Post The Right Legal Entity for Your Business In Moldova (SRL, SA, GT, II)

Intro

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.

Source: http://cis.gov.md

SRL= Limited Liability Company (LLC)

SA= Joint Stock Company (JSC)

ÎI= Individual Enterprise (IE)

Altele=Others

Individual Enterprise

General Data

Individual Enterprise (IE) is an enterprise wich belongs to the citizen (individual) with the right of private property, or wich belongs to a family members with common ownership. IE`s assets are formed by citizen`s (family`s) assets and from other sources that are not prohibited by law.

Among the most accessible and the most frequently used organizational-legal forms for practicing entrepreneurship in the Republic of Moldova, is the Individual Enterprise (IE).

The individual enterprise is a form for practicing individual entrepreneurship activity, on behalf and at own risk.

Advantages/Disadvantages

The popularity of this legal form is explained by the fact that the Individual Enterprise (IE) as an organizational-legal form presents the following advantages:

  1. it may be founded by one person or the members of one family;
  2. the registration procedure is simple and the costs incurred by the individual to prepare the documents for business registration are reduced;
  3. IE organizes and keeps accounting using the single entry accounting system that provides unilateral ecording of the economic facts, using the “input-output” method), without presenting the financial statements until their registration as VAT payers. For entities applying single entry accounting system, accounting may be held directly by the head of the entity. This does not absolve the Individual Enterprise (IE) from submission of tax reports.

The entrepreneurs who are willing to choose this legal form should take into consideration its limits and the following disadvantages:

  1. the Individual Enterprise`s (IE) assets are formed by citizen`s (family`s) assests and from other sources not prohibited by law;
  2. the Individual Enterprise (IE) is not a legal entity and shall be presented in law relationships as an individual (founder). Therefore, the Individual Enterprise (IE) may be considered an individual with the status of legal entity, and the Individual Enterprise (IE) has a separate fiscal code different from the fiscal code of the founder. Simply said, the Individual Entreprise (IE) and its founder are one and the same person;
  3. because the assets of the Individual Enterprise (IE) are not separated from the personal property of the founder (individual), the founder shall bear unlimited liability for the IE`s obligations and debts with his entire fortune, except those goods which, according to the legislation, shall not be subject to prosecution;
  4. the members of the family-founders of an Individual Enterprise (IE) shall bear unlimited liability jointly for the IE`s obligations with all their assets, except those goods which, in accordance with the legislation, shall not be subject to prosecution;
  5. the Individual Enterprise has limited opportunities for development and for the receiving bank credits;
  6. the Individual Enterprise (IE) may have staff problems. An IE`s employee can not become a partner/an associate of the Individual Enterprise (IE), by owning a part of the share capital (Individual Enterprise does not have share capital), as IE is identified with its founder and with his entire fortune (houses, automobiles, etc.);
  7. the Individual Enterprise (IE) has fewer opportunities to attract foreign capital and loans;
  8. any citizen can be founder of only one Individual Enterprises (IE);
  9. The individual (founder) bears personal responsibility for the keeping of accounting and financial reporting.

Taxation

In terms of taxation the Individual Enterprise (IE) is not the most convenient legal form for practicing entrepreneurship because the income tax rates are:

7% from annual taxable income that does not exceed 31140 lei;

18% from annual taxable income that exceeds the amount of 31140 lei.

Conclusions

In conclusion, the choice of Individual Enterprise (IE) as organizational-legal form for launching and running a business is recommended in cases when the expected revenue is relatively small, and the same time the degree of risk is low. The major advantages of this organizational-legal form, are simple accounting system and tax and financial reporting.

Smallholder General Data

Individual entrepreneurial activity in agriculture shall take the legal form of Small Holder (PF). The small holder is an individual enterprise, based on private ownership of agricultural land and other goods, based on personal work of the members of a family (members of small holder), having the purpose to obtain agricultural products, their primary processing, and selling mostly its own agricultural production.

