligations of the cooperative company, the KB member is responsible for the share due to be paid.
KB has at least 5 members and its own name. The name must contain the words "cooperative society" or "cooperative".

KB has the right to:

  • engage in activities that do not contradict the laws and the goals specified in the company's articles of association;

  • have accounts in the banks of the Republic of Lithuania and other countries;

  • manage, use and dispose of property owned by it in accordance with the law;

  • to join the unions of cooperative companies, as well as to other organizations in accordance with the procedure established by other laws;

  • enter into transactions, assume financial obligations;

  • determine the prices, rates and tariffs of their production, works and services;

  • to borrow funds from its members in accordance with the procedure established in the KB statutes;

  • determine your organizational structure, establish branches and representative offices, be the founder of other companies and organizations.

The founding documents of KB are the articles of association and the founding agreement. KB's statutes are the document by which KB is guided in its activities.

KB founders must be at least 5 natural and/or legal persons. Every founder of KB must become its member. The founders of the KB conclude the founding agreement of the KB, prepare the draft of the KB statutes, convene the founding meeting. The memorandum of association is a public document.

The legal basis of KB's activity is the company's articles of association, which are prepared by the founders and adopted at the founding meeting. KB members can be individuals and legal entities of the Republic of Lithuania and abroad.

The establishment and activities of KB are regulated by the Law on Cooperative Companies (Cooperatives) of the Republic of Lithuania .

Non profit organizations

If a person or their group wishes to work in the social, educational, scientific, cultural, sports or other similar fields and if the purpose of their activity is not profit seeking, it is possible to establish one of the non-profit organizations - public institution, association, charity and support fund, public organization.

The most popular non-profit organization is a public institution (VšĮ), because it is the only non-profit organization that can carry out economic and commercial activities. VšĮ is a public legal entity that does not seek benefits for itself and cannot distribute the profit to the founders, members, shareholders.

Private limited liability companies can be established by natural and legal persons of the Republic of Lithuania and foreign countries. The number of founders is unlimited. State and local government institutions can transfer state (municipal) property to Public Enterprises only on the basis of use. Some distinctive features of VšĮ:

  • institutions must operate in social, educational, scientific, cultural, sports, business support or other similar fields;

  • the institution can receive income for the activities provided for in the statutes of the public institution, but it cannot distribute the profit to its shareholders (owner), therefore the majority of the income is used to develop the main activity;

  • the institution can receive material and financial support in the form of charity.

The Law on Public Institutions of the Republic of Lithuania establishes the procedure for establishing, managing, operating, reorganizing and liquidating public enterprises.

The Law on Associations of the Republic of Lithuania establishes the procedure for establishing, managing, operating, reorganizing and liquidating associations.

European Economic Interest Group

Since 2004 May 1st the Law on European Economic Interest Groups of the Republic of Lithuania (hereinafter - the Law) comes into force. This law applies to European economic interest groups with their headquarters in the Republic of Lithuania (hereinafter referred to as the group). The law ensures the 1985 July 25 EU Council Regulation no. 2137/85 "On European economic interest groups" (hereinafter - the regulation) application in Lithuania.

A European Economic Interest Group is a private legal entity whose purpose is to help its members to carry out or expand economic activities, to achieve better performance, but its purpose is not to seek profit. The group's activities are related to the economic activities of its members and only supplement them. Therefore, the group is not allowed to:

  • to directly or indirectly manage or supervise the activities of its members or other companies, in particular in the areas of personnel management, finance and investments;

  • directly or indirectly, on any basis, hold shares of its members; owning shares of other companies is allowed only to the extent necessary to achieve the group's goals, and only if it is done for the benefit of the group's members;

  • hire more than 500 employees;

  • to be a member of another European economic interest group, etc.

The members of the group can be companies and other legal entities whose headquarters and central administration are located in the territory of the EU. Group members may also include natural persons engaged in industrial, commercial, craft or agricultural activities, or providing EU professional or other services.

