Starting Business In Russia
Opening a business in Russia by citizens of another country is possible in several ways:
- registration of a legal entity (separate company);
- purchase of a share or participation as a co-founder;
- opening a branch or representative office;
- conducting business through distributors.
Each of these options has its own special aspects: different package of documents and requirements for individuals, types of taxation, as well as the availability of necessary permits. Let’s consider every opportunity for foreigners to start their own business in Russia.
Registration of your own company
Russian legislation allows foreign citizens to register several forms of business: joint-stock company (JSC), limited liability company (LLC), as well as to acquire the status of individual entrepreneur (IE). In addition to differences in the registration procedure and the package of necessary documents, there is another important nuance that may affect the choice of the form of entrepreneurship.
To register an LLC or a JSC, the founder does not have to reside in Russia. He may not even be personally present at the registration – the necessary documents can be sent by mail. To become an individual entrepreneur, it is necessary to be legally present in the Russian Federation: you need to obtain a temporary residence permit or a permanent residence permit.
Another important point is whether the founder of the LLC or the JSC is going to be the head of the company. If after starting a business in Russia, the owner wants to hold the position of director, he will have to obtain a work permit. If this position is held by a citizen of Russia or the Eurasian Economic Union (for instance, Belarus, Kazakhstan), the permit is not required.
Also, an individual entrepreneur is responsible for the company’s debts with his own property. The liability of the participants of the LLC and the JSC is limited to the size of their shares. Representatives of small and medium-sized businesses in the Russian Federation may use a simplified tax system.
The following is necessary to start a business in Russia in the form of LLC and JSC:
- legal address;
- authorized capital not less than 10 thousand rubles;
- presence of a director and an accountant;
- official stay of a foreign citizen in the territory of the country (business visa, permanent residence permit, temporary residence permit).
- In five days after the submission of the documents it will be possible to pick up a certificate of registration of the company. If the founder is a foreign company, it is necessary to translate into Russian all the documentation about the incorporation and certify it with a notary.
The following is necessary to register an individual entrepreneur by foreigners:
- application for registration on form P21001;
- state fee payment;
- photocopy of the permanent or temporary residence permit;
- photocopies of the passport.
All documents submitted in a foreign language must be translated into Russian and notarized. Official foreign documents require legalization (apostille) in the country of issue.
Registration of a joint venture or purchase of a share
Foreign nationals may be co-founders of the company together with Russian citizens. In this case, the procedure of business registration is similar to the establishment of an LLC or a JSC. The conditions remain the same – you need a legal address, authorized capital, as well as the legal stay of a foreigner in the territory of Russia. All documents must be translated into Russian and notarized – this is a mandatory requirement.
In addition, opening a business in Russia is also possible through the acquisition of a share in the authorized capital. There is a way to do without its aqcuiring: you need to register a new participant of the company, who will increase the share capital with his own investments. In this case, registration of changes takes about 7 days. In addition to investments in business, it will be necessary to pay state fee, as well as legal verification of documents and their translations.
A joint venture in Russia can also use a simplified tax system. However, it is only possible if the share of a foreign company does not exceed 24%.
What is needed to register a joint venture for different forms of company:
- an application which includes the name and legal status of the company;
- documents of founders and executive management staff; indication of the amount and form of the authorized capital;
- current legal address of the company;
- choice of thetax system.
Opening of a branch or representative office
Representative offices and branches are another way of starting a business in Russia. What is the difference between these forms of activity? The representative office is engaged only in advertising and marketing, it has the right to conclude contracts, look for partners and interact with dissatisfied customers, etc. They have limited powers – they cannot engage in business and economic activity.
The branch is a full-fledged form, which is engaged in the same activities as the parent company. Both representative offices and branches of foreign companies are considered non-residents, so the taxation system is regulated bilaterally according to the conditions between the two countries.
What you need to register a branch or representative office of a foreign company in Russia:
- to prepare the necessary package of documents, translate them into Russian and notarize;
- to pass the accreditation procedure (it takes about 30 days);
- to approve the design of the seal;
- to approve the number of foreign employees with the Chamber of Commerce and Industry;
- to register a branch/representative office with the Pension Fund, Social Insurance Fund, and Federal State Statistics Service;
- to pay the state fee in the amount of 120 thousand rubles.
This form of business is relevant only for large or medium-sized businesses. Any cash or property transactions, including bank transfers, between branches and the parent company are carried out directly, which greatly simplifies the allocation of funds within the same company.
An important point is that in order to open a branch or representative office it is necessary to have a legal address. All foreign citizens including executive managers must obtain a work permit in Russia.
The whole process of opening a business in Russia through the registration of a representative office or branch will take a total of about 1-1.5 months.
Conducting business through distributors
Distribution is one of the ways of doing business in Russia by foreign companies. It is suitable for small and medium-sized enterprises. If a foreign company does not have offices, employees or sales channels in Russia, it should conclude contracts with distributors. They will receive the goods from the foreign enterprise and will be engaged in its realization.
What are the advantages of starting a business in Russia in this form? The main advantage is the minimum requirements and risks. There is no need to be in the country, to obtain permits, to register a company and to contribute the authorized capital. A competent contract between the manufacturer and the distributor is enough. Furthermore, the foreign company does not risk loosing its property.
The disadvantage of cooperation with distribution companies is the lack of opportunity to influence the promotion of goods, as well as to independently appoint managers and expand the market. In addition, the intermediary can terminate the contract at any time, thus you will have to look for a new representative.
To register business on your own or to be registered by a specialist?
Almost all ways of starting a business in Russia require thorough preparation. It is necessary to collect a package of necessary documents, translate them into Russian and notarize them before submitting them to different authorities. In addition, it is important to take into account the aspects of Russian and international law, which may vary depending on whether there are any tax agreements between the countries.
Large companies can entrust the solution of these issues to their own lawyers, but it is more profitable for small and medium businesses to advise with law firms that help with the registration of a subsidiary, branch / representative office or individual entrepreneur. What is usually included in the services of such legal assistants:
-Comprehensive legal advice; -Assistance in preparing the necessary package of documents; -support during the procedure of business registration; -obtaining the necessary permits, payment of duties and other fees.
When contacting such a company, you can be sure that you will be properly prepared and assured of all the necessary papers. Another advantage is that you save time. As a rule, everything is done in the shortest possible time, and the failure rate is low. But even in case of failure, legal assistants will complete the case by filing an application again.
You don’t need a full-time lawyer to start your own business in Russia quickly and competently. Moreover, it is not necessary to understand all the aspects of the company itself – it is enough to entrust the registration of the company to specialists who will register a foreign company, saving the founder from unnecessary trouble.