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Lithuania Routes to Market

So, you've decided to expand your business in Lithuania and researched your market. Now it's time to decide how you will register and set up the business. What is the best, most viable option for your company, your products, and yourself? Which is the path of least resistance?

Here are your typical options when expanding a business into Lithuania:

Private Limited Liability Company (Uždaroji akcinė bendrovė, UAB).

Private Company is the most common among foreign-based enterprises. Only one person or more can set a Private Company. The minimum amount of capital required to open Private Company is EUR 2,500. This type of company has limited civil liability and shareholders aren‘t personally liable for AB obligations. Maximum number of stakeholders for this type of company is 249 shareholders. The management bodies of the company are determined by the general shareholders meeting. You will need to open an accumulative bank account and to reserve the name of the limited liability company (name has to be in Lithuanian of Latin languages). As well as register at the Register of Legal Entities, including registration with the State Tax Inspectorate for corporate tax, VAT, and State Social Insurance Fund Board (SODRA). Founding documents will have to be notarised at the notary‘s office. Setting up Private Company involves quite a lot of legal work so it‘s best to consult a legal advisor.

Public Limited Liability Company (Akcinė bendrovė, AB)

Public company (AB) is similar to limited liability company (LLC) or joint stock company (JSC). When establishing a Public Limited Company, a minimum share capital of EUR 40,000 is required. Shareholders are not held personally liable for AB obligations. Shares of the company can be traded publicly. With Public Limited Company it is easier to attract investors by emitting shares or obligations, therefore expanding business.

Individual enterprise (Individuali Įmonė, IĮ)

Individual enterprises fall into second place in Lithuania by popularity. Establishment does not require any initial capital. Owner of an Individual enterprise works in its own company and doesn’t need to conclude employment contracts. This results in paying less taxes and furthermore, company is subject to tax concessions. If annual profit of the company is less than EUR 300,000 and it employs no more than 10 employees, company is subject to 5% tax rate instead of 15%. Owner himself can choose freely on business decisions and on the future of the company. Also, an Individual enterprise can always be transformed to a different legal form such as Private Limited Company or Public Limited Company.

Small Partnership (Mažoji Bendrija, MB)

This type of company is not required to have a minimum share capital. It has limited civil liability. Only a natural person can set this type of company and there can only be maximum of 10 members within the company. Founders work without employment agreements and receives payments from company account or distribution of profits. This type of company is similar to joint venture partnership and has a comparatively less corporate compliance.

Branches/Representative Offices

Foreign companies can establish a branches and representative offices in Lithuania. They will not have a status of a legal person and will function under regulations of the incorporator. It is advised for tax purposes to set up a permanent establishment in Lithuania.

Licensing

Licensing is the permission for someone else to use your intellectual property rights in Lithuania: either a patent, trademark, trade secret, or copyright. Different types of license include:

Non-Exclusive License - A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.

Exclusive License - A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France yet grant another licensee its use in Lithuania.

Patent License - The allowance of another party to use your patented product, design or process.

Trademark License - Trademark licensing means permission is awarded to a license to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore sustain customer confidence and satisfaction.

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