It is important to identify the most appropriate sort of business entity to embark on before forming a company, as dictated by the law. This choice is a determining factor for many things relating to the business which include the company’s legal status, the quantity of equity capital, and other business-related concerns. Limited Liability Company (SIA), Joint Stock Company (AS), Branch Company, Sole Trading, and Representative Office of Foreign Merchant are the types of business entities that can be registered in Latvia. This article discusses the distinctions between a Limited Liability Company and a Joint Stock Company.
Limited Liability Company (SIA)
In Latvian, limited liability company is the translation of “Sabiedriba ar Ierobezotu Atbildibu” which brought about the acronym, ‘SIA’. It is the most popular type of business in Latvia. It appeals to entrepreneurs since it is easy to understand, simple to establish, allows family businesses and significant capital investment projects to operate, and has limited accountability. A limited liability company is a legal entity that can exist indefinitely, can take, keep, and convey the property, and can sue and be sued. The minimum equity capital required for an SIA in Latvia is €2800. The equity capital contribution might be made in cash or the form of real estate.
A limited liability company can be founded by one or more people, who can be both natural people and legal entities. The founder can be a Latvian resident or a non-resident of the country. The corporation is liable for its liabilities to the full extent of its assets. A founder or shareholder is not liable for the liabilities of the limited liability company, and the limited liability company is not liable for the liabilities of the founder or shareholder. Because SIA is a private corporation, its stock cannot be traded on the stock exchange. The board of directors and, if necessary, the council are the decision-making bodies of a limited liability corporation. The board is made up of one or more natural people who can be Latvian residents or non-residents. The procedure of forming and registering the business is not difficult. From the time all incorporation documents are created and filed to the Commercial Registry of the Republic of Latvia, the registration takes only four business days. The registration period could take just two business days upon request.
Stock company (AS)
In Latvian, the stock company is ‘Akciju sabiedrība” i.e AS. A Stock Company, like a limited liability company (SIA), is considered a legal entity. It is a public corporation, and its stock can be traded on the open market. It’s frequently set up if you want to run a business that requires a lot of money. Because stock is security, raising public money by issuing additional stock is easier to do than providing shares to a limited number of applicants, as is the case with a limited liability corporation (SIA). The corporation is responsible for its liabilities to the full extent of its assets. One or more people can be the founders, and they can be both natural people and legal entities. The founder can be a Latvian resident or a non-resident of the country. In comparison to SIA, a joint-stock company’s minimum equity capital is substantially larger, at EUR 35000. The only way to contribute equity capital is to make a monetary investment. The corporate governance of a joint-stock company is more complex than that of an SIA since it is administered by a shareholders’ meeting, council, and board. The board can be made up of one or more natural persons who are either inhabitants or non-residents of the Republic of Latvia.