Russia has one of the largest economies in the world as well as a significant domestic market. Foreign investors interested in establishing a business in the nation are drawn to the country’s economic potential. The nation has many special economic zones that attract investment in industries like industrial production, research and development, logistics, and tourism.
Doing business in Russia may entail adhering to new rules, registering in the Russian company register, and collaborating with or competing with Russian enterprises. This article will help you understand the process of launching a business in Russia.
Tired of the never-ending cycle of looking for a job just to add to your resume? Maybe now is the time to go out on your own and establish your own business.
What do you need to know and what do you need to do if you are a foreign individual or corporation wishing to start actively conducting business in Russia? What alternatives do you have for structuring your business?
How much does it cost to open a business in Russia?
The cost is determined by the type of business: individual entrepreneurship (IP) is the simplest and cheapest. The only expense is the state registration charge of 800 rubles ($13). Creation of a seal and the establishment of a bank account for individual entrepreneur are optional.
Despite the simplicity of the procedure, it would be advisable to consult with an expert. Incorrect document preparation, faults in completing or legalization might not only prolong the registration procedure but also incur needless fees.
In Russia, forming a limited liability company Moscow corporation (LLC) is substantially more expensive. Minimum permitted capital – 10 000 rubles (€158), state registration fee – 4 000 rubles (€63), manufacture of the seal – € 30-40, notary services – around € 300 and additional charges for the legal address – €700 for 6 months.
The LLC registration process currently takes 3-5 working days. However, if there are many documents and foreign firms or citizens act as founders, the production of documentation might take up to a month or longer.
Services for LLC registration start at € 900, depending on the task’s complexity.
When forming a joint-stock company, you should also pay for the allowed capital (at least 100 000 rubles if the JSC is public) and the issuance of shares. The state duty on securities issued is 0.2% of the nominal value, but not more than 200 000 rubles.
Buying an existing running firm is another option for beginning a business in Russia. Typically, they are authorized capital shares or whole LLCs. The purchase of such a business starts at € 1000 + notary services + state duty for making changes to the register. A corporation having a “business history” will be substantially more expensive.
The LLC Russia gains the status of a business with foreign involvement after acquiring a portion of the authorized capital. This implies that its operations will be governed by foreign investment regulations. This enables foreign enterprises participating in the realization of priority projects, in particular, to import means of production with large customs benefits.
The method for forming a business in Russia
Before you may register, you must complete nine steps. An investor can form a single proprietorship, a partnership (limited or general), or a corporation (limited liability or a joint stock company).
Foreign firms can also establish a branch or a representative office. Each firm must be registered with the Russian government; for international corporations, branches and representative offices must also be registered with a tax inspectorate.
The government offers numerous incentives to new businesses. In reality, distinct entities, such as the Foreign Investment Advisory Council, ensure the relationship between the government and the corporate market. A number of organizations were established to assist the establishment of new businesses, including the Investment Fund of Russia, the Development Bank of Russia (Vnesheconombank), and the Russian Agricultural Bank. Special Economic Zones were established to encourage investors to establish a business here.
If you want to open a company but are unable to be present in Russia, our lawyers in Russia will assist you with the entire registration procedure through the use of a power of attorney. They can also help you if you want to go to Russia.
Starting a company in Russia
If you are an individual or a firm considering opening a business in Russia, there are several factors to consider and procedures to follow. You should start with the basics, such as if you may lawfully operate a business in Russia.
Before going on to practical matters such as choosing a legal structure, drafting documentation, entering the Russian company register, and creating a Russian bank account for your firm, you must first have a viable business concept.
Steps for registering a business in Russia
Foreign investors who wish to start businesses in Russia must take the following procedures, regardless of the type of business:
- Prepare the following paperwork for the company’s incorporation: the Association’s Memorandum and Articles of Association;
- Sign a rental agreement for a registered address for the company; open a bank account into which the share capital will be deposited prior to beginning the registration process; pay the company registration fee and obtain the receipt, which must be filed with the Trade Register; file all documents with the Trade Registrar and obtain the company’s Certificate of Incorporation;
- Register with the tax authorities for taxation, VAT, and social insurance reasons.
How much time does it take to establish a business in Russia?
When establishing a business in Russia, the following processing times must be taken into account:
creating the legal documents – 1 day. Trade Register registration – 2 to 5 days tax registration – 4 to 7 days obtaining a company seal.
