Setting up a business in Russia
There are a few ways for international players to set up business in Russia:
- Contract with an individual Russian resident to act on Principal’s behalf in Russia
- Opening a representative office
- Establishing a branch
- Setting up a subsidiary in Russia
- A joint venture with a Russian partner
- Supply or distributorship agreement with a Russian contractor
- Licence agreement for technology transfer in return for royalties
- Acquiring an existing business in Russia.
The most popular business models are:
1. Contract with an individual Russian resident
It is the fastest and probably the most economic option. Your international business does not have to register its permanent presence with Russian authorities. Instead, you engage a Russian resident individual who will act as your representative or consultant in the country. Your relationship is regulated by a Civil law contract, thus you avoid employer-employee commitments.
2. Representative office
Repoffice normally performs support, liaison, and ancillary functions. It is not allowed to engage in commercial dealings to generate profit. Typical activities include cooperation with other entities like marketing research and promotion. Representative offices must be accredited and registered with the Russian authorities.
Similar to representative office, a branch is a subdivision of a foreign company. Unlike repoffice, a branch can perform some of its founder’s functions such as contracting with Russian entities, carrying out sales and other activities. However, it cannot perform profit generation activities. As is the case with repoffice, a branch is supposed to be registered with the Russian Tax office. If it carries out commercial functions for its parent company, it forms a Russian permanent establishment, which is subject to Russian corporate profits tax.
Profit generating entities are represented by Limited Liability Company (LLC), Private Joint-Stock Company, and Public Joint-Stock Company.
a. Limited Liability Company (LLC) is the most popular form of commercial entity, easier to register and less complicated with formalities. LLC model is close to GmbH in Germany, SARL in France, and Co Ltd in the UK. Participant number is 1 to 50. Minimal charter capital is RUB 10,000 (appr. €130/ $150). LLC cannot be traded on stock exchange but is allowed to issue bonds.
b. Joint-Stock Companies (JSC)
These companies could be of private and public form, i.e., something similar to private and public joint stock companies that exist in many European countries. Joint-stock companies are allowed to go for IPO and can issue securities, i.e., shares, bonds, etc. Minimal share capital for private JSC is RUB 10,000 (appr. €135/ $150).
If you’d like to discuss your particular situation, please book your free consultation