Open Business in Russia. The method for forming a business in Russia

Contents:

• How much does it cost to open a business in Russia?
• The method for forming a business in Russia
• Starting a company in Russia
• Steps for registering a business in Russia
• How much time does it take to establish a business in Russia?
• The Benefits of Doing Business in the Russian Federation
• Russian Federation’s high-priority business sectors
• Foreign personnel employed in Russia
• Visas for doing business in Russia
• Social customs and manners
• Summary
• FAQ

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 (€9). 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 (€105), state registration fee – 4 000 rubles (€42), manufacture of the seal – € 30-40, notary services – around € 300 and additional charges for the legal address – €550 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 € 1000, 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 in 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

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.

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 under 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:
  • application form P11001;
  • the Articles of Association of the LLC;
  • the resolution/minutes to create the company;
  • guarantee letter with the company’s address;
  • receipt of payment of state duty;
  • notification of the transition to a simplified taxation system (if necessary).

• Sign and notarize application form, if founder is abroad – also apostille or legalize it at Russian consulate.
• File for registration of company via Russian notary or directly to registration body. If founder is abroad – it is possible to file by representative under power of attorney.
• Once company is registered – complete following steps:
  • obtain company’s seal;
  • sign a rental agreement for a registered address for the company;
  • open a bank account into which the share capital will be deposited;
  • start doing accounting.

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 business day.
• registration of company – 2 to 5 business days
• obtaining a company seal – 4 to 7 business days.

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 resolution/minutes on incorporation). 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. Filing to the Russian registration body

Once the company forms are completed, incorporate your Russian firm by submitting to the Federal Tax Service (FTS) registration office following documents:

• documents on founder (a copy of the passport of a foreign citizen/extract from trade register on founder – foreign company with a notarized translation into Russian)
• completed application form № P11001;
• articles of association of LLC;
• the resolution/minutes on creation of a company;
• guarantee letter with the company’s address;
• receipt of payment of the state fee;
• power of attorney (if necessary);
• notification of the transition to a simplified taxation system (if necessary).

Foreign founders from unfriendly countries, when applying to a notary to open an LLC, should also provide permission from the government commission of the Ministry of Finance to register an LLC.

Signature on application form and power of attorney should be notarized, if founder is abroad – apostilled or legalized. 

After receiving these papers, the FTS takes a decision within three working days. They can either accept or reject registration – article 23 of Federal Law No. 129-FZ contains a list of grounds for denial.

Within 3 business days after submitting your application, you will get the following documents:

• the Certificate of tax registration with Tax Identification Number
• articles of association of company
• extract from the Company State Register with main registration number

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
• Extract from the Company State Register with main registration number
• The resolution/minutes on the establishment of the LLC
• Certificate of tax registration
• Decision on election, order on appointment or other document confirming the powers of the head of the company.
• 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 (if necessary)
• 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.

For 2022 amount of foreign investment reached $53 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 $750, 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

Foreign citizen should get a work permit from the Migration office and work visa to work in Russia.

Visas for doing business in Russia

To become self-employed you will need to acquire a residence permit. Non-residents may own open company in Russia without even coming to Russia.

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.

Summary

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 work permit and work visa for 3 years — and then you may be director of your own business.

FAQ