How to open a company in lithuania

Expand your business to Europe: a step-by-step guide to opening a company in Lithuania.

Are you thinking about expanding your business to Europe? Lithuania could be your ideal destination. Known for its favourable business climate, strategic location in the Baltic region, and supportive regulatory framework, Lithuania offers numerous benefits for entrepreneurs. With a robust economy and a welcoming attitude towards foreign investors, Lithuania provides a fertile ground for new businesses. In this blog post, we’ll explore the detailed steps and considerations to open a company in Lithuania, ensuring a smooth and informed process.

Choosing the right business entity

The first and crucial step in establishing a business in Lithuania is selecting the appropriate legal structure. Each structure has unique features, benefits, and requirements:

Public limited company (AB)

A public limited company (AB) is ideal for larger businesses with many shareholders. This structure allows for the easy transfer of shares and the ability to raise capital from the public, making it suitable for significant ventures looking to expand rapidly. Establishing an AB involves higher regulatory compliance and transparency, which can instil greater confidence among investors and stakeholders. It’s a robust structure for businesses aiming to grow significantly and attract public investment.

Private limited company (UAB)

The private limited company (UAB) is Lithuania’s most common business structure, perfect for small to medium-sized enterprises. It offers limited liability to its shareholders, meaning personal assets are protected against business liabilities. A UAB is relatively straightforward to manage, with fewer regulatory requirements than an AB. This structure provides flexibility and simplicity, making it an attractive option for many entrepreneurs. Establishing a UAB involves lower initial capital requirements, making it accessible for new businesses.

General partnership (TUB)

A general partnership (TUB) is best for businesses with two or more partners who share responsibilities and profits equally. This structure is excellent for collaborative ventures where all partners are actively involved in the business operations. In a TUB, partners have unlimited liability, meaning personal assets can be used to cover business debts. This arrangement requires strong trust and explicit agreements between partners to ensure smooth operation and conflict resolution.

Limited partnership (KUB)

A limited partnership (KUB) has both general and limited partners. General partners manage the business and assume full liability, while limited partners invest capital but have limited liability. This setup benefits those who want to invest in a company without taking on management responsibilities. A KUB allows businesses to attract investors who prefer not to be involved in day-to-day operations, providing a flexible investment structure.

Branch or representative office

A branch or representative office is ideal for foreign companies looking to establish a presence in Lithuania without forming a new legal entity. This structure allows a foreign company to operate in Lithuania under its existing legal framework, making it easier to manage from abroad. A branch can conduct business activities, while a representative office typically handles marketing and administrative tasks. Establishing a branch or representative office involves fewer regulatory requirements than setting up a new company.

Step-by-step process to open a company in Lithuania

Starting a company in Lithuania involves several key steps, each essential to ensuring your business is legally compliant and ready to operate:

Select the appropriate business structure

Begin by choosing the entity that aligns with your business goals and needs. Consider factors like the number of shareholders, desired liability protection, and the level of regulatory compliance required. The proper structure can significantly impact your business’s operational efficiency and growth potential.

Reserve a company name.

The next step is to ensure your chosen name is unique and compliant with Lithuanian regulations. This can be done online through the Register of Legal Entities. A unique name helps establish a distinct brand identity, which is crucial for marketing and legal purposes. Ensure the name reflects your business values and is easily recognisable.

Prepare incorporation documents

Draft essential documents, such as the memorandum of association and articles of association. These documents outline the company’s structure, purpose, and operating rules, providing a clear framework for business operations. Properly prepared documents can prevent future legal disputes and ensure smooth business functioning.

Register with the registrar of legal entities.

Submit your incorporation documents and officially register your company. This process can be done online or in person and is crucial for your business’s legal recognition. Registration with the Registrar of Legal Entities is a formal step that grants your company legal status, enabling you to conduct business activities.

Opening a business bank account

Establish a local bank account to handle your company’s financial transactions. This step is vital for separating personal and business finances ensuring transparent financial management. A business bank account facilitates smooth financial operations and is essential for tax compliance and auditing.

Register for taxes and social security.

Register for VAT and other necessary taxes to ensure your company is compliant with Lithuanian tax laws. Additionally, register for social security to cover employee benefits, ensuring you meet all legal obligations. Proper tax and social security registration help maintain compliance and avoid legal issues.