In terms of number of members, the group must consist of at least:

  • two companies or other legal entities whose central administrations are located in different Member States, or

  • two natural persons who carry out their main activities in different Member States, or

  • a company or other legal entity whose central administration is located in one Member State and a natural person who carries out its main activity in another Member State.

Parties wishing to join the group must conclude a group establishment agreement. The founding agreement together with other documents must be submitted to "Registrų centras" LLC, which maintains the register of legal entities. The group registration procedure is regulated by the regulations of the Register of Legal Entities (changes to the regulations regarding group registration will be approved in the near future). From the day of its registration in the Register of Legal Entities, the group can acquire and have all rights and obligations, enter into transactions, and perform other legal actions in its own name. Group members assume unlimited joint and individual liability for group debts and other obligations.

The group establishment agreement must state: the name of the group, the official address of the group, the objectives of the group's establishment, the period of the group's activity (if it is limited), the last name of each group member-natural person, the name of the legal entity, legal form, permanent address, registration number and location.

The group's official address must be in the EU.

The name of the registered group must contain the words "European Economic Interest Group" or the abbreviation "EEIG".

The regulation and the law do not provide a requirement for the minimum capital of the group.

The profit obtained from the group's activities is considered the profit of its members and is distributed to them in the parts determined in the group's founding agreement, and if such parts are not determined in the agreement - in equal parts. Any member of the group may transfer all or part of his share to another member of the group or to a third party, but only with the unanimous consent of the other members of the group.

The group does not pay corporate tax, and the taxation of its performance is passed on to its participants. Therefore, the performance of the group is taxed by assigning to its members the income earned and the expenses incurred by the group. Revenue share:

  • in the event that a member of the group is a resident, the general procedure provided for in the Personal Income Tax Law of the Republic of Lithuania is taxed;

  • in the event that the group member is a legal entity, the general procedure established by the Law on Profit Tax of the Republic of Lithuania is taxed.

Groups are subject to the legal norms of the Republic of Lithuania, which regulate the liability, insolvency, and liquidation of the members of the real business partnership, to the extent permitted by the regulation and the aforementioned law.

The law allows the establishment of groups since 2004. on May 1, but in reality it will be possible to establish groups only after the amendments to the provisions of the Register of Legal Entities come into effect.

European company

If the Lithuanian market is not enough for the development of your company's activities, you want to develop your business in other EU countries or unify the management structure of companies operating in several countries, we recommend establishing a European company (SE, French: Societas Europaea). The activities of SEs with their headquarters in the Republic of Lithuania are regulated by the Law on European Companies of the Republic of Lithuania and the legal norms of the Republic of Lithuania regulating the activities of ABs. The aforementioned law ensures the 2001 October 8 Council of Europe Regulation no. 2157/2001 "On the implementation of the European Company Statute" in Lithuania.

An SE can be established in one of four ways: by merging, by establishing a management (holding) European company, by creating a subsidiary SE, operating during the transformation of an AB into an SE. Companies from at least two Member States must participate in the establishment of an SE.

The authorized capital of SE must not be less than 120 thousand. euros. The authorized capital is divided into shares. The SE shareholder is not liable for an amount greater than the value of the shares subscribed by him.

The legal acts provide that the registered office of the SE must be in the EU territory, in the same country as its head office, i.e. the location of the permanent management body. However, the registered office may be transferred to the territory of another Member State.

SEs, whose headquarters are in Lithuania, are registered in the Register of Legal Entities. SE becomes a legal entity from the day of its registration in this register.

The formal sign of SE is the abbreviation "SE" before or after the name.

Depending on the form of governance approved by the articles of association, the SE can be governed by a two-tier or one-tier governance system.

Although the establishment of an SE requires considerable initial capital, this legal form of companies provides opportunities to search for the most favorable environment for your company, as taxes are paid in accordance with the laws of the country where the registered office of the SE is located. SE has a single company bookkeeping, so you can reduce administrative costs, legal costs, which arise due to the uneven legal environment.

The Law on European Companies of the Republic of Lithuania allows the establishment of SEs since 2004. on October 8, but it will be possible to actually establish an SE only after the by-laws related to this law enter into force.