General information on company formation in Latvia
Company formation is an initial process of starting your business. On this stage it is necessary to choose proper legal entity form and company name, profit-sharing and administration matters. No doubt that in the future it can be changed, but making changes in documents do require time and money. Our assistance will help you to avoid difficulties, as well as to save your valuable time and money.
In Latvia the procedure of company formation is quite fast and simple. If you search for a country to start your business – Latvia has one of the friendliest environments. Corporate tax rate is one of the lowest in Europe - 15% and the procedure of company formation is pretty fast. (Usually it takes one day to launch a company) The main laws, which regulate company formation and business in Latvia are
Commercial law and
The Register of Enterprise of Republic of Latvia law
Registration of companies is performed via Register of Enterprises (further – RE), which is a governmental institution, that registers companies, merchants, their branch offices and representations. Work of RE is provided by legal regulations and laws. That is why, working with RE special forms of documents, terms and other formalities and strict regulations must be followed.
Types of legal entities in Latvia
In Latvia it is possible to register several different types of legal entities. Each of them has their pros and cons:
- Individual merchant;
- Single or multiple natural person Limited Liability Company (SIA);
- Limited Liability Company with reduced minimum equity capital;
- Single or multiple natural person Joint Stock Company (AS);
- Limited Partnership;
- General Partnership.
The most common legal entity, registered in Latvia, is Limited Liability Company (LLC or SIA in Latvian). The main feature of LLC is limited liability of its shareholders, which means that creditors of a company cannot bring judicial proceedings against the owner of the company, only against company’s property. Another reason, why businessmen choose LLC is the amount of its minimum share capital, which is LVL 2,000, comparing, for example, to Joint Stock Company (AS) with LVL 25,000. At least half of a minimum share capital has to be paid before registration, remaining – in a year term. In Latvia, there is a special type of LLC – micro company or company with reduced minimum equity capital. Such formation has to pay special micro enterprise taxes, which are much lower than usual LLC taxes.
You can read more information about the main types of LLC HERE!
Opportunities provided by company formation in Latvia due to participation in the EU
According to the data provided by Register of Enterprises – currently in Latvia there are 126.706 registered (47.590 active) commercial enterprises. Since Latvia enters Eurozone on 1st January 2014, and Euro will be national currency – legal regulations provide an opportunity to register companies with equity capital shares in Euro (EUR). This can be done during period of 9 July 2013 to 1 January 2014. This option provides number of opportunities on extending your business in future and exploring the market of European Union. However, in order to do so, specific requirements, provided by the legal regulations must be met.
In addition, Latvia as a member state of EU, provides businesses an opportunity to enter EU market and trade with other European countries receiving all benefits hereof. Also, taxation system in Latvia is relatively liberal, comparing to other EU countries, for instance: Corporate Income Tax rate is 15%, while in Lithuania it is 20%, 28% in UK and 30% in Spain. Minimum share capital for LLC is LVL 2,000 (approx. EUR 3,100), at least half should be paid instantly and other in a year term, which is also motivating factor. There are no restrictions for non-residents to form, own or manage Latvian company. Natural person can be a founder, manager or owner coming from any country of the world.
Since Latvia participates in the Schengen zone, the Immigration law provides a possibility to receive a temporal residence permit for up to 5 years with a right to travel freely in Schengen area. To receive it, you have to invest in the equity capital of Latvian enterprise under these conditions:
- The amount of investment must be at least LVL 25,000 (approx. EUR 36,000)
- The amount of taxes payable for the next year must be at least LVL 20,000 (approx. EUR 28,600)
- The quantity of workers does not exceed 50 and year turnover does not exceed LVL 7,000,000 (approx EUR 10,010,000)
- The amount of investment must be at least LVL 100,000 (approx. EUR 143,000)
However, on the 1st January 2014 legislation will be changed, so the rules for obtaining a residence permit through business investment may change as well.
If you want to read more about Latvian residency permit and immigration programs – click here!