LITHUANIA EASES INCORPORATION RULES FOR SMALL - AND MEDIUMâ€'SIZED BUSINESSES

In Lithuania there exists the following main legal forms of business: public limited liability companies, private limited liability companies, State enterprises, municipal enterprises, cooperative societies (cooperatives), agricultural companies, general partnerships, limited partnerships, individual enterprises, European economic interest groupings, European companies and European cooperative societies. The activity of each legal form of business is regulated by special law. There are two types of legal forms of business that dominate in Lithuania: private limited liability companies and individual enterprises.

According to the data of the Department of Statistics to the government of the Republic of Lithuania, the number of economic entities in operation, by legal form, at the end of the year 2009 was 84,574 in total, whereas the number of private limited liability companies was 43,561 (51.5 percent of all economic entities in operation) and the number of individual enterprises was 20,499 (24.2 percent, accordingly). Together these two legal forms constitute 75.7 percent of all Lithuanian economic entities in operation at the end of 2009.

The Ministry of Economy of Lithuania announced that the World Bank, in its research made on June 1, 2009, ranked Lithuania in 99th place of a total 183 countries (21st of 26 European Union member states) due to the difficulties in procedures of starting a business. The Lithuanian government declared its objectives to improve the procedure for starting a business (focusing on these two most popular legal forms), and on Oct. 23, 2009, passed a regulation which set standard forms of incorporation documents for individual enterprises. On Nov. 22, 2009, the regulation on private limited liability companies followed, setting standard forms of incorporation documents for this legal form also.

To start an individual enterprise in Lithuania, it is sufficient to fill in the blank fields on the standard forms with individual information, and to then submit it to the Register of Legal Entities. Drafting and notary certification of these documents is now avoided. Since a private limited liability company is a more complex legal form than an individual enterprise, the new regulation related to private limited liability companies involves only the situation where there is only one shareholder who chooses to use all the standard provisions of the Law on Companies of the Republic of Lithuania and to form only one management body of the enterprise – the director. In this situation, as well as in an individual enterprise, it is sufficient to fill in the blank fields on the standard incorporation act and articles of association and to submit these forms to the Register of Legal Entities.

Drafting and notary certification of these documents are also avoided. But while the single-shareholder limited liability company suits the needs of small- and mediumâ€'sized businesses, here it should be noted that the legal form of a private limited liability company in Lithuania provides much more possibilities for doing business, and is intended to be used by 1 to 250 shareholders, with unlimited share capital (minimum – 10,000 litas or 2,900 euros), and a sophisticated multilevel management structure – and these implemented regulations with standard forms do not cover any of those, or many other additional issues.

These changes shorten incorporation procedures for small- and mediumâ€'sized single-individual-owned businesses nearly in half. Together with the plans of the government to shorten registration procedures at the Register of Legal Entities, from 5 to 1 working day, these improvements should turn to tangible results not only in surveys and rankings but also in a real easement of doing business in Lithuania. The most appropriate legal form for doing business in Lithuania that suits individual needs can be chosen after considering responsibility, expediency, taxation, management issues and, of course, after consulting professionals.