1. Immigration situation
The first step for a foreigner looking to start a business in Russia is to ensure that your immigration status enables you to do so. Will you require a business or work visa, as well as a resident permit? For additional information about business visas in Russia, see the section below.
2. Business strategy for doing business in Russia
Second, do you have a viable idea and have you investigated the market to determine whether your business would succeed in Russia? Before embarking on any company endeavor, it’s a good idea to create a business plan that answers all of the issues regarding whether your business concept can not only get off the ground but also survive in the long run. Successful Russian entrepreneurs understand that while having an innovative concept is great, not all company ideas thrive in practice, thus solid planning is essential.
Download business plan templates and examine example business plans from a variety of sectors from a website like this one. You might also visit a website that maps companies in Russia, such as this one. The webpage may be searched by company category or name.
3. Legal framework
If you can start a business in Russia and are convinced that your business concept will succeed, the next step is to choose a legal structure for your company. The section on Russian business kinds below contains information on the various possibilities.
4. Selecting a firm name and address
You must select an appropriate firm name for your Russian business (ensuring that it is not already registered) as well as an address to register your Russian business at.
5. Documents establishing the foundation
According to Russian law, the foundation documents must be created by the company’s founders (charter and founding agreement). The procedure will differ according on the legal structure you pick, but it should involve the following:
complete company name (plus any abbreviation it will use in business transactions)
The names and signatures of the company’s founders, as well as the number and kind of shareholder contributions (cash or in-kind)
6. Registration with the Russian company registration
Once the company forms are completed, incorporate your Russian firm by submitting the following documents to the Federal Tax Service (FTS) registration office:
Notarized signatures are required on the registration application form foundation document copies receipt of the state registration fee evidence of the legal status of the business founder(s)
After receiving these papers, the FTS takes a decision within five working days. They either accept or reject your registration on the State Register. Article 23 of Federal Law No. 129-FZ contains a list of grounds for denial.
If your business is accepted in Russia, this step also registers it for tax purposes. Within 7 days after submitting your application, you will get the following documents:
the Incorporation Certificate (or Certificate of State Registration) for your company Tax Certificate Tax Identification Number for your company a copy of your foundation documents with the registering authority’s seal
Extract from the Legal Entities Common State Register
7. Create a business seal
This is the company’s official logo, which was created by a professional firm. Following a change in the legislation in 2015, company seals are no longer a legal necessity in Russia, yet many Russian enterprises still maintain seals.
8. Open a bank account to do business in Russia
You can create a Russian business bank account once you have received all of the appropriate documentation from the FTS. To create a business account in Russia, you will need the following:
- Foundation documents – articles of association, memorandum of association with the latest amendments, if any, and the decision on the establishment of the LLC.
- Certificate of state registration.
- Decision on election or other document confirming the powers of the head of the company.
- Tax registration certificate of the company.
- Extract from the Unified State Register of Legal Entities, valid at the time of application.
- A card with a sample seal and signatures of all persons who will have access to current accounts and will be able to dispose of the money in the accounts of the company.
- Powers of attorney or orders for all employees indicated on the signature card.
- Passport of the manager and employees indicated in the signature card – for RF citizens. The requirements for non-residents’ identity documents should be clarified with the bank.
After you have accomplished these processes, you are free to begin running your Russian firm, which will surely include a lot of organization, marketing, and so on. This is when the real work begins!
The Benefits of Doing Business in the Russian Federation
Despite the indications of crisis, national currency depreciation, commodity dependency of the Russian economy, and several other challenges, including bureaucratic obstacles, the Russian Federation remains appealing to international investors. Their volume fluctuated unevenly throughout the past decade, yet there are logic and regularity patterns in this. For example, $74.7 billion in foreign capital was invested in the Russian economy in 2008. In light of this, the 2017 indications appear small – only $28 billion. However, there were apparent failures, such as in 2015, when foreign investment barely surpassed $6,8 billion. This obviously demonstrates that foreign cash is progressively returning to Russia today — investment attractiveness is increasing. However, a foreigner establishing a corporation in Russia must also examine aspects of the Russian economy and legal system. The following are some arguments in favor of establishing a business in the Russian Federation:
- The departure of foreign money has significantly “thinned” the business climate. This “sanitary clearance” lowered market rivalry significantly. Actually, it did not occur in profitable areas of economic activity; legislative liberalization. Foreign money is given a local legal framework — identical to that of Russians, and in addition, legislation ensures investment protection, the possibility of their easy withdrawal to native land, and so on; target market.