Advantages/Disadvantages

As an organizational-legal form, the small holder presents the following advantages:
  • the small holder may be founded by a single individual;
  • in Moldova only small holders may carry out individual entrepreneurial activity in agriculture;
  • the small holder registration is carried out at the village hall where the land is located;
  • the small holder organizes and keeps accounting based on single entry accounting system without presenting the
  • financial statements until the registration as VAT payers. This does not exempt the small holder from submitting tax reports.Entrepreneurs who are willing to choose the legal form of small holder must take into account its limits and the following disadvantages:
  • it has the legal status of individual;
  • the small holder must use more than 50 percent annually of personal labor of its members;
  • small holder members have unlimited joint liability for PF`s obligations with all their property, except goods which, according to law, are not subject to prosecution;
  • an individual may be the founder (member) of a small holder only;
  • PF can be created only for entrepreneurship activities in the agricultural branch of the economy.

Taxation

In terms of taxation, the small holder is the most convenient legal form of entrepreneurship as the income tax rate is in the amount of 7% from the taxable income.

Conclusions

In conclusion, the choice of small holder as legal form for starting and operating a business, it is recommended if the planned activity is linked to agriculture, and the expected revenues are relatively low, and the degree of risk is also low. Also, as major factors for choosing this legal forms, there are the simple way of keeping accounting, tax and financial reporting, and the reduced rate of income tax of 7%.

Entrepreneurial patent and individuals performing independent activities

General Data

In Moldova, individuals can carry out limited business activities, performing certain types of activities specified by legislation using the entrepreneurial patent. The entrepreneurial patent, patent hereinafter, is a nominative state certificate, confirming the right to conduct the kind of business activity indicated in it, within a certain period of time.

The patent holder can be any citizen in capacity of the Republic of Moldova, any foreign citizen or stateless person who permanently resides in the Republic of Moldova and is entitled to pursue entrepreneurial activity, which has declared his intention to buy the patent and who corresponds to the qualification required for this type of activity. Since January 2017, the entrepreneurial patent was supposed to disappear. Authorities decided, however, to postpone this deadline to find a compromise with entrepreneurs.

However, the patents can be used only by entrepreneurs who already hold them. The new ones will not be released. As an alternative to the entrepreneurial patent and as a step of transition, it was introduced a new simplified tax regime for individuals performing independent (self-contained) trade activities. The new concept was developed by the Government, as a part of the tax policy for 2017.

Simplified tax regime is designed for individuals who are willing to conduct independent trade activities with other individuals without registering an enterprise or another legal form of entrepreneurship. This tax regime is applied only to activities carried out in the independent retail trade (except for excisable goods). This tax regime is determined by the size of the obtained income during the fiscal year, which must not exceed 600 thousands lei. The right to apply this tax regime is achieved by the application submitted by the taxpayer to the subdivision of the State Tax Service.

Particularities

it will be required to use the cash machine. During the first tax period, the taxpayer is entitled to reduce the amount of income tax due to with the amount of expenditure incurred for purchasing the cash machine. In other words, cash machine will be purchased using the money from the state budget;

the taxpayers will be required to keep accounting records in a simplified form (using single entry accounting system).The Ministry of Finance will establish simplified guidelines.

Taxation

Individuals who perform independent activities will pay a tax of 1% from the obtained income, but not less than 3 thousand lei annually. Income tax calculation will be made by applying the tax rate on income from independent activities. Tax calculation shall be performed annually. The tax payment to the budget shall be made in installments, quarterly, until the 25th of the month following the quarter.

The income tax shall be paid to the treasury account of the administrative-territorial budget unit according to home address / residence of the taxpayer.

The income tax report shall be presented not later than 25th of March of the year following the tax declaration period. The form of income tax report will be approved by the Ministry of Finance.

Individuals who perform independent activities will be exempt from local taxes. The same time, this category of taxpayers will be granted with the right to import goods while performing independent trade. The individuals who perform independent activities will pay all taxes and import duties, as other legal forms. Imports will be allowed only for goods used in independent trade activities.

Conclusions

Individuals who perform independent activities will pay a tax of 1% from the obtained income, but not less than 3 thousand lei annually. Income tax calculation will be made by applying the tax rate on income from independent activities.

Tax calculation shall be performed annually. The tax payment to the budget shall be made in installments, quarterly, until the 25th of the month following the quarter.

