Lately, more and more information has emerged on how to access irredeemable European funds, business accelerators and ideas; however, everyone seems to overlook the part about the actual company establishment. For some of those who want to start a business this step seems to be very difficult to overcome precisely due to the lack of information. Likewise, there are others who are reluctant to start a business just because they think that setting up an LLC is a highly complicated procedure and moreover, managing a company seems even more difficult.
We want to shatter many of these fears in order to boost even further the implementation of the brilliant business ideas that you have.
Thus, we will address the issue of launching a new company from several points of view.
We start by mentioning that all the necessary steps needed in order to register a company can be made for a fee directly at the Trade Register Office from the county where the new company will have its registered office.
In case you do not have the necessary time or do not wish to have direct contact with all the bureaucracy, you can refer to a lawyer or a consultant specialized in such operations, who will take over the necessary activities in this stage under a service agreement or an express mandate.
The first step you need to take for opening an LLC is to go to the Trade Register Office and reserve the company name. At this time, the cost for this document is 72 lei.
With the name availability proof provided by the Trade Register Office, you will go to a lawyer or an attorney for the statuary declarations, respectively that the partners and directors meet the conditions stipulated by Law 31/1990. We would like to bring to your attention the following situation: if in the past you were a partner and/or director in a company that maybe did not have any activity or you simply did not file the tax return (even if with value zero) or the balance sheets in the terms stipulated by the law you may be surprised to have these facts registered in your tax record (attention! not your criminal record) and this might prevent you from being granted the quality of partner or administrator in a new company.
It is also important to know that you can be a sole shareholder in only one company. Hence, if you already have a business and you wish to open another company, you will have to choose a partner, even if only formally (with 5% of the shares). We are often asked if the Registered Sole Trader status falls into the same category and the answer is no; if you are a Registered Sole Trader and do not have a company, you can be a sole shareholder in the new company.
In case the director(s) cannot be present at the Trade Register Office when you file the documents, you will be required to prepare the specimen signatures before an attorney.
An essential element while establishing a new company is the office. It can be your personal residence, a lawyer's office, a rented space or received through a bailment agreement. Depending on the chosen option, certain documents need to be prepared.
Thus, if the space to be used as the office is not a store but a residential space, you need to have the agreement of the neighbours or tenants' association to use it as headquarters of the company. If the area concerned is a house, this agreement is necessary only if the house has common walls with another establishment or if a tenants' association exists in that area.
If another company is registered in the same location, then you need to prepare a statuary declaration with an attorney that the conditions regarding the registered office are met. The declaration can be given both by the manager of the company that will be set up, as a user of the space, and by the owner of the premises. The Trade Register Office will verify how many companies are registered at each address.
If you choose to base your company at a lawyer, then you do not have to prepare these statements.
If you have a lease for the space to be used as headquarters, you should know that the owner has the legal obligation to register the lease at the Public Finance Administration and to provide you with a copy of the contract together with the proof of registration. Without this evidence, the registration of the company will not be accepted by the Trade Register Office judge.
Once you have established the headquarters, you will have to prepare the articles of association. This is a document that defines the operational framework of the company; to be more precise, it stipulates the associates and their contribution to the company, the directors, NACE codes etc. If there are specific references between the associates with regard to gains and losses, it is very important to detail them in the document.
Even if at the time when you start the company you are considering a certain activity, we recommend specifying in the document all the NACE codes that do not have a special status, and later you will only activate the ones required for the desired activity. This way, the costs of subsequent changes or activations of NACE codes will be smaller and the modification term reduced. If you choose a limited number of NACE codes and subsequently you wish to expand your business with an activity not included in your articles of association, you will have to recommence the formalities and draw up updated articles of association.
The articles of association must also include the period of the administrator's mandate which can be unlimited or for a specific period of time. It also has to specify the limits allocated to the director. If we do not discuss the context in which the management is ensured by third parties contracted for this particular function, then we recommend stipulating that the administrators individually have full powers of representation and administration. One of the questions we are usually asked in this situation is if the directors can become employees of the company later on, and the answer is yes.
In order to set up the company, you will have to open a primary capital account with a bank of your choosing in which the partners will have to transfer the subscribed capital. If such operation is delegated to a third party, the power of attorney will also stipulate that the delegate is authorized to deposit the money in cash, on behalf of the respective partner.
Besides the documents mentioned above, some other forms are also required, such as copies of documents, fiscal stamps and in particular cases other documents. A complete list of these documents can be found here.
The fees charged by the Trade Register Office for setting up a company are approximately RON 500-600.
After the registration of the file with the Trade Register Office, it normally takes 3 days to pick up the incorporation documents.
The previously described steps are valid both for the establishment of a company with 100% Romanian capital owned by individuals, and for a company with legal entities as partners. However, more documents need to be provided by the partner companies.
