Updated 31.01.2024<\/p>\n
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These forms of companies are most often used in Lithuania:<\/p>\n
\u2014 Limited liability company (UAB) \u2013 the most popular form of a company, suitable for any size of businesses.<\/p>\n
\u2014 Small partnership (MB) \u2013 is a popular company form for a small business.<\/p>\n
\u2014 Personal enterprise (I\u012e) \u2013 is a company form intended for a small business, but the founder can be only one person, and the founder is responsible for the company’s obligations with his own assets.<\/p>\n
\u2014 Public limited company (AB) \u2013 appropriate for a large business.<\/p>\n
\u2014 Public Institution (V\u0161\u012e) \u2013 adapted for non-profit activities.<\/p>\n
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The most important criteria for choosing the legal form of a company are:<\/p>\n
1. Liability of the founders (whether the company’s obligations are covered by personal assets).<\/p>\n
2. Management, decision-making and voting methods.<\/p>\n
3. Taxation.<\/p>\n
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UAB features\u00a0<\/strong><\/p>\n \u2014 UAB is a limited liability legal entity. This means that the shareholders are not liable with their own assets for obligations of UAB.<\/p>\n \u2014 The founders can be natural and legal persons of any state. The number of shareholders is not limited.<\/p>\n \u2014 The minimum amount of authorized capital is EUR 1000.<\/p>\n \u2014 The director (manager) of UAB may be only a natural person, but of any nationality. It is mandatory to hire a manager. An employment contract must be concluded with the manager.<\/p>\n \u2014 Shareholders have the right to receive a share of profit (dividend) in proportion to the number of shares held. UAB profits can be distributed more than once a year. Advance payment of dividends is prohibited.<\/p>\n \u2014 UAB can be liquidated if it has no debts. The liquidation procedure lasts 5-8 months<\/p>\n <\/p>\n Decision-making methods<\/strong><\/p>\n \u2014 The most important management decisions of the company are made by shareholders by voting. Each share carries one vote, so the person with the most shares has the greatest influence on voting.<\/p>\n \u2014 Decisions may be adopted if more than 1\/2 of the votes of the shareholders who participated in the voting are collected for it.<\/p>\n \u2014 Some decisions require a majority of at least 2\/3 or 3\/4 of the votes cast, e.g. a decision on the payment of dividends may be adopted if at least 2\/3 of the votes are cast for such a decision.<\/p>\n \u2014\u00a0UAB must have one-person management body – the director (manager), a collegial management body – the board is optional.<\/p>\n <\/p>\n MB features<\/strong><\/p>\n \u2014\u00a0The small partnership (MB) is a limited liability legal entity. The members are not liable for the obligations of MB with their own assets.<\/p>\n \u2014\u00a0MB may be set up by a maximum of 10 natural persons (legal entities cannot be founders).<\/p>\n \u2014\u00a0When setting up the partnership there is no need to contribute a required amount of share capital, but members must make contributions (the amount is determined by the members themselves).<\/p>\n \u2014\u00a0MB profits are distributed in proportion to the size of the member’s contribution. MB profits can be distributed more than once a year. Advance payment of dividends is prohibited.<\/p>\n \u2014\u00a0A member may work for MB without entering into an employment contract (no need to pay high taxes on wages). MB can only enter into employment contracts with employees who are not members of the partnership.<\/p>\n \u2014\u00a0MB can operate with or without a manager. If there is a manager, a civil contract is concluded with him. Income under such contract is taxed at a rate of 15%, what is significantly less than under employment contract \u0334 40%.<\/p>\n \u2014 MB can be transferred in to UAB.<\/p>\n <\/p>\n Decision-making methods<\/strong><\/p>\n The following MB management bodies are available:<\/p>\n 1. Meeting of members only. In this case, the meeting of members is also the management body, one of the members being appointed as the representative of the small partnership, who in principle performs the functions of the director (manager).<\/p>\n 2. The meeting of members plus the one-person management body \u2013 a manager.<\/p>\n <\/p>\n \u2014 The most important management decisions of the company are made by members by voting.<\/p>\n \u2014\u00a0One member shall have one vote, regardless of the size of its contribution.<\/p>\n \u2014\u00a0If the small partnership has a director (manager), the regulations may provide for a different voting procedure (eg the number of votes depends on the size of the contribution).<\/p>\n \u2014\u00a0Decision is may be adopted if more than 1\/2 of the votes of all members of the small community are in favor.<\/p>\n \u2014\u00a0Some decisions have a majority of at least 2\/3 of the votes (eg on the distribution of annual profits), there are decisions that are taken unanimously (eg on the distribution of profits for a period shorter than the financial year).<\/p>\n <\/p>\n MB is well appropriate in the following circumstances:<\/p>\n \u2014\u00a0If the business is small (income does not exceed 100.000 Eur).<\/p>\n \u2014\u00a0If the business will be not hindered by the image of a small company.<\/p>\n \u2014\u00a0If some tax savings are significant to your business.<\/p>\n <\/p>\n <\/p>\n We will be happy to assist you with accounting<\/a><\/span>, taxation <\/a><\/span>or finance<\/a> <\/span><\/span>matters<\/strong><\/p>\n