Choosing a Business Structure in Russia

Most foreign founders in Russia end up with a limited liability company (OOO). It is cheap to set up, shields the owners' personal assets and does not require a securities registrar. A joint-stock company makes sense when you plan to raise capital by issuing shares. An individual entrepreneur status suits one person working alone, and partnerships are rarely used in practice.

Attorney Elena Petrova advises founders from California and other jurisdictions on picking the form, drafting the charter and registering the entity. The choice affects liability, taxes, reporting and how easily you can exit later.

The Limited Liability Company (OOO)

An OOO can have from one to fifty participants, and a single foreign individual or company may own all of it. The minimum charter capital is 10,000 roubles. Participants risk only their contribution, except where a court imposes subsidiary liability on controlling persons in bankruptcy.

Share transfers are usually certified by a Russian notary. The charter and a corporate agreement between participants can set rules on voting, deadlock and exit.

The Joint-Stock Company (AO)

A JSC issues shares, and every issue must be registered with the Bank of Russia. Its shareholder register is kept by a licensed registrar, which adds a running cost. Joint-stock companies are either public, with shares that may trade on an exchange, or non-public.

Founders choose a non-public JSC when they expect several rounds of investment or an employee share plan. Shares move without a notary, which makes deals with investors simpler.

Working as an Individual Entrepreneur (IP)

An individual entrepreneur is not a separate legal person. The owner registers with the tax service and trades in his own name. A foreign citizen can register only with a residence permit or temporary residence permit and a registered address in Russia.

The main drawback is unlimited liability: debts of the business can be recovered from personal property. The advantage is simplicity. Accounting is light and profit can be withdrawn freely.

Partnerships Under the Civil Code

The Civil Code provides for a general partnership and a limited partnership. In a general partnership all partners answer for its debts with their own assets. In a limited partnership only the general partners carry that risk, while limited partners risk their contributions.

Only individual entrepreneurs and commercial companies can be general partners. Because of the personal exposure, these forms are almost never chosen by foreign investors. Joint projects are usually built through an OOO with a corporate agreement or through an investment partnership contract.

Side-by-Side Comparison

Taxes and Reporting by Form

Companies pay corporate profit tax under the general regime or use the simplified system if they meet income and staff limits. Dividends paid to foreign participants are taxed at source. An individual entrepreneur pays personal tax on business income or chooses the simplified system on revenue or on profit.

Every company files annual financial statements with the tax service. Transfers of profit abroad are subject to currency control and, for owners from some countries, to temporary restrictions.

Setting Up Your Entity With an Attorney

We start by asking what you plan to do in Russia, who will own the business and how you might exit. Then we recommend a form, draft the charter and any shareholder agreement, and prepare the registration file. Documents from the United States need an apostille and a certified translation.

After registration we help open a bank account and appoint a director. We also set up signatory powers so the company can operate while you stay abroad.

The main channel of communication with the attorney is email: attorneypetrova1@gmail.com.