A substantial amount of people returning to Lithuania bring plenty of new ideas and business plans with them.
Establishing a business includes: finding and formulating a vision, choosing an appropriate type of enterprise, creating a business plan, finding financial sources, acquiring business licenses and permits.
Forming a clear vision for the start of your business is perhaps the most important step to start with. The vision will help you decide which type of business entity is the most appropriate to choose from – pursuing self-employment or establishing a legal person. To facilitate the decision making, you might need to evaluate the following criteria:
- Character of activity. The specific activities you plan to carry out, that is, the decision, depends on the complexity, size and other circumstances specifically related to the operational activities of your business.
- The amount of available capital. To establish certain types of legal persons, the founder of the legal entity is required to meet the requirements set for a specific amount of authorized capital.
- Tax implications. The amount of the taxes payable directly depends on the form of activity chosen by the person in question.
- Degree of liability. If a person intends to limit his/her liability and chooses not to assume liability for the obligations in the case of business failures including own or family assets, he/she should choose a limited liability legal entity.
- Number of founders. If there are several and more stakeholders wishing to engage in a particular activity together, business activities should be pursued by establishing a legal entity.
- The complexity of business activities. Being self-employment is easier, that is, you do not need to create a legal person management
- If a decision has been made to establish a company, what type of company should it be?
Source: "Innovation agency"
If you decided to set up a company, first assess and choose the legal type of an undertaking which is the most appropriate to implement the identified goals.
According to the degree of liability of legal persons (LP), they are divided into those of limited and unlimited civil liability. The participant of a legal person undertakes unlimited civil liability obligations to the extent of his owned assets or assets held by the trust. If a legal person is established as a limited liability company, its participant is not responsible for any obligations.
In relation to the pursued objective, legal persons may be grouped into public and private. Public and private legal persons usually differ according to their founders’ objectives (meeting public (not seeking benefit for themselves) or private (seeking material gain) interests, type of activity and use of profit (participants of private legal persons have the right to participate in the profit, whereas the profit of public legal persons may only be used for operational objectives).
Most widespread types of companies in Lithuania:
- Individual enterprise;
- Private limited liability company;
- Small partnership.
The main features of and differences between the most popular legal forms of legal entities
|MB, Small partnership
|UAB, Private limited liability company
|IĮ, Individual enterprise
|Minimum number of participants
|10 members. Only natural persons.
249 (shareholders). Natural persons or legal entities.
|1 owner. Only a natural person can be the owner.
of the capital.
|Not less than 2 500 EUR
|This requirement is not applicable.
|Natural and/or legal persons
|Participant’s liability for
the commitments of
the legal entity
|A small partnership member has limited civil liability (a member of a legal entity bears no responsibility for liabilities of a legal entity).
|A shareholder has limited civil liability (a member of a legal entity bears no responsibility for liabilities of a legal entity).
|Owner of an individual enterprise has unlimited civil liability (if the assets of an individual enterprise are not enough to meet all the commitments of the enterprise, the owner of the individual enterprise must cover these liabilities with his own assets).
|The principle of voting
during the process
of decision making
|Usually it is 1 member per one vote, however, when the small partnership is led by the head, the provisions of the small partnership may specify otherwise.
|1 share per 1 vote
|The decisions are made by the owner of the individual enterprise.
|Accounting (legal regulation)
Simplified accounting procedure Republic of Lithuania Law on Accounting, Republic of Lithuania Law on Financial Statements of Entities, business accounting standard
|Republic of Lithuania Law on Accounting, Republic of Lithuania Law on Financial Statements of Entities, Republic of Lithuania Law on Consolidated Financial Statements of Entities, international accounting standards, business accounting standards.
Simplified accounting procedure, the requirement to produce a set of annual financial statement is not applicable. If the provisions of an individual partnership provide for drafting of financial statements.
