BusinessWednesday 12 July 2017

Business opportunities in Romania: the difference between Corporation and Limited Liability Company

Any entrepreneur who owns or wishes to open a business in Romania should know exactly what type of legal entity he or she wants to initiate; or, an essential condition for this is knowing and understanding the distinction between a Limited Liability Company (LLC) and corporation or Joint Stock Company as it may also be known

Business opportunities in Romania: Corporation or LLC

Starting a business or looking to invest in something is not an easy decision, especially when the resources we have at our disposal are limited. In this regard, to make sure that the step we are making is not the wrong one, we need to carry out a thorough analysis before putting our money at stake. This analysis often includes a market study, a thorough business plan, a risk assessment, and, where appropriate, an investment strategy. In addition, at this early stage, the entrepreneur should have already decided whether his business will be constituted as a LLC or as a joint stock company (corporation)

The decision is an important one because, from the outset, such a choice can decisively influence the allotted budget, since the amount needed to set up a limited liability company is only RON 200, compared to approximately RON 90,000 needed to found a corporation. Also, within a LLC, owners, or associates as they are legally called, can be excluded from the company without much effort by other owners/associates. On the other hand, the owners of a corporation, or shareholders, cannot be removed from the company unless they are proven to have acted against the entityțs interests.

Finally, in a LLC the number of associates is relatively small and, as a result, important decisions related to the activity of the company are taken unanimously. In the case of joint stock companies, where the number of shareholders may be quite large, decisions are taken by majority. Moreover, in such a corporation, there is a lot more rigor with regard to the performance of the company, shareholders having the right to periodically interject the executive team concerning their management decisions. For this very reason, the vast majority of Romanian companies are organized as LLCs, which are cheaper and easier to manage. However, when a company needs a substantial capital injection, its organization as a joint stock company may be an extremely viable solution.

Sources:

adevarul.ro/economie/afaceri/diferente-srl-sa-potriveste-mai-bine-1_54d3a877448e03c0fd4fd28c/index.html https://pixabay.com/ (photos)  

Claudiu Bolcu

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