Enterprise Development

Introduction

Lithuanian legislation provides for a number of various forms of legal entities. The most popular are the following forms of legal entities:
• Limited liability companies;
• Branches/Representative offices of foreign companies;
• Partnerships;
• Non-profit organizations.

Limited liability company

The main types of limited liability companies are:
• the private limited liability company (uždaroji akcinė bendrovė or UAB);
• the public limited liability company (akcinė bendrovė or AB).
As the mentioned forms of companies are the most common among Lithuanian and foreign investors, they are discussed below in more detail.

The private limited liability company (UAB)

The private limited liability company (UAB) share capital is divided into shares. UAB may be established by one or more natural or legal persons, either residents or non-residents, in any combination and number of shareholders cannot exceed 250. The minimum share capital established by the legislation is LTL 10,000 (EUR 2,896) The shares of the private limited liability company may not be offered and sold publicly.

The management structure of UAB and/or a public limited liability company (AB) must have the general meeting and its sole management body i.e. the manager of the company. The supervisory council – a collegial supervisory body, and the board – a collegial management body, may also be formed in a company. If the supervisory council is not formed in a company, the functions of the supervisory council laid down in laws shall not be delegated to other bodies of the company. If the board is not formed in a company, the functions of the board shall be delegated to the manager of the company. The general meeting shall not be entitled to delegate the issues within the scope of its powers to other bodies of the company. The manager of the company shall act on behalf of the company in day-to-day business.

The public limited liability company (AB)

AB is usually established by the incorporators seeking shares of the company to be traded publicly through the stock exchange following the rules regulating trading in securities. The minimum share capital of AB is LTL 150,000 (EUR 43,443).
Most of regulations applicable to the establishment, management structure and powers of the management bodies in AB are identical to those for UAB, as described above. 

Branches/Representative offices of foreign companies

The branch and the representative office do not have the status of a legal entity. A branch is entitled to carry out all or part of the functions of the foreign company (parent company). Therefore, a parent company is liable for its branch and the branch is liable for the obligations of its parent company. A representative office is entitled to represent and protect the interests of the parent company, conclude contracts and perform other actions on behalf of the parent company; however, it is not allowed to carry out independent commercial activity. Export and import operations may be performed only between the representative office and its parent company or any other company related to the parent company.
A branch will normally receive the same treatment as a local company and will be regarded as a separate entity for tax purposes.

Partnerships

A partnership is an entity of unlimited liability, founded on the basis of a partnership agreement between several natural or legal persons combining their property under a partnership agreement with the aim of performing joint economic-commercial activities under a single company name.
There are two forms of partnerships:
• General partnership (tikroji ūkinė bendrija or TŪB);
• Limited partnership (komanditinė ūkinė bendrija or KŪB).
TŪB is the form of commercial partnership, in which the partners are jointly and severally liable for all of its commitments and debts. TŪB must be registered with the Register of Legal Persons. There are no restrictions on the nationality or residency of the partners.
In addition to the presence of general partners who are jointly and severally liable for the partnership's debts, KŪB also has three or more limited partners whose liability is limited to the contributions they have made to the partnership's capital.

Sole proprietorships

Sole proprietorships (individualios įmonės) may be established by individuals. Sole proprietorship has a status of a legal person of unlimited liability. The owner of the sole proprietorship may be one individual only.

Non-profit organizations

If a person or a group of persons are willing to be active in the field of social affairs, education, science, culture, sports or other similar activities and if the objective of their activity is non profit-oriented, they may establish a non-profit organisation, such as a public institution, association, charity and sponsorship fund or a public organisation. The most popular among the non-profit organisations is the public institution (viešoji įstaiga) (PI), which is entitled to perform economic-commercial activity.
PI is a non-profit legal entity that carries out publicly beneficial activity. PI is not allowed to distribute the profits to it’s stockholders received for any other tasks than those set in the Articles of Association. There are no limitations with respect to the number of founders or stockholders.