What organizational-legal form favors your business? In most situations, this is the basic question put in by the person who takes the firm decision to make the first steps in business. Some organizational-legal forms are “cheaper” as launching and starting, but these forms suppose several risks from the point of view of the responsibilities assumed by the initiator of the business. Other organizational-legal forms are “more expensive” in terms of the launch, they have a minimum amount of share capital to be established and submitted, higher registration costs, but instead, they offer limited liability.
One of the first decision to take, but also one of the most important, with long-term effects, that the entrepreneur has to assume when running the business, is linked to the choice of the organizational-legal form of the future business. Since there is neither good nor bad organizational-legal form of a business, in order to take the right and argued decision, it will be necessary to take into consideration the field of activity which is to be carried out, the available resources, and the expectations of the entrepreneur from the future business. Thus, in order to make a well founded choice, the entrepreneur should take into consideration the decision factors and to answer the following questions:
What is the branch/field of activity in which he intends to launch the business?
The responsibility for the launch and pursuit of the business will be assumed by himself/herself, or it is intended to share the risks and responsibilities with another person/other people?
Does he have sufficient financial and material resources to initiate the business alone or he needs to attract a partner/ an associate?
Does he possess knowledge, skills and abilities needed to manage the business alone?
Does he have the capabilities/skills of working in group/team or he prefers to rely only on his own forces?
What is the size of income / profit planned to be obtained and is he willing to share it with anyone?
What ideas he has about accounting and financial reporting? etc.
Depending on the answers to the questions above, the entrepreneur will choose the legal form which corresponds the best to his wishes and requirements.
According to the legislation of the Republic of Moldova, the entrepreneurship can be practiced under the following organizational-legal forms:
a) Individual Enterprise (IE);
b) General Partnership (GP);
c) Limited Liability Partnership (LLP);
d) Joint Stock Company (JSC);
e) Limited Liability Company (LLC);
f) Co-operative (Coop).
Figure 1. The organizational-legal forms for practicing entrepreneurship in Moldova
The entrepreneurship activity may be carried as an individual – individual entrepreneur or as a legal entity. In the Republic of Moldova, the most frequently encountered organizational-legal forms are: individual enterprise, limited liability company, joint stock company. The Figure 2 shows the quota of registered enterprises by legal organizational status.
Figure 2. The structure of the registered enterprises in Moldova, according to the legal forms.
SRL= Limited Liability Company (LLC)
SA= Joint Stock Company (JSC)
ÎI= Individual Enterprise (IE)