Among the European Union, Lithuania is one of the most suitable for entrepreneurs and investors looking to establish productive businesses in Europe. This is a result of some basic factors, including a favorable tax environment, business-oriented government, standard airline facilities, a growing electronic services industry, and others.
However, in response to the aforementioned, Lithuania is ranked 4th among the EU-28 and 11th among over 190 countries in the global ranking for Ease of Doing Business (2020). In that case, if you’re an entrepreneur looking to start a business in Lithuania, you have made the right choice.
Nonetheless, to have a successful business in Lithuania, there is some basic information you should know and strategies you should practice while establishing your business. As you read further all these will become clearer to you.
Benefits Of Starting A Business In Lithuania
As mentioned above, Lithuania is a comfortable business environment for most foreign entrepreneurs and a suitable site for multinational start-ups and fast-growing businesses. Below are some of the benefits of starting businesses in Lithuania:
- Well-developed infrastructure that ensures fostered development and smooth running of businesses.
- The beneficial tax structure of 15% and 5% for small companies.
- Opportunity to enter the global EU market without restriction.
- A business-oriented government that encourages infants and start-up businesses.
- Availability of business accounting companies that provide support and advice for start-up businesses.
- Smooth communication as a result of several languages in the state including, English, Russian, Polish, and others.
- Fast Internet and advanced IT in several cities in the state.
Steps In Starting A Business In Lithuania
Lithuania might be a suitable site for both start-ups and growing businesses, but without a proper understanding of the basic steps and strategies involved, success might be challenging. Therefore, to have a successful business in Lithuania, you have to follow these steps:
1. Prepare Articles Of Association
To have a registered business in Lithuania, you have to prepare the article of association. This will state the name of the business, its address, the rules and regulations of the business, the purpose, and the process for appointing directors. While preparing your articles of association, you have to prepare the founding act also.
2. Reserve A Temporary Company Name
You can reserve a temporary name for your company, although this is optional. All you have to do is to come up with a name and submit an application (form JAR-5) to the Register of Legal Entities. This name will be reserved for 6 months.
3. Open An Accumulative Bank Account
An accumulative bank account is an account used to deposit the share capital or increase the share capital of an established company. The amount of the required share capital must be at least EUR 2500.
You can only open an accumulative bank account after your company is registered and no payment can be made from the account. However, after your company has been recognized as a legal entity, you can convert the account from an accumulative bank account to a settlement account.
4. Notarize The Founding Documents
The next step is to notarize your founding document at the registered notary’s office. However, if your country is a member of the 1961 Hague Convention Treaty, your documents need to be certified by an Apostille but if not, your documents need to be legalized according to the Lithuania requirements.
Additionally, documents issued in Russia, Moldova, Estonia, Latvia, and Ukraine do not require both legalization and certification by Apostille.
5. Register The Company In The Register Of Legal Entities
After your company has been notarized, the next thing to do is to register the company as a legal entity. This is when your company is recognized to have legal rights and responsibilities, including tax filings. Now at this point, you can convert the accumulative bank account into a settlement account.
6. Business Accounting And Establishment Companies
After you have successfully registered your business and clarified all the required documents, the perfect thing to do is to partner with a professional and trustworthy business establishment company that can guarantee the successful running and improvement of your business and also help in your business accounting.
However, one of the notable in Lithuania is StartBusiness companywhich specializes in helping Start-ups and growing businesses with business accounting, advice, and strategies.
Types Of Business Structures In Lithuania
The selection of business structure is another thing to consider before starting your business in Lithuania. Below are some of the common business structures in Lithuania.
Public Limited Liability Company
In Lithuania, Public limited liability is most suitable for medium or large businesses. The minimal registered capital to establish this kind of company is EUR 40,000 and at least 25% of the capital must be deposited to the company bank account.
Moreover, there can be more than one founder or shareholders, who might either be individuals or legal organizations. Interestingly, shares are made available to the public.
Private Limited Liability Company
This kind of company is basically for small-scale businesses. The minimal registered capital is EUR 2,500 and at least 25% of the required capital must be deposited in the bank. Shares of this kind of company are not for the public and one or more people can be founders or shareholders.
General Partnership And Limited Partnership
These are the common partnerships in Lithuania. A general partnership is a kind of partnership that has unlimited liability while a limited partnership has limited liability. However, both partnerships are regarded as separate legal entities.
Frequently Asked Questions
How Much Does It Cost To Incorporate A Company In Lithuania?
If you want to establish a private limited liability company, you will pay a state charge of 574 EUR and a notary fee in the range of 102 EUR to 233 EUR. Sometimes, you will pay additional fees for translation which is a range of 20 to 25 EUR.
How Do Taxes Work In Lithuania?
Lithuania is one of the most favorable tax environments for foreign investors. Below is the list of taxes in Lithuania:
- Profit tax for all legal entities is 15% of total annual revenue.
- A reduced profit tax of 5% to all companies whose annual income received doesn’t exceed one million litai and not more than ten people.
- If a company is engaged in agricultural production, payment of profit tax is exempted for such a company.
- If your company’s annual turnover is more than 29,000 EUR, you have to pay 21% VAT.
Lithuania is a perfect site for foreign investors who wants to build a successful business in Europe, connect to several states without stress, and pay fewer taxes. However, it’s essential to understand the step-by-step processes to establish a successful business in Lithuania.
Most importantly, a partner with business establishment companies in Lithuania might be of help and save you from some inevitable stress. One of the notable in Lithuania is StartBusiness company.
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