- The Russian Federation’s population is nearing 150 million people, and there are many significant cities in Russia: for example, the population of St. Petersburg is four times that of Estonia; altogether, Russian businesspeople lack professionalism. A foreign businessman producing a high-quality product/service at an inexpensive price will be ahead of the competition; the ease and low cost of company registration in Russia will, of course, pale in comparison to New Zealand and Singapore, but
- cheap labor expenses — the average pay in the Russian Federation is under $500, therefore many Chinese firms have already relocated their producing capacity to Russia;
- unlike many other nations, the opportunity to own the complete firm rather than just a portion of it.
Russian Federation’s high-priority business sectors
Because the crisis had altered Russians’ cost structures, several previously viable niches of continuing business on Russian Federation territory had been significantly diminished. Taking into account market circumstances, the following are the most popular sectors for beginning a small business today:
- Food expenditures in the budget section have steadily increased in comparison to 2014-2018; transportation sector — from public transportation organization to automobile services and car washes. For example, in the previous five years, Muscovites’ transportation prices have climbed by 93%.
- real estate The demand for warehouse real estate surged by 15% in 2019. Residential real estate is gradually decreasing in price, therefore an increase in demand is projected shortly.
- IT-sector — one of the most rapidly increasing industries, with the advantage of relatively inexpensive labor costs when compared to foreign professionals;
- The service sector — which is driven by the demands of the populace — remains at the top.
Foreign personnel employed in Russia
To hire foreign workers in Russia, you must first get an employment permission from the Migration office and visa.
Visas for doing business in Russia
To become self-employed, start a Russian business, or occupy a position in a firm (e.g., partner, director, board member), you will need to acquire a residence permit and the necessary visa (if applicable). Those with both temporary and permanent residency permits can seek to open a Russian business. Non-residents may own shares in Russian corporations.
If you wish to start a business in Russia but do not have residence, you can apply for a Russian Operate Visa to come and work as a self-employed person if you get an invitation from the Russian General Directorate of Migratory Affairs (GUVM).
Social customs and manners
Hospitality is a Russian virtue, and you see a totally different side of Russians at home than you see at work. It is an honor to be welcomed to a Russian house, and there are several norms to follow while visiting for the first time:
- When invited, bring a gift. Wine, cake, chocolates, and flowers are popular gifts. Flowers should be offered in odd numbers, and yellow roses, which represent separation, should be avoided.
- Avoid shaking hands or kissing over the threshold of the door because it brings ill luck. Before shaking hands, remove your gloves. Before entering the home, remove your shoes.
- Both the guest and the host should dress appropriately.
- Traditionally, a visitor will be led to a table packed with food and beverages as soon as they arrive, however elements of ‘European’ behavior are becoming more apparent. At the table, you should actively engage in the dialogue.
- Accept all types of food and beverages. Russians like their beverages; if you decline, do so politely.
- Russians have a distinctive toasting style. Participate and learn it, just like you should while entertaining.
- The host will frequently talk about his trips, favorite things, or accomplishments. They may even bring out family photos. Make sure to express your gratitude. More often than not, it is a means of opening up to a visitor. Russians are terrific satirists and can handle criticism.
- Dinners are typically held late into the night, with a lot of drinking and loud chatting. Expect nothing in the way of niceties. Remember, the best of the home is on the table; treat it with care.
Despite various obstacles, Russia remains an attractive investment destination for foreign money, as evidenced by:
Simple business company registration in Moscow and relatively cheap costs of this procedure; low-cost labor and a range of new markets; and the potential of using a streamlined taxation system.
Another advantage is that foreigners are subject to the same rules as Russians. It is sufficient to get a residency permit — and then you may start your own business.
The Russian Federation, like any other civilized country, does not restrict foreigners legitimately residing in the country from conducting business. Furthermore, in order to attract international investment, foreigners must follow the same regulations as Russians. There are, however, subtleties. We went through them in further depth.
The cost is determined on the type of business: a limited liability business (LLC), joint-stock company (JSC) or individual entrepreneurship (IP)
Although it may be seen as a country that presents certain challenges, Russia continues to implement policies that encourage foreign investments, particularly in business fields like innovation or technology.