Business Registration in Lithuania

Lithuania is a country that offers numerous opportunities for entrepreneurs wishing to start their business in the European Union. Business registration in Lithuania is distinguished by its simplicity and accessibility, making it attractive for foreign investors and startups. In this article, we will consider the main steps and requirements for business registration in Lithuania, the advantages of doing business in this country, and useful tips for those planning to start their venture in this Baltic state. Whether you intend to open a small company or a large-scale project, Lithuania provides favorable conditions for the development and growth of your business.

What Forms Can Business Registration in Lithuania Take?

Sole Proprietorship (SP). Sole proprietorship in Lithuania is called individuali veikla (IV). Both Lithuanian citizens and foreigners who have already obtained residence documents in the country can register as sole proprietors in Lithuania. Registration as a sole proprietor without residence documents is not allowed. SP is the simplest form of business and does not require significant investments to start and maintain the business. SP operates based on a business certificate or license. It is important to remember that a sole proprietor is liable with all their property, and if you plan to engage in activities associated with risks, we recommend considering other forms of business in Lithuania.

Limited Liability Company (LLC). In Lithuanian, it is called Uždaroji akcinė bendrovė (UAB). Both individuals and legal entities can register an LLC. For LLC registration, it is not necessary to have residence documents in the country, as required for SP. The number of allowed founders is from 1 to 250 people. The liability of the founders is limited to the amount of contributions and the company’s property, making this form of business well-suited for activities associated with entrepreneurial risks. The minimum share capital is 2,500 euros.

Small Partnership (SP). A small partnership is a simplified form of a limited liability company in Lithuania. Registration requirements for SP:

• Founders can only be individuals
• The number of founders is a maximum of 10 people
• Income up to 300,000 euros per year There are no requirements for share capital. The share capital can even be 1 euro, but in practice, it is recommended to indicate a more substantial amount. The liability of the founders in SP is limited to the amount of contributions and the company’s property.

Public Limited Company (PLC). A public limited company in Lithuania is called Akcinė bendrovė, abbreviated as AB. This form of business registration is suitable for large businesses and allows raising investments by issuing shares. The number of founders is unlimited, and the minimum share capital is 40,000 euros. PLC is the most complex form of business in terms of both jurisprudence and accounting. There are also other, less popular forms of business registration in Lithuania that we will not cover in this article.

The cost of business registration in Lithuania and additional services that you may need can be found at this link.

Business Taxes in Lithuania

Lithuania is a progressive European jurisdiction with favorable taxation. Tax rates vary depending on the form of business registration. Below, we will consider the business forms that can be registered in the country from a tax perspective.

Sole Proprietorship 20% – 32% personal income tax for sole proprietors. SPs in Lithuania pay personal income tax, contributions to mandatory health and social insurance. In some cases, VAT. More information on SP taxation can be obtained on the official website of the Lithuanian Tax Authority through this link.

Limited Liability Company 15% corporate income tax rate for LLCs. LLCs are required to pay taxes at a fixed rate of 15%. The rate does not change depending on the company’s income. 21% VAT rate. Upon reaching an income threshold of 45,000 euros, there is an obligation to register as a VAT payer. A director can be appointed from among the founders, and in this case, it is not necessary to pay a salary initially. It is recommended to pay a salary after the company starts operations to avoid issues with the tax authority. Initially, it is enough to pay only social contributions.

Small Partnership 5% corporate income tax rate for SPs. If the income threshold of 300,000 euros per year is exceeded, the income received above this amount will be taxed at a rate of 15%. SP can be a VAT payer at a rate of 21%. The director does not need to receive a salary initially if appointed from among the founders. Only social insurance contributions are mandatory.

Public Limited Company 15% corporate income tax rate for PLCs, as well as 21% VAT, which must be paid if the income threshold of 45,000 euros per calendar year is exceeded. 15% dividend tax rate, which must be paid when distributing profits in a public limited company.

Registration Process

The registration of a company in Lithuania involves several steps that need to be completed sequentially.

1. Choose the form of business registration.
2. Select and reserve the company name.
3. Prepare the founding documents.
4. Submit the documents for legal entity registration.
5. Open a bank account.
6. Obtain licenses, if necessary.

The business registration process in Lithuania is distinguished by its simplicity. You can register a company by personally visiting the country, through a representative by proxy, or by using the popular registration method of first registering the company to a representative in Lithuania and then “selling” the company to yourself. This method avoids unnecessary bureaucracy and is suitable for most cases. On average, company registration in Lithuania takes 2-3 weeks.

What Advantages Does Business Registration in Lithuania Offer?

Business Registration in Lithuania provides several advantages for business owners. Let’s consider some of these benefits in more detail:

1. Favorable Tax System. The standard corporate tax rate is quite low, at only 15%. The rate for small businesses is one of the lowest in Europe, at just 5%. Additionally, there is the possibility of not paying the director’s salary in the first few months of the company’s operation, which is a great incentive for startups and small businesses.
2. Low Entry Threshold. Registering a company in Lithuania can be done for relatively little money, and in some cases, there are no requirements for the company’s share capital.
3. Access to EU Markets. Having a company in Lithuania allows you to trade in the EU market, which consists of over 450 million customers. This includes the opportunity for importing and exporting goods and services, participating in EU tenders, receiving grants, and much more.
4. Business Prestige. Registering a company in a European jurisdiction gives your business a high status in the eyes of clients and partners. This also helps attract investments to the company, as European jurisdictions are always more reliable.
5. Possibility of Obtaining Residence Documents. Lithuania offers the possibility of business immigration to the country. Under certain conditions, it is possible to obtain a temporary residence permit.
6. No Language Barrier. Services in Lithuania are provided in three languages: English, Russian, and Lithuanian. Therefore, this jurisdiction is well-suited for citizens from post-Soviet countries in terms of communication. Unlike some European jurisdictions, you will not encounter problems communicating with accountants, lawyers, or government authorities in this country.

Conclusion

If you are considering entering the European market with minimal investment and the potential for tax savings, Business Registration in Lithuania is an excellent choice for registration. This jurisdiction allows you to register a flexible form of business tailored to your needs, optimize taxation, obtain residence documents, and take advantage of all the opportunities the European market offers.

Contact us, and we will help you register your company in Lithuania quickly and reliably!