Necessary documents and requirements

To successfully register your company, you’ll need to prepare various documents specific to the type of business entity you’re forming:

Public and private limited companies

These typically need a memorandum of association, articles of association, proof of initial capital, and personal identification documents of the founders. These documents establish the company’s legal foundation and operational guidelines. Proper documentation ensures your company meets all legal requirements and is crucial for future business transactions.

Partnerships and branches

The required documents may vary, but they generally include partnership agreements, proof of identity, and details of the parent company (for branches). Ensuring all documents are correctly prepared and submitted is crucial for avoiding registration delays. Proper documentation helps define roles, responsibilities, and the scope of business activities, ensuring smooth operations.

Post-registration procedures

After successfully registering your company, there are ongoing obligations to maintain compliance with local laws:

Annual filings

You must submit financial statements and other required documents annually to the Register of Legal Entities. This transparency helps maintain your company’s good standing and legal compliance. Regular filings ensure your business remains transparent and accountable, crucial for building stakeholder trust.

Tax returns

Ensure timely and accurate tax filings to avoid penalties and ensure compliance with Lithuanian tax laws. Proper tax management is essential for financial stability and legal compliance. Precise tax returns help prevent legal issues and monetary penalties, ensuring smooth business operations.

Recruitment and workforce

Lithuania boasts a highly educated and skilled workforce, making it an attractive destination for recruitment. Here’s what you need to know about hiring in Lithuania:

Labor market overview

Lithuania offers a diverse pool of talent with strong skills in various fields, particularly technology, engineering, and business services. The labour market is competitive, with many qualified candidates available for different roles. Understanding the local labour market helps attract the right talent for your business.

Recruitment process

The recruitment process is straightforward but must adhere to local labour laws and regulations. This includes offering competitive salaries, ensuring proper working conditions, and adhering to employment contracts. A well-structured recruitment process helps attract and retain top talent, ensuring the success of your business.

Legal requirements

Ensure compliance with employment laws, including proper contract management, fair wages, and safe working conditions. This helps maintain a positive work environment and avoids legal issues. Compliance with labour laws ensures your business operates ethically and sustainably.

Financial incentives and banking options

Lithuania offers various financial incentives to attract foreign investment, which can significantly reduce the cost of doing business:

Financial incentives

These include tax benefits, grants, and subsidies promoting business growth and innovation. Exploring these incentives can provide substantial financial support for your business. Taking advantage of economic incentives can enhance your business’s competitiveness and growth potential.

Banking options

The banking system in Lithuania is robust and offers numerous options for business banking needs. Lithuanian banks provide services tailored to business requirements, from basic accounts to complex financial products. Choosing the right banking partner can facilitate smooth financial operations and support business growth.

Regulatory environment and support

The Lithuanian government has implemented business-friendly policies and participates in international agreements that facilitate business operations:

Government policies

Lithuania has a supportive regulatory framework to encourage business growth and foreign investment. Understanding these policies helps in navigating the business environment effectively. A clear understanding of government policies ensures your business operates within the legal framework and leverages available opportunities.

Support services

Organisations like Invest Lithuania and local chambers of commerce offer support services to help you navigate the regulatory landscape and set up your business smoothly. These services include legal advice, market research, and assistance with finding office space. Utilising support services can streamline the setup process and provide valuable insights for business growth.

Takeaway note

Starting a business in Lithuania offers many benefits, from a supportive regulatory environment to a skilled workforce and attractive financial incentives. Following the steps outlined in this guide, you can successfully open a company in Lithuania and take advantage of all the opportunities this vibrant market offers. Your business can thrive in this dynamic and welcoming environment with careful planning and adherence to local regulations.

FAQs

How much does it cost to open a company in Lithuania?

The cost of opening a company in Lithuania can vary depending on the type of business entity you choose but typically includes registration fees, legal costs, and initial capital requirements.

How do you create a company in Lithuania? 

To create a company in Lithuania, choose a business structure, reserve a company name, prepare incorporation documents, register with the Registrar of Legal Entities, open a business bank account, and register for taxes and social security.

Is Lithuania a good place to start a business? 

Lithuania is an excellent place to start a business due to its strategic location, favourable business environment, skilled workforce, and supportive government policies.

What are the benefits of registering a company in Lithuania? 

Registering a company in Lithuania offers benefits such as access to the European market, financial incentives like tax benefits and grants, a competitive business environment, and a highly skilled workforce.

How much is income tax for business in Lithuania? 

The corporate income tax rate in Lithuania is typically 15%, making it attractive for businesses, with possible lower rates under certain conditions.