Deciding on which countries to expand your business to can be a complex and difficult decision. As an aspiring entrepreneur, you might have heard of the lucrative business environment of Lithuania and might be wondering about the process of starting a business in Lithuania as a foreigner. In this article, Tetra Consultants will provide the ultimate guide on starting a business in Lithuania as a foreigner so that you may better understand this business phenomenon and make a more informed decision about whether you should register company in Lithuania.
First and foremost, before you even begin the process of starting a business and incorporation, you must understand what the main types of company and business structures there are in Lithuania. There are four main types of business structures for international investors, namely public limited company (AB), private limited company (UAB), general partnership (TUB) or limited partnership (KUB), and branch or representative office.
Public LImited Companies
Firstly, with respect to public limited companies, they remain to be the most common business structure for medium to large sized companies. The minimum share capital expected of such public limited companies is roughly €44,000, with at least 25% to be put up. Additionally, 1 or more shareholders are required in order to fully register a public company. However, the company and its shareholders have limited liability, meaning that their personal assets are protected and free from the debt burdens and obligations of the company, ensuring personal security for these business owners.
On the financial side, auditors are needed to prepare the company’s annual financial statements. Additionally In terms of management, you are expected to appoint a supervisory council or “board of management”.
To officially register for a public limited company, an incorporation agreement or act of incorporation is required. The relevant documents such as the company’s articles of association, the minutes of the founding meeting as well as various conformations are required. These confirmatory documents include the confirmation of a Lithuanian corporate bank account, as well as a confirmation of share registration with the Securities Commission. Last but not least, a report on the company alongside the auditor’s opinion is required for official business registration.
Private Limited Companies
The business structure of a private limited company is especially popular among smaller foreign investors, with a minimum share capital of roughly €2,900 required for business initiation. However, its maximum number of shareholders is 250, with the company and its shareholders maintaining limited liability similar to that of public limited companies.
In terms of its official business registration, the company’s incorporation agreement or act of incorporation is required, alongside the company’s articles of association, the minutes of the founding meeting, as well as a confirmation of its Lithuanian corporate bank account
There are two different types of partnerships, namely general or limited partnerships. General partnerships have unlimited liability, where the partners personal assets are not protected and they hold personal responsibility for the business debts and obligations. In contrast, limited partnerships ensure that partners have limited liability, and are protected in a similar fashion as limited companies, both public and private, explained above.
Branch or Representative Offices
In terms of responsibility and liabilities, the foreign parent company in charge of this branch operations is responsible for all its liabilities. Moreover, the branch office can conduct trade within the scope set by the parent company. In contrast, the representative office can promote but cannot engage in trading activity within Lithuania.
In terms of regulations surrounding management, at least one manager must reside in Lithuania. However, there are no formal auditing requirements for the preparation of financial statements unlike the business structures explained earlier.
Now that you have a better understanding about the the key types of business structures you can incorporate under as a foreigner, it is important to understand the country’s overall business environment to determine if you should being the process of starting a business in Lithuania as a foreigner.
Business and regulatory environment
The government of Lithuania is committed to a free market economy liberal business environment, thus ensuring ample economic opportunity. In fact, as a member of the WTO which has ratified the vast majority of international treaties, setting up a business there would not be a significant challenge. Additionally, the country’s investment laws conform to European Union standards as well, with free regulations like allowing foreign investors to buy over Lithuanian companies. Furthermore, the unrestricted movement of capital and dividends further bolsters investment from foreign actors.
Tax and financial environment
Lithuania is current within multiple double taxation agreements with many countries, ensuring that the taxes paid by international businesses are minimised as far as possible. There are also multiple different types of financial incentives available such as investment incentives in Lithuania, most frequently centered on three Free Economic Zones in the cities of Klaipeda, Utena and Kaišiadorys.
These financial incentives include the provision of tax holidays and tax reductions for companies investing over €1 million, exemption from various taxes and dividends paid when it comes to foreign investments and many more. In fact, strong economic support and funding from the EU for companies setting up in Klaipeda further bolsters the entrance of new businesses if you are a foreigner.
On the financial side, Lithuanian banks offer the standard range of facilities, including foreign exchange and international payments. Furthermore, there are no foreign exchange restrictions, meaning that foreign businesses are given maximal comfort and ease of operations.
Navigating the country of Lithuania’s complex business climate might be a challenging process – a hassle to say the least. However, with key benefits regarding tax rates and a business friendly environment outlined above, it is easy to see why many businesses would choose to set up in Lithuania. As such, Tetra Consultants hopes that this article has provided you a much better understanding about the key steps to starting a business in Lithuania as a foreigner so that you can truly decide on whether you should register company in Lithuania yourself.
So, what are you waiting for? Contact us to find out more about the process of starting a business in Lithuania, and our dedicated and experienced team will respond within the next 24 hours. Tetra Consultants will not only empower you by helping to navigate the different regulations of Lithuania, but also aid in facilitating the registration of your company there while providing invaluable, nuanced insights into any potential challenges.