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This article is based on the "ABC of Russian Business Law". You may subscribe here

JSC vs LLC

Anti-monopoly regulations

Labour law

Types of business presence

Business in Russia may be conducted in various forms, involving setting up a legal entity or not. Principal forms of commercial organisations — legal entities are joint-stock societies and limited liability societies. Foreign companies may operate in Russia both via Russian daughter companies and via branches and representations.

Joint-stock societies

Joint-stock societies may be open (OAO) or closed (ZAO), roughly corresponding to public and private companies. The open form is the only one for companies established during privatisation and for holding companies. Legislation does not restrict foreign entities' participation in joint-stock societies, except for specific branches of defence industry, etc. Joint-stock societies, independent on their type, register the issue of their shares with divisions of the Federal Service for Finanicial and Budgetary Supervision. Transactions with unregistered shares may be deemed invalid.

Limited liability societies

Limited liability societies (OOO) are simpler to organise and manage than joint-stock societies (no need to register the issue of shares, to keep register of shareholders, etc.), but in Russia this form is not confined to small business. Societies may be set up by a single founder. Withdrawal from the LLC is possible at any time with payment of the actual value of participatory share.

Minimum amount of statutory capital

Contributions to statutory capital may be made in Roubles or in foreign currency. If contribution to statutory capital is made in the form of property to the amount exceeding 200 times the minimum monthly pay, it should be appraised by an independent appraiser (auditor). Foreign investor's contribution to statutory capital made by fixed assets imported to Russia's territory is exempt from import duties and VAT.

Other forms of commercial organisations

The Civil Code of the RF stipulates establishing commercial organisations in other forms: superadded liability societies, partnerships (full and in commandam), production cooperatives, state and municipal unitary enterprises. Such organisations are legal entities and are subject to taxation as companies. These forms may be effective only for specific types of business. Russian legislation also provides for conducting business in non-incorporated forms — by conducting joint business under an agreement (simple partnership).

Conducting activity on behalf of foreign organisations

Foreign companies may conduct activity in Russia without establishing daughter Russian companies — via branches and representations. Branches and representations of foreign entities are not viewed as resident legal entities. Ideally, representations may carry out only auxiliary and introductory functions, but practically they conduct commercial activity as well, and in this case they are taxed in the same order as resident companies(with due account to double taxation treaties).

For visa support, duty-free temporary import of equipment, etc. representations of foreign legal entities should get accredited with the State Registration Chamber under the Ministry of Justice. Irrespective of accreditation with this body representations should register for taxation purposes.

Branches of foreign legal entities are not a popular form of conducting business in Russia, as a number of taxation and accounting points relating to branches have not yet been made clear. Generally, for taxation purposes branches are equated with Russian legal entities.

Natural persons conducting business

Russian and foreign citizens may conduct entrepreneurial activity without forming legal entities. In order to do so they must be included into the Unified State Register of individual entrepreneurs kept by tax bodies. Special taxation rules are applied to such natural persons

Non-commercial organisations

There are over 30 forms of non-commercial organisations in Russia (public and religious organisations, non-commercial partnerships, institutions, charity foundations, associations and unions, etc.) Non-commercial organisations may conduct entrepreneurial activity within the framework of limitations stipulated in their statutory documents — but only insofar as it serves the purposes for which they have been established.

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