Before starting your business in Montenegro, you must decide on the correct legal entity for the particular activity. The legal framework providing the types of registered companies is the Company Law. The simplest type of business formation is with limited liability. Limited liability companies are more complex but they yet have their advantages.
Principle entities under Montenegro Company Law
One of the main factors to consider when choosing a company type is the size of the business that is going to be set up. Another important factor will be the activity of the business.
The law lists the following types of companies:
- Sole proprietorship- the simplest company type that can be modified at any time
- Partnership- general or limited but requires at least two founders
- Limited Liability Company- private or public with different requirements regarding shareholders and founders
- Subsidiary Company- set up as a foreign company but complying with the rules that apply to the domestic company
- Branch Office- suitable for financial institutions that wish to expand into Montenegro
By law, you can also set up a representative office for the purposes of marketing and a joint venture, which will be similar to a limited liability company. Let’s go over some of the main company types in more detail.
Sole Proprietorship in Montenegro
This is the smallest type of business and it doesn’t require a minimum share capital. The personal belongings of the business owner aren’t protected if the company can’t pay any debts.
Limited Liability Company in Montenegro
Known locally as a ‘Drutvo s ogranienom odgovornou’, it is one of the most popular company formations due to the positive incorporation procedures. The minimum share capital is just 1€ by a minimum of one shareholder. The maximum number of shareholders must not be more than 30. In the case of the share capital is more than 25,000€, the company can be reorganized to form a joint-stock company.
Joint Stock Company in Montenegro
An ‘Akcionarsko drutvo’ is a company type for high capital investors. The minimum capital for a joint-stock company (or A.D) is 25,000€ cash. There will be a General Meeting of shareholders where decisions are made. It is necessary to have an auditor who will check the company’s books annually.
General Partnership in Montenegro
In order to form a general partnership (Ortako drutvo) you don’t have to lay down a minimum share capital. You are also not obliged to register the company with the Central Register of the Commercial Court. The name of the partnership and the addresses of the partners must be included in the registration status. While not mandatory, an agreement can be signed.
Limited liability Partnership in Montenegro
To form a Komanditno drutvo you need two parties. There will be general partners and limited partners. The general partners are liable for debts incurred up to the amount of the capital invested. Limited partners can’t make decisions, nor can they ask for the dissolution of the partnership. Permission from limited partners is not needed if a third party I brought into the partnership.
A Branch Office or Subsidiary in Montenegro
If a foreign company wants to expand into Montenegro, they can do so by forming a subsidiary or branch office. The difference boils down to the amount of control the foreign company has, the taxes that are to be paid, and the type of activity that can be carried out.
A branch office fully depends on its parent company, carrying out the same activity. It will be taxed on the income that is generated in Montenegro.
A subsidiary is an independent company in Montenegro. In terms of taxation, it is the same as any other domestic company. There are some restrictions on the activity in which it can carry out.
There is a third option; a liaison office- It is recognised under local legislation but it cannot participate in any commercial activity.
The Process Of Forming A Company In Montenegro
Whichever company formation is the most suitable for your needs, the principal steps are the same. The company must be registered with the Trade Register:
- Choose and reserve a trading name for limited liability companies. A sole trader can use their own name and a partnership can choose the name of one of the founders.
- The required paperwork needs to be prepared, whether that’s the Articles of Association or Partnership Deeds.
- The incorporation documents have to be completed, as well as any details about the shareholders, founders, and directors.
- Registration for taxes and a VAT number, employment, and social security payments.
- Apply for the business license for the relevant business activity that will be carried out in Montenegro.
Why Choose Montenegro To Open Your Company
Situated in Eastern Europe, Montenegro has great economic development. Foreign investment comes from over 100 countries, including Russia, Italy, and Austria. Tourism from foreign investment activities rose by 8% between 2015 and 2017. Real estate is also doing well. The income generated from real estate in 2016 was up to 117.4€ million.
Foreign investors appreciate taxation rates, free trade and the continuous growth in the economy in Montenegro. Likewise, there are a number of advantages that you could benefit from if you choose to set up your company in Montenegro.