Micro company in Lithuania
A micro company (MB) is a legal form of business that was introduced in Lithuania in 2012.
MB is not required to have a minimum share capital, thus a micro company may be established with 1 EUR or any other tangible property contribution. And yet, it still a limited liability company with certain unique traits and limitations for this legal form of business.
A founder can only be a natural person (max 10 persons). Founders of MB work for company without employment contract (except CEO) and receive payments for personal needs out of company account or distributed profits. In fact, micro company has less corporate compliance and more similarities to a joint venture partnership. Founders may choose whether MB will have only the meeting of members (and a representative appointed by the members) or both the CEO and the meeting of members. Corporate structure and relationships between members are regulated less thoroughly for this type of company if compared with a common form of a limited liability company UAB.
That being said, micro companies (or “mažoji bendrija” in Lithuanian) have become quite popular among start-ups and small family businesses also due to lower accounting requirements and ability to use company funds for establisher’s personal needs (e. g. services, representation etc.). For the purposes of an annual financial report of the MB, only a balance sheet, profit and loss statement and an explanatory note are necessary.
Taxing of micro company
Same as with UAB, MB can also benefit from a reduced Corporate Income Tax rate of 5 %, if the company have less than 10 employees and its turnover during the financial year does not exceed 300 000 EUR. However, it should be noted that when MB’s funds are withdrawn by the member for personal needs, they are taxed with income, social security and health insurance taxes.
Micro company can later be reorganized into a sole proprietorship, UAB or some other legal forms. A member of the MB can also transfer his/her member’s rights to another natural person, outside of the MB, however, this question is subject to the member’s obligation to refer this question to the MB’s members’ meeting beforehand.
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