Ways of working for foreign business in Russia

Jun, 14 2023

Foreigners and foreign companies can conduct business in Russia in several ways:

• registration of a legal entity (separate company);

• buying a stake in a business or participating as a co-founder;

• opening of a branch or representative office;

• registration as an individual entrepreneur;

• cooperation with distributors.

Each of these options has its own characteristics: a different set of documents and requirements for founders, types of taxation, as well as the availability of necessary permits. Let’s take a closer look at every opportunity for foreigners to open their own business in Russia.

1) Registration of your own company

Russian legislation allows foreign citizens to register several forms of business: joint stock company (JSC), limited liability company (LLC).

To register an LLC or JSC, the founder does not have to be in Russia. He may not be present at the registration in person – the necessary documents can be sent by mail.

Another important point is whether the founder of the LLC or JSC is going to be the head of the company. If, after opening a business in Russia, the owner wants to hold the post of director, you will need to get a work permit.

The liability of the LLC and JSC participants is limited by the size of their share.

Representatives of small and medium-sized businesses in the Russian Federation can use the simplified taxation system, for this, an individual must be a participant in an LLC or the participation share of a foreign company should not be more than 25%

What is necessary to open a business in Russia in the form of LLC and JSC:

• legal address;

• authorized capital of at least 10 thousand rubles;

• availability of a director and an accountant;

All foreign documents must be legalized by apostille, then they must be translated into Russian and the translation certified by a notary.

Within three days after submitting the documents, it will be possible to obtain a certificate of registration of the company.

2) Buying a share in the business

Foreign citizens can open a business in Russia through the acquisition of a share of the authorized capital. There is a way to do without buying: you need to register a new member of the company, who will increase the authorized capital with his own investments. In this case, registration of changes takes about 7 days. In addition to business investments, you will need to pay a state fee, as well as legal verification of documents and their translations.

A joint venture in Russia can also use a simplified taxation system. But this is possible only if the share of a foreign company is no more than 25%.

What is needed to register a joint business of various forms of entrepreneurship:

• a statement including the name and legal status of the company;

• documents of the founders and management staff;

• indication of the size and form of the authorized capital;

• current legal address of the company;

• indication of the taxation system.

3) Opening of a branch or representative office

Representative offices and branches are another option for starting a business in Russia. How do these forms of activity differ? 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 entrepreneurial and economic activities.

A branch is a full–fledged enterprise that engages 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 adopted between the two countries.

What you need to register a branch or representative office of a foreign company in Russia:

• prepare the necessary documents, translate them into Russian and legally certify;

• pass the accreditation procedure (it takes about 30 days);

• coordinate the number of foreign employees with the Chamber of Commerce and Industry;

• pay a state duty in the amount of 120 thousand rubles. This type of entrepreneurship is relevant only for large or medium-sized businesses. Any monetary or property transactions, including bank transfers, between branches and the main company are carried out directly, which greatly simplifies the distribution of funds within one enterprise.

An important point is that to open a branch or representative office, you need to register a legal address. All foreign citizens, including managers, must obtain a work permit in Russia.

The whole process of starting a business in Russia through the registration of a representative office or branch will take a total of about 1-1.5 months.

4) Registration as an individual entrepreneur

To register as an individual entrepreneur, a foreigner must obtain a temporary residence permit or a residence permit.

To register an individual entrepreneur by foreigners, you need to provide:

• application for registration;

• receipt of payment of the registration fee;

• a photocopy of a document with registration in the Russian Federation or a residence permit, a temporary residence permit;

• All documents submitted in a foreign language must be translated into Russian, and the translation is notarized.

An individual entrepreneur is responsible for the company’s debts with his own property, and also has restrictions on the types of activities.

5) Work 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, sales channels for its products on the territory of the Russian Federation, then contracts should be concluded with distributors. They will receive the goods from a foreign company and will be engaged in its implementation.

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 on the territory of the country, obtain permits, register an enterprise and contribute the authorized capital. A well-written contract between the manufacturer and the distributor is enough. At the same time, a foreign company does not risk its property.

The disadvantage of cooperation with distribution companies is the lack of an opportunity to influence the promotion of goods, as well as independently appoint managers, expand the market. In addition, the intermediary can terminate the contract at any time, and you will have to look for a new representative.

Author of the article
Ways of working for foreign business in Russia
Valentina Khlavich
Managing Partner
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