Republic of Lithuania Law on Accounting, Republic of Lithuania Law on Financial Statements of Entities, business accounting standards
|Capital and contributions
Contributions by members of small partnerships can be of monetary or non-monetary form. The value of non-monetary contributions is agreed upon by all members of the small partnership.Works or services cannot be considered as contributions
|Shares are the parts to which the capital is divided. Shares are paid with money and/or a non-monetary contribution owned by a shareholder by the right of ownership, the value of which must be established in line with the procedure specified in legal acts.Shares are the parts to which the capital is divided. Shares are paid with money and/or a non-monetary contribution owned by a shareholder by the right of ownership, the value of which must be established in line with the procedure specified in legal acts.
|Contributions are the personal property of the owner of an individual enterprise.
|Distribution of profit
Profit is distributed proportionally according to the amount of the contributions made, unless the provisions of the small partnership provide otherwise.
Profit can be distributed in advance. In the event it becomes clear following the end of the financial year that the advanced distribution of profit exceeds the established amount, the surplus has to be recovered.
|The amount of dividends paid to shareholders is proportionate to the nominal value of shareholders’ shares. Dividends can be paid for a shorter period than the financial year.
|The whole profit goes to the owner of the individual enterprise.
Founders (members) of the small partnership can choose one of the two structures of the small partnership:
– when the small partnership is a meeting of members of the small partnership, which is its management authority. In this case, the small partnership does not have other bodies, only a representative elected by its members, however, all the operational decisions are made during meetings of members of the small partnership;
– when the small partnership is the meeting of members of a small partnership and the single-person management body, i.e. the head of the small partnership, with whom a civil agreement is concluded.
Private limited liability company must have a general shareholders’ meeting and a single-person management body, i.e. the head of the company.
A collegiate supervisory body, i.e. a supervisory council and a collegiate management body, i.e. the board, can be established.
A job agreement is concluded with the head of the company.
Usually, the owner of an individual enterprise is a single-person management body, i.e. the head of the company.
When another person is appointed the head of an individual enterprise, this person acts on behalf of the individual enterprise, and the owner of the individual enterprise acts only within his competence as a meeting of members.
|A person acting on
behalf of the legal person
Depending on the structure of a small partnership, the following persons may act on its behalf:
the meeting of members of a small partnership, the latter represented by its representative or
the head of the small partnership, i.e. the single-person management body.
|A private limited liability company is represented by its head when dealing with other persons.
|When there is no head of an individual enterprise appointed by its owner, the owner acts on behalf of the enterprise. When there is a head of an individual enterprise, he acts on behalf of the enterprise.
Source: Innovation agency
Time to complete
1. Prepare articles of association, along with founding act/founding agreement
1 day (after receiving all required information and documents)
Only legal costs, if carried out by legal advisor
You will need:
2. Reserve a temporary company name (optional)
Approx. 16 EUR
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
1-2 days (due to bank’s risk management procedures)
Free (or bank fees)
This accumulative bank account is only used for depositing share capital. Later any bank can be chosen for operations. Minimum required share capital – 2500 EUR.
4. Transfer share capital to that accumulative account
Free (or bank fees)
5. Notarise the founding documents at a registered notary’s office
Approx. 72 - 290 EUR (depending on the amount of share capital)
If your country has joined the 1961 Hague Convention, your documents need to be certified by an Apostille. List of countries
6. Register the company in the Register of Legal Entities
Up to 3 business days
Approx. 57 EUR
The documents may be submitted to the register only after they have been notarised. (step 5).
7. Convert the accumulative bank account into a settlement account
2-7 days (depends on the bank)
Depends on the bank
Source: Invest Lithuania
- Centre of Registers E-guide: Starting a Business/Organisation in Lithuania and information how to register a new legal entity: "Centre of Registers"
- Bank of Lithuania financial market participats (banks, credit lenders, insurance companies etc.): Bank of Lithuania
- Palace of notaries: a map of notaries all over Lithuania: Notarų rūmai
Contact “Innovation agency” for more information and free consultations!
How to establish an enterprise? Am I eligible for financial support? How to create a good business plan? Where can I find help?