When starting a business in the Republic of Belarus, choosing the right organizational and legal structure is crucial. Selecting between a Limited Liability Company (LLC) and a Closed Joint Stock Company (CJSC) is frequently the deciding factor in this decision. Since each option has advantages and disadvantages, choosing one is an essential first step in matching your company’s goals.
Comprehension of LLC: Moderate Risks and Adaptability
In Belarus, limited liability companies (LLCs) are the most popular business structure, particularly for small and medium-sized businesses. Crucial elements and things to think about are:
- Member Responsibility: One of LLCs’ main benefits is that members are not held personally responsible for the debts of the business. Their accountability is restricted to the amount of authorized capital that they possess.
- Share Disposal: Members of an LLC are able to freely sell or transfer their shares, making it a fairly simple process to leave the company.
- No Minimum Capital: Since there is no legal minimum capital requirement, LLCs give founders the freedom to determine the amount of authorized capital.
- One to Fifty Founders: One to fifty people, either legally or personally, may form an LLC.
- Diverse Economic Activities: LLCs are able to participate in a wide range of economic endeavors.
- Contributions to the Authorized Fund: All forms of property, including cash and property rights, may be contributed to the fund. Property rights cannot be more than 50% of the total.
- Information Disclosure: LLCs are required under certain circumstances to provide information about their transactions with affiliated parties; however, failure to comply does not carry administrative penalties.
- Registration Fees: A minimum investment of 150 Belarusian rubles is needed to register an LLC.
CJSC: Perfect for Bigger Investments and Projects
Closed Joint Stock Companies (CJSCs) are better suited for large-scale businesses and projects requiring significant capital outlays. The salient features, benefits, and drawbacks of CJSCs are as follows:
- Investment Attraction: CJSCs provide the opportunity to sell shares in order to raise money, and members are liable for the debts of the organization up to the value of their shares.
- Restrictions on Share Disposal: CJSC members are not as free to sell their shares as LLC members are, which makes it harder to leave the company or sell investments.
- Minimum Capital: CJSCs must issue shares that are tradeable on the securities market and have an authorized capital of at least 100 basic units.
- Unrestricted Founders: A CJSC can have an unlimited number of founders, giving it flexibility.
- Diverse Economic Activities: CJSCs are able to participate in a wide range of economic endeavors.
- Share Contributions: In line with LLCs, contributions to the authorized fund may be made in the form of cash, real estate, or property rights, with the maximum percentage of real estate being 50%.
- Shares: CJSCs are able to issue both common (also known as ordinary) and preferred shares. Preferred shares give holders priority rights to dividends and other benefits as specified by the Charter, whereas ordinary shares give voting rights to shareholders at general meetings.
- Information Disclosure: CJSCs are required to provide information on material transactions and relationships with connected parties on the stock market. Fines apply for noncompliance.
- Legal Costs: A significant amount of paperwork and legal support are needed to establish a CJSC, which raises the overall costs.
- Tax Implications: Transactions involving shares subject CJSCs to additional taxes, potentially raising their overall tax burden.
Choosing Wisely: Important Things to Take into Account
There are a few important considerations to make when choosing between LLC and CJSC:
- Business Type and Size: An LLC might be a better option if you want to start a small or medium-sized business. In the case of larger investments, CJSC might be better.
- Risk management: Selecting an LLC can assist in reducing individual liability for the debts of the company.
- Startup Costs: Take into account the substantial legal and documentation costs associated with CJSC creation when making your decision.
To sum up, choosing an organizational and legal structure is an essential first step in starting a business in Belarus. When choosing between LLCs and CJSCs, take into account your unique business goals and requirements as each structure has advantages and disadvantages of its own. Finally, in order to make an informed decision, always seek the advice of tax and legal professionals. Consider long-term business development plans and potential legislative changes when choosing an organizational and legal structure.
We offer professional consulting services to help you make the right choice for your business needs. From establishing your business to managing legal and tax matters, we’re here to guide you every step of the way.
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If you need help starting a business in Belarus or need additional information in this area, do not hesitate to contact us. We are here to help and support you personally.
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