If you have decided to establish a company in Serbia, you should know both Serbian residents and non-residents are eligible to found a company in Serbia. The procedure on establishment of the company is governed by the Companies Act and Law on the Registration Procedure with the Serbian Business Registers Agency. Here below are main steps to introduce you in company formation in Serbia.
STEP NO. 1 – CHOOSE THE LEGAL FORM
Prior to starting the company formation procedure, you should be introduced to the legal forms of company. Which legal form should you choose depending on your business model.
GENERAL PARTNERSHIP COMPANY (GPC)
A general partnership is a company founded by at least two partners who are fully responsible and liable with all their assets for the company’s obligations. The owners of a general partnership are fully liable as entrepreneurs. Owners can be both natural and legal persons and they may use general partnership to perform any activity, except activities prescribed by the law to be performed only in certain legal form (banks, insurance companies etc.).
LIMITED PARTNERSHIP COMPANY (LPC)
A limited partnership is a company of at least two members, one of whom has unlimited liabilities for the company’s obligations and the other who has limited liability. This company represent a kind of hybrid of a company, given that some owners have unlimited liability and are responsible with all of their assets (such as partners in general partnership), while some have limited liability (such as members in LLC). A limited partnership can also perform any activity, except activities reserved to be conducted only in certain legal forms.
It should be noted that partnerships are rare in the Republic of Serbia, provided that there are some justifications for founding a company in these forms. For instance, the company formation in these forms by foreigners may lead to favorable tax treatment, which may result in savings and increase of the owners net profit!
LIMITED LIABILITY COMPANY (LLC)
A limited liability company is established by one or more company members that own shares in company’s equity, while founders are not liable for the company’s obligations except in case of piercing the corporate veil. A limited liability company can also perform any activity, except some activities that may be conducted only in form of JSC.
A limited liability company is by far the most commonly used legal form of a company in Serbia.
JOINT STOCK COMPANY (JSC)
A joint-stock company is a company with share capital divided into shares, held by one or more shareholders. Shareholders have limited liability for the company’s obligations. A joint-stock company can perform any activity, while its shares may be private or publicly traded on registered stock exchanges. The joint stock company is liable for its obligations with all its assets and is meant to be suitable for large companies.
In addition to these four legal forms, one can perform business as an entrepreneur (aka sole trader). Entrepreneur is a natural person who run business being fully liable with all of his personal assets for the obligations arising from his business activity. However, entrepreneurs may have favorable tax treatment performing certain activities!
STEP NO. 2 – BUSINESS NAME OF THE COMPANY
Business name of the company consists of the name, legal form and company seat. The name of the company must not be the same as the name of another registered company, otherwise your registration application may be rejected by the Business Registers Agency. If such name is registered, third company is allowed to sue your company and seek damages. To avoid this scenario and to be sure that your company will be registered under the selected name, we suggest you to make the reservation of the company business name. Reserved business name is valid for 60 days.
Business name of the company must not confront moral and ethical standards, nor mislead the public on legal form or predominant activity of the company, nor mislead with regard to the identity of the other companies.
STEP NO. 3 – BUSINESS ACTIVITY AND ADDRESS
Business activity of the company that is registered with the Serbian Business Registers Agency is predominant activity. However, company may perform all the other activities besides the registered one, unless it is prescribed that company needs permit to deal with some activities (e.g. pharmaceutical companies). The company you founded in Serbia allows you to acquire any real estate in Serbia, regardless of the fact you may not be eligible to purchase real estate as foreign natural person.
When founding a company, you are about to register the address. Companies Act prescribes three types of addresses:
Headquarters of the company is the place on the territory of the Republic of Serbia where company perform operations and manages the business. It has to be registered.
MAILING AND DELIVERY ADDRESS
In addition to the business seat, the mailing address may also be registered and serves only for receiving mail. If the company has registered the separate mailing address, it will receive post on that address.
Company is obliged to have registered address for receiving emails. It is the official email address of the company.
STEP NO. 4 – DRAFT THE MEMORANDUM OF ASSOCIATION
A Memorandum of Association is the constitutive act of every LLC. In case company has one founder it is called Decision on the Formation of the LLC, or when it has been founded by two or more founders it is defined as Articles of Association of the LLC. GPC, LPC AND LLC use a Memorandum of Association to govern the management of the firm, business name, prevailing business activity, contribution to equity, etc.
A company’s memorandum of association contains, in particular, the following:
1) Data on the members of the company, as well as the data on the domicile of the company member;
2) Company’s business name and seat;
3) Company’s predominant business activity;
4) Total amount of the company’s share capital;
5) Amount of the pecuniary contribution, i.e. pecuniary value and description of the in kind contribution of each company member;
6) Time of making contribution to the company’s share capital;
7) Each member share;
8) Determination of company bodies and their competencies.
Memorandum of Association can be used to appoint the director or the other legal representative in the company, which can also be non-resident of the Serbia. Besides the Memorandum of Association, the joint-stock company has a statute as well. The entrepreneur does not enact a Memorandum of Association, statute nor any other constitutive act.
The share capital represents the contribution of the owners to the company. Contributions can be monetary or non-monetary (in kind contributions in tangibles or intangibles). Founders are not required to pay/give their contributions immediately upon establishment of the company. In the event owners did not pay/give contributions to the company within deadline determined by the Companies Act or Memorandum of Association, they will be held accountable for the damage caused to the company. The Companies Act prescribes that the minimal amount of share capital for LLC is 100,00 RSD, while for a JSC minimum is 3.000.000,00 RSD, unless other regulation prescribes higher threshold.
STEP NO. 5 – THE PROCEDURE WITH THE BUSINESS REGISTERS AGENCY
If you have followed all the previous steps, you need to collect the documentation which is required for the registration. The application for registration can be submitted directly to the Business Registers Agency, via post and in certain cases it can be done online. The decision on registration is enacted within 5 working days.
You are not required to be personally present in Serbia when establishing the company. The whole procedure can be done based on Power of Attorney and completed by the attorney at law.
OPENING A BANK ACCOUNT AND REPORTING TAXES
When you have successfully registered your company, you are obliged to open a bank account in the bank by your choice. Bank account may also be opened before registration of the company, but only for the purpose of investing in share capital. According to Corporate Income Tax Act, the firm has a 15 days deadline to file tax report.
Establishment of a company is the opportunity to define the company’s business operations at the very beginning, so that it is efficient and profitable for a long run. This is achieved by proper legal defining of the owner’s mutual relationships, director`s authorities, the purchase of one owner’s share from another, the company’s business model, supervision, financing mechanisms, tax analysis and savings, etc., in order to avoid subsequent issues. Additionally, technical errors in registration process may cause additional costs and prolong the beginning of the business activity.
*The content of this blog is for informative purposes only and does not constitute legal