Foreigners interested in conducting business in Russia have several possible options in this country:
- register a new company;
- purchase some shares in an existing business, or become a co-founder;
- open a branch in Russia.
Each case has advantages, features, and limitations. In to complete the process, a specific package of documents should be prepared. As for taxation, its rules differ for legal and physical entities. So, here we will briefly consider all the possible options for starting business in Russia.
Company incorporation (LLC/JSC) depending on the founding members:
|Establishing a branch / representative office of a foreign company||from 1100 euro|
|Legal address (for 6 months)||from 550 euro|
|Interim manager services||from 900 euro|
|Liquidation of company||from 1300 euro|
Set up a new legal entity
Let us begin with the 1st case of starting business in Russia – setting up a new legal entity. Current legislation allows foreigners to open a joint-stock company (JSC) or limited liability company (LLC) in Russia, besides, a foreigner may become a sole proprietor, and that results in a simplified taxation procedure. Among the crucial features of JSC and LLC is the following one: during the registration process (JSC or LLC) in Russia a foreigner may stay abroad, residence is not required, like for an individual. At that, a foreigner must have legal documents confirming residence in Russia.
Here is another crucial feature – first foreigners must get work permits in the Russian Federation if they intend to take the director positions in their own companies. No additional permissions are required if a director is from the EEU countries.
A private entrepreneur and LLC also differ in terms of responsibility to partners and creditors, a private entrepreneur is responsible with personal assets, but as for a company – responsibility is limited with the amount of shares owned. Small and medium companies are also offered a simplified taxation system.
Those starting their own business in Russia should:
- Ensure a legal address in the country;
- Minimum authorized capital must be at least RUB 10,000;
- Have an official director and accountant;
- When a registration is completed, and a company is added to the State Register, a foreigner receives documents confirming the fact of registration.
When submitting documents for registration, it is crucial to add a certified translation of personal documents of foreign investors and statutory documents of a company from abroad, if this company acts as a founder.
The following actions have to be done to set up a new company:
- Fill out a standard application form;
- Provide documents confirming your payment of a state fee;
- Submit the copies of documents for shareholders (plus translation and notarization; official documents are to be legalized in the country of their issuance).
- Provide documents allowing the Russian residence (in case if a foreigner is a sole proprietor, or will be a director).
Buying company shares or registering a joint venture
Those interested in starting business in Russia have another option – to buy a stake in an existing company or to act as a co-founder (with local citizens). If a foreigner acts as a co-founder in a new company, the registration process goes same way as the registration of a new firm described earlier. Here, one also needs a legal address, and collects the documents of all founders, pay a state fee, and provide the authorized capital. If the documents are in a foreign language, they must be translated into Russian and certified.
A simplified taxation system is applied for those companies where the foreign capital is less than 24%.
The list of documents necessary to set up a JSC in the Russian Federation is the following:
- completed application form, indicating the business legal status;
- copies of documents of all founders and directors;
- specified authorized capital;
- selected taxation system.
After completing the registration, a new company is added to the State Register.
Open a branch / representative office in Russia
Representative office or a branch is the final option of starting a business in Russia. Both these entities are local divisions of a parent company, but not individual companies. Thus, on behalf of a parent company, they can conduct business, sign contracts and receive profit, which can then be taken abroad (the scheme is much simpler than in the case of a separate LLC). A representative office is a structure that can perform the same functions: advertising, search for partners, work with potential clients, but a representative office is not involved in commercial activities, and it is the main limitation. A branch has more powers. It can perform representative functions in the territory of its registration; besides, they can conduct commercial activities.
Both of these are non-residents, therefore the taxation system applied is regulated by international agreements.
Those interested in starting business in Russia, and those who have chosen to open a branch must do the following things:
- Collect documents of a parent company;
- Pass accreditation, this will take about 1 month;
- Obtain a work permit for all foreign employees;
- Register with the Pension Fund, Social Insurance Fund, and Rosstat;
- Provide documents confirming the fact that state fees are paid (120,000 rubles).
Many foreign companies, especially large ones, choose this form because of several advantages. First of all, due to simplified schemes for depositing/withdrawing funds, property transfers, which take place directly, in contrast to the situation with a separate company, for example, LLC in Russia.
A branch also must have a legal address, and every foreign employee, including all directors, must first obtain work permits.
As a rule, it will take about 30-45 days to open a branch, if everything is done on time and correctly.
Register by yourself or seek the support of professional lawyers?
Whichever method you choose, you will have to do some preparatory work, i.e. collect documents, obtain permits for future employees, find a suitable legal address, etc. Besides, you should choose the organizational form, the one that is optimal for your case, taking into account the taxation system, currency control rules, etc., and for this, you need at least some minimal knowledge in this area. In short, you need a qualified lawyer.
For large companies, it is not a problem, since they have quite a lot of specialists on their staff, but for small firms, starting business in Russia it is a quite challenging issue. VALEN consulting company provides support for these businesses.
Our experts are ready to provide comprehensive support for foreign entrepreneurs and businesses, they will help you at all stages, from a preliminary assessment of the situation and choosing the best solution to obtaining all the necessary registration documents and getting started.
By seeking legal advice, you will receive the following guarantees: the result will be achieved within a certain period, and any issue will be resolved as quickly and efficiently as possible, and all this for reasonable money. Besides, you will protect yourself from possible risks and mistakes, which can turn out to negative consequences.