Russia is the largest European foreign trade partner. During the first six months of year 2013 imports to Russia grew by 3.6 percent. Year by year new companies enter the Russian market to sell their good and services with the aim to increase profits and revenues. With this article we want to give you a first rough overview about the mostly used corporate forms for establishing a business in Russia. It shall give you an orientation which path to go towards your new company in Russia.
There are different corporate forms a foreign company may choose to become present in the Russian market. Namely these are the representative office, the branch and the subsidiary. As Russian legal system and bureaucracy is rather complicated the proper legal form should be chosen with a long term view because it will be difficult to change the corporate form later on.
At the end of the century the representative office foreign companies chose mainly the representative office for market entry. By Russian law representative offices are conceived a taxable long-term establishment of a foreign company in Russia. They are usually used to execute marketing activities in Russia and arrange for agreements between a Russian local firm and the mother company abroad. Usually representative offices do not execute business activities like import and trade. Russian local businesses perceive the representative office as giving only a minor priority of the foreign mother to the Russian market. This and a large bureaucracy related to currency control make the representative office rather unpopular between local firms.
The branch is another corporate form. Being also considered to be a foreign entity established in Russia it usually has business activity, can import goods and have trade activity in Russia. Representative offices and branches are subject to currency control as they are considered as foreign companies. That means that any business with local companies exceeding USD 5.000 must be comprehensively documented and reported by the local Russian company. This process is very unpopular.
The most popular corporate form in terms of business appearance and operability is the subsidiary, which can appear as a Limited Liability Company (LLC) or Joint Stock Company (JSC). Between those the LLC is regularly the preferred form as it is easy to register and the capital requirement is low (RUB 10.000 or USD 350). The subsidiary is a company by Russian law and therefore not subject to currency control. It can import goods and have trade activity. Between local businesses the subsidiary is the preferred corporate form to do business with.
Representative offices, branches and subsidiaries are considered permanent taxable establishments in Russia. They need to calculate taxes for payroll, determine social security fees, issue financial accounting statements at the end of each quarter and another 15 reports that need to be sent to various Russian authorities.
The start-up financing of representative offices and branches is easy as are considered as foreign companies. Cash transfers can be done without complication. However, the subsidiary as a corporate form by Russian law is subject to currency control. Cash transfers and payments from outside Russia need to have a legal reason like loan- or dividend payment. They also take much longer as documents have to be prepared for the currency control and banks have to check those. Incorrect documents may lead to a reject of cash transfers.
Which corporate form to chose depends pretty much on the business activities you plan in Russia, be it active trade-, service- or simply marketing activities. You also should arrange a meeting with a Russian business consultant as there are a number of other considerations to be done before deciding registering your company.
There are different corporate forms a foreign company may choose to become present in the Russian market. Namely these are the representative office, the branch and the subsidiary. As Russian legal system and bureaucracy is rather complicated the proper legal form should be chosen with a long term view because it will be difficult to change the corporate form later on.
At the end of the century the representative office foreign companies chose mainly the representative office for market entry. By Russian law representative offices are conceived a taxable long-term establishment of a foreign company in Russia. They are usually used to execute marketing activities in Russia and arrange for agreements between a Russian local firm and the mother company abroad. Usually representative offices do not execute business activities like import and trade. Russian local businesses perceive the representative office as giving only a minor priority of the foreign mother to the Russian market. This and a large bureaucracy related to currency control make the representative office rather unpopular between local firms.
The branch is another corporate form. Being also considered to be a foreign entity established in Russia it usually has business activity, can import goods and have trade activity in Russia. Representative offices and branches are subject to currency control as they are considered as foreign companies. That means that any business with local companies exceeding USD 5.000 must be comprehensively documented and reported by the local Russian company. This process is very unpopular.
The most popular corporate form in terms of business appearance and operability is the subsidiary, which can appear as a Limited Liability Company (LLC) or Joint Stock Company (JSC). Between those the LLC is regularly the preferred form as it is easy to register and the capital requirement is low (RUB 10.000 or USD 350). The subsidiary is a company by Russian law and therefore not subject to currency control. It can import goods and have trade activity. Between local businesses the subsidiary is the preferred corporate form to do business with.
Representative offices, branches and subsidiaries are considered permanent taxable establishments in Russia. They need to calculate taxes for payroll, determine social security fees, issue financial accounting statements at the end of each quarter and another 15 reports that need to be sent to various Russian authorities.
The start-up financing of representative offices and branches is easy as are considered as foreign companies. Cash transfers can be done without complication. However, the subsidiary as a corporate form by Russian law is subject to currency control. Cash transfers and payments from outside Russia need to have a legal reason like loan- or dividend payment. They also take much longer as documents have to be prepared for the currency control and banks have to check those. Incorrect documents may lead to a reject of cash transfers.
Which corporate form to chose depends pretty much on the business activities you plan in Russia, be it active trade-, service- or simply marketing activities. You also should arrange a meeting with a Russian business consultant as there are a number of other considerations to be done before deciding registering your company.
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Learn more about start-up of a business in Russia. Stop by the site of Rusconsult24 where you can find out all about our consulting-, company registration- and bookkeeping services in Russia.
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