If you wish to associate with non-resident individuals, in addition to the above you should know that non-resident partners must sign the necessary documents (declarations, specimen signatures, articles of associations etc.) in the presence of an interpreter for the language of the residing country. If you are in this situation and your foreign partners will not be present at the signing of the documents, they can authorize you by power of attorney given in their country of residence or before the Romanian Consulate in that country; the power of attorney will have to be then translated and legalized. In this case, we recommend that you get samples of the documents that they need to notarize, to send such samples to them so as to be accurate and to avoid wording mistakes or content problems in the documents you will file with the Trade Register Office.
Considering that Benjamin Franklin's principle, i.e. that the only things in life are death and taxes, apply in our country, as well, you will have to choose one of the two tax systems for LLCs depending on the conditions met. Choosing is just a way of putting it, as in fact this is not really optional.
Thus, the standard system for newly established companies is income tax for micro-enterprises. According to this system you are being charged 3% of the company revenues. Attention: revenue= the services provided according to the issued invoices, not equal to returns. This taxation system will apply to a turnover of Euro 65,000 and/or until you have revenues from consulting of over 20% of the company's total revenue.
The other system of taxation is the corporate tax. You will be able to choose this taxation system from the beginning, only if the main activity field is related to consulting services. Otherwise, you can switch to this system only after your turnover exceeds the limit of Euro 65,000, at which time, the entire fiscal year will be reconsidered and recalculated as if it were corporate tax. Basically, in the year when you exceed the limit, the amount which was already paid during the year as income tax for micro-enterprises shall be considered payment for the corporate tax. The same applies if during the fiscal year the weight of the income from business and management consultancy exceeds 20% of your total revenues.
In terms of VAT, a newly established company will not pay VAT. Registering as a VAT company is compulsory after achieving a turnover (as defined in the Tax Code) of RON 220,000. If you wish to register the company as VAT-registered prior to the realization of such turnover the law allows for it. The registration procedure is not very easy and transparent, but we recommend making a sound analysis of the VAT registration opportunity.
For IT services we recommend choosing the VAT registration by way of option, because you can deduct the VAT for all purchases you will make in Romania (equipment, furniture, services etc.) If paying VAT in the classical sense is not in the fiscal interest of the company, but still you wish to make intra-community acquisitions (both goods and services), you are obliged to obtain a valid VAT code enlisted in the Register of intra-community trade operators only for intra-community operations. Thus, using this code, you can provide intra-community services or make purchases without VAT from the EU, but you will declare and pay the VAT for purchases made in Romania. If you make imports or exports of goods and services, you will have to obtain the EORI code form customs. The procedure in itself is not complex, however the application where you need to fill in the data has not kept pace with the IT development (it can be filled online but it must be submitted in original at the Customs).
With the opening of a business there are some minimal compulsory procedures to be made from the start.
When the registration with the Trade Register Office is completed, within 30 days you will have to submit statement 010 together with copies of the documents you received from the Register to the Public Finance Administration. Practically there is communication between the Public Finance Administration and the Register, however you have to file the statement and copies of the company documents, otherwise you will be fined.
Then, within 30 days as of the establishment, you need to procure a Control Ledger from the Public Finance Administration. In this ledger, you need to register all the inspections carried out at the taxpayer by all the specialized control bodies in the fields of: safety, labour inspection, financial-fiscal, health, plant protection, consumer protection, fire protection, urban planning, construction quality etc.
Corporate tax payers need to purchase the Tax Audit Register within 30 days as of the time when the company became a corporate tax payer. The register needs to contain all the information considered in the determination of the taxable profit and the calculation of the corporate tax.
Companies must notify any cash transaction exceeding Euro 15,000 to the National Office for Prevention and Control of Money Laundering. For this process, when you establish the company, you need to appoint one person responsible for reporting these transactions to the Office and you need to draw up an internal procedure for tracking and reporting these transactions. The fine for not designating the person responsible ranges from RON 10 000 to RON 50 000 and for not declaring the transaction form RON 10 000 to RON 30 000 (depending on the seriousness of the offense, there may be other penalties including closing down the company).
Invoices and receipts can be issued electronically, but the company's representatives have to appoint one or more persons in charge of the allocation of the series and numbers of the used invoices and receipts. This decision needs to be taken annually, at the beginning of the year.
Before the hiring of any employee, you must receive a certificate from an occupational physician, confirming that such employee is fit for work. You must also conclude an agreement with a company that provides personnel training for Fire Prevention and Fire Fighting.
Even if it seems like a difficult and complex process it should not hamper the implementation of business ideas. You can refer to a consultant for help any time and just keep in mind that all enterprises need to be taken step by step.
by Monica Rațiu
by Emil Luța
