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How to start a business?

When foreigners start a business in Russia there are several different legal ways available, which are explained hereafter. There are essentially three legal structures for doing a business.

1. If you are already doing a main business abroad there are reasonably setting up and registering in Russia the branch or the permanent establishment (PE) of the foreign company.
2. It is also possible forming a legal entity with participation of the foreign capital, or
3. Registering as an individual enterpreuner, who is running a business without formation of the legal entity.

A step-by-step guide to forming a legal entity

Whether you are a foreign citizen, a person without citizenship, or a representative of a foreign company you can register a legal entity by yourself. The information below could help you pass the registration process and compile necessary documents.

The steps to register a legal entity are follows.

1. Deciding on a business legal structure.

2. Forming the foundation documents. 

3. Preparing the set of the required documents for registering. 

4. Filing the required documents to the register office.

5. Receiving the incorporation documents.

6. Manufacturing the seal.

7. Opening a bank account.
 
Starting a business!

1. Deciding on a business legal structure.

The list of a business legal structures and the features of their legal status, including the requirements for company officers, the liabilities of founders, the registration requirements, etc. is defined in the Civil Code of the Russian Federation and the companies law (Federal Law 208-FZ of 26 December 1995 «On Joint-Stock Companies», Federal Law 14-FZ of 8 February 1998 «On Limited Liability Companies» and others).

Registering and running a open joint-stock company (OAO, the Russian equivalent of public company), closed joint-stock company (ZAO, corresponds more to the concept of private companies) or limited liability company (OOO) requires more legal administration than a individual enterpreneur or partnership. On the other side, if you are a partner or an individual enterpreneur, the outstanding debts incurred by business can be met from your personal assets.

In Russia the most common legal entities with foreign capital are limited liability companies, open joint-stock companies or closed joint-stock companies.
In all three cases, the liability of their shareholders for the company debts is limited to the amount of their contributions to the nominal capital of the company.

One of the main differences between open and closed joint-stock companies is the number of shareholders, which is limited to 50 in the case of a closed joint-stock company. As a general rule, shares in both companies are freely transferable. However, existing shareholders of a closed joint-stock company have pre-emptive rights in acquiring the shares of the withdrawing partner.

It is highly unlikely that start-ups will be starting life on the stock exchange so in a «Starting a business» chapter we will concentrate on limited liability companies.

When you have decided on the right business legal structure, before you start company formation you should choose the name and the location (legal address) for the company.

Depending on your company location you should be advised on 1) the appropriate registering office, where you should file the documents for business registration, and 2) local tax office, where your company shoul register for taxation purposes. Due to one-stop shop procedure it is generally the same office. For your convience, please use our online service «Find your tax inspectorate».

2. Forming the foundation documents.

In accordance with Russian legislation the founders who are forming company should prepare and approve (sign) the foundation documents (the charter and the founding agreement).

A limited liability company, as well as closed joint-stock company, may be formed by one or more individuals or legal entities. If the number of shareholders exceeds 50, the company must be transformed into an open joint-stock company.

The foundation documents inter alia should contain:

the full name of the company and the abbreviation it is going to use in business, the names and signatures of the founders who are forming the company, the amount and nature of the shareholders’ contributions (cash or in kind) and the procedure, in which the contributions will have to be made the rules for running the company, internal management affairs and legal responsibility.

Also the company officers (executive bodies) must be appointed that are usually named as directors in the charter.

Any amendments and changes to the charter and the founding agreement must also be registered. The same applies to limited liability companies in the case of change of shareholders.

Minimum capital requirement is 10 000 RUR. Contributions can be made in cash or in kind. At the time of registration, each member must have paid up at least 50% of the amount of his contribution, and the balance must be paid within 12 months.

3. Preparing the set of the required documents for registering.
To incorporate a company you must send the following documents to registration office.

- Application for registration of a company (form Р11001);
- Decision (protocol) on forming of company (in the prescribed manner);
- Foundation documents in duplicate (in case of paper filing by hand or by post), or in one copy (in case of e-filing);
- Extract from the business register of appropriate foreign country or other equal proof of the legal status of the foreign legal entity\the founder;
- Documents on payment of a state duty.

Only one of the founders (no matter whether individuals or legal entity, resident or non-resident) of registering company should be the applicant. Application forms are available on the FTS website (http://www.nalog.ru/gosreg/reg_ul/). Form Р11001 recommended by the FTS is applied only to limited liability companies.

The abovementioned documents should be issued taking into account the following requirements:

- Each document containing more than one sheet should be stitched and numbered;
- Number of sheets should be proved by the signature of the applicant or the notary on the back of last sheet on an insertion place;
- Application and the appendix should be filled in by the typescrypt text or by the hand printing letters with use of ink or a ballpen of dark blue or black colour;
- If any section or point of section of the application is not filled in, at the corresponding graphs the crossed out section is put down.

Documents are filled in (issued) in Russian. Documents in a foreign language are subject to assurance by an apostille or consular legalisation and the subsequent translation into Russian. Translation should be notarized.

Authenticity of the applicant’s signature on the application should be notarized.

Documents in which the authenticity of the aplicant’s signature is witnessed by a foreign notary, are subject to assurance by an apostille or consular legalisation and subsequent translation into Russian. Translation should be notarized.

The amount of the state duty for the state registration of the legal entity makes 4 000 RUR.
Requisites for payment order are available on websites of the FTS Regional Directorates.

4. Filing the required documents to the registration office.

The authorised tax authorities make the decision on registration of the commercial organisations (except the credit and bank organisations), and also regarding the number of the noncommercial organisations.

You should file the required set of documents to registration tax office in a place of the future location of forming company.

You can file the required documents by the following ways:
- paper filing by hand in the registration office (personally or through your authorised representative);
- paper filing by post;
- e-filing via the Internet, including the use of a single portal of public and municipal services.

Within no more than 5 working days since of receipt of the documents the registering authority should examine the documents submitted and either make the decision on the state registration of your company making appropriate records in the State Register, or make the decision on refusal of registration.

An exhaustive list of the grounds for refusal of registration is defined by par. 1, art. 23 of the Federal Law № 129-FZ.

Registration of a company is one-stop shop procedure following which the registering authority not only makes a business registration, but also registering a company for taxation purposes, sending electronically the company data to extra-budgetary funds and statistical agency. There is no further need to visit any other authorities to make a registered company operational.

5. Receiving the incorporation documents.

If examination of your documents has passed successfully, on the day appointed by registering authority you can take out the following documents:
- The Incorporation Certificate (full name is the Certificate on State Registration of the Legal Entity);
- The Tax Certificate (full name is the Certificate on registration in tax authority);
- One copy of foundation documents gives you back with the mark of registering authority;
- Extract from the Common State Register of the Legal Entities.

It is important to note that the abovementioned documents should be issued by registering authority no later than on the 6th working day since the day of receipt of application for the state registration.

In case you did not refer to the registration authority for obtaining the documents, they will be sent to the legal address of your company. At the e-registration you can choose the way of receiving the documents.

6. Manufacturing the seal.

After receiving the documents of company registration you should to make your company seal.
Manufacturing of the seal is provided by a commercial organization at your company director choice.

7. Opening a bank account.
With the registration documents and company seal, you are entitled to open an account in any bank at your choice.

The procedure of opening accounts and the list of the required documents are defined by the Instruction of the Bank of Russia of 14.09.2006 N28-I.

Note that within seven days from the date of a bank account opening you must notify your tax authority with this information.

After the abovementioned actions your company is ready to start a business.