The income tax shall be paid to the treasury account of the administrative-territorial budget unit according to home address / residence of the taxpayer.

The income tax report shall be presented not later than 25th of March of the year following the tax declaration period. The form of income tax report will be approved by the Ministry of Finance.

The development and implementation of this new simplified tax regime aims to support individuals involved in entrepreneurship activity without creating a legal form. The new tax regime has the goal to sustain the individuals to start their own businesses and the further development of these businesses using one of the legal forms allowed by law, such as individual entreprises, limited liability companies, etc. This simplified tax regime is supposed to be an intermediate step in the process of business evolution.

The new tax regime for individuals performing independent activities are exposed in the infographics below:

Source: https://monitorul.fisc.md

Limited Liability Company (LLC)

General Data

The Limited Liability Company (LLC) can be established by one or more founders which can be both individuals and/or legal entities that are allowed by law. The number of partners/associates can not be more than 50. The size of the share capital shall be determined by founders and is fixed in statute, therefore the size of the share capital can be established even in size of 1 lei.

The shareholders’ contributions to the share capital of LLC’s may be both cash and in-kind. As contributions to the share capital of the LLC can be assets, including property rights, and money. As contributions to the share capital of the LLC, the partner/associate can not submit consumable goods, such as goods, materials etc. Each partner will have to submit the full subscribed contribution within 6 months from the date of registration of the LLC.

In addition to the share capital, the Limited Liability Company is required to form a reserve capital of at least 10% of the share capital. The reserve capital of the LLC can be used only to cover losses or to increase the share capital and is formed from annual LLC`s benefit.

The share capital may be modified by increase or reduction.

The supreme governing body of the limited liability company is the general meeting of shareholders. The LLC can create a board of the company, consisting of at least 3 people, if it is provided by statute or by founding documents.

The LLC`s management is carried out by its administrator, appointed by the general meeting of shareholders or by the company`s board. As administrator, can be named one of the partners (shareholders) or a third party. In order to exercise control over the management of the LLC and over the administrator`s actions, the general meeting of shareholders may appoint one or more censors, which can be named from the shareholders or can be third parties. If the number of shareholders exceeds 15, the appointment of the censor is mandatory. The number of censors shall be determined by the company’s founding documents. The censor is appointed for a period of three years and can be revoked at any time.

The LLC is entitled to establish branches in Moldova in accordance with legislation, and abroad in accordance with foreign laws, if an international treaty to which Moldova is a party do not provide otherwise.

Some types of activities allowed by law shall be conducted only under a license.

Advantages/Disadvantages

The main advantages of LLC as a legal entity are:
  • relatively simple setting up procedures – there are few formalities for establishment, and the registration charges are relatively low;
  • relatively simple management;
  • well-defined legal basis – in 2007 it was appointed the Law on Limited Liability Companies, which regulates the establishment, operation, reorganization and liquidation of limited liability companies;
  • the financial risks assumed by associates (founders) are lower. This is caused by the limited liability of the associates – the associates are not liable for LLC`sobligations bearing the risk of losses resulting from the company’s activity within their share capital;
  • the company is responsible for its obligations with all its assets;
  • there are no obligation to publish the financial statements.
The disadvantages of a limited liability company as a legal entity are:
  • difficulties related to honoring associates` obligations to submit the contributions to the share capital, especially when the number of associates is significant;
  • if the contributions to the share capital have to be made in kind, the contributions should be evaluted by an independent valuer and approved by the general meeting of shareholders, which may be difficult and may require more time and additional costs;
  • misunderstandings between associates, which could lead to the liquidation of the LLC, slow decision making;
  • limited liability companies organize and keep accounting using double entry accounting system The entities that meet the following criterias for the previous reporting period can present simplified financial statements
  • a) average number of employees does not exceed 9 persons;
  • b) revenues from sales do not exceed 3 million lei; and
  • c) the total balance value of assets at the reporting date do not exceed 3 million lei.
Organize and keep accounting based on double entry accounting system with complete presentation of financial statements, entities other than those mentioned above, including:
  • a) entities whose share capital owner (associate, participant, shareholder) is a legal entity that is not a small and medium size enterprise, and its share exceeds 35%;
  • b) trust companies;
  • c) entities importing excisable goods;
  • d) microfinance organizations, savings and loan associations and other participants of the financial market;
  • e) exchange offices and pawnshops;
  • f) gambling entities.

Taxation

Limited liability companies are legal entities that calculate and pay income tax in the amount of 12% from taxable income. Additional to income tax, there have to be paid the tax on dividends in amount of 6%, whether the beneficiary of the dividends (associates/founders) is resident or non-resident of the Republic of Moldova. Therefore, LLC`s calculate and pay a total “corporate” income tax in total amount of 18%.

If the LLC falls into the category of economic agents which are subjects of small and medium sized enterprises (businesses that are not registered as VAT payers, except peasant farms and individual entreprises), then the LLC can calculate and pay the income tax in amount of 3% from income from operating activities (the operating activities are considered the basic LLC`s activities). Additional to income tax, there have to be paid the tax on dividends in amount of 6%, whether the beneficiary of the dividends (associates/founders) is resident or non-resident of the Republic of Moldova. In this situation, LLCs calculate and pay a total “corporate” income tax in total amount of 9%.

Conclusions

In conclusion, the limited liability company as a legal form is one of the most suitable for entrepreneurial activity in Moldova, offering the largest possibilities for practicing various activities.Among the most important strengths of this legal form is the ease of formation and administration, including the situations when the founders are non-residents of RM (whether the founders are individuals or legal entities). Also, an important advantage is the limited liability of the associates – associates are not liable for LLC`s obligations bearing the risk of losses resulting from the company’s activity within their contribution in the share capital, which makes the LLCs being the most popular and attractive form of practicing entrepreneurship. In addition, the procedure of changing and sale of shares is relatively simple.

Joint Stock Company (JSC)

General Data

The Joint Stock Company (JSC) is a commercial company whose capital is wholly divided into shares and whose obligations are secured by company`s assets.

The joint stock company may be established on the path of creating a new company or by reorganizing an existing legal entity.

Figure: Ways of setting up a JSC

The JSC can be founded by one person. In this case, the decision establishing the company will be taken by this person independently and will be perfect as the founding statement of the company. Founders of the company may be individuals and legal entities from Moldova, from other states, stateless persons and foreign states and international organizations.

The number of shareholders is not limited by the law, and may be considered as an advantage of this legal form, while the minimum share capital required for its registration it is 20 thousands lei. The company can be founded by one founder (one shareholder), only if the founder (shareholder) is not another company founded by one person.

The company is entitled to carry out any prohibited activities by legislation. Certain activities, the company is entitled to carry out only under license. The company is entitled to establish branches in Moldova in accordance with local laws, and abroad – under the law of the foreign state, if an international agreement to which Moldova is a party do not provide otherwise.The registration formalities of joint stock companies are relatively difficult and expensive. In order to establish a joint stock company, there are required to be drawn up the Constitutive Contract, to be organized the Constitutive meeting and to be approved the statute. Also, the founders have to be subscribed to the issued shares (if the company is established by one founder, all shares will be purchased by him), there have to be opened a provisional bank account for preservation of the cash generated from the sale of shares. Then, there have to be performed the state registration of the joint stock company and to be placed the shares that are registered by the National Security Market Commission etc.In addition to the share capital, the JSC is required to form a reserve capital of at least 10% of the share capital. The reserve capital of the JSC can be used only to cover losses or to increase the share capital and is formed from annual JSC`s benefit.

The governing bodies of the joint stock company are: general meeting of shareholders,the company`s board, the executive body and censor committee.

The supreme governing body of the Joint Stock Company is the general meeting of shareholders which is convened mandatory at least once a year, in order to be taken the most important decisions regarding the activity of the joint stock company, for example: approval of JSC`s statute, decisions regarding the changes of the share capital, approval of the Regulation documents for the Board, election of the members of the Board, approval of the report issued by the censor committee, examining annual reports, approval of regulations regarding profit distribution, reorganization and liquidation of the company, and other important questions.

The Board (JSC`s Council) represents the interests of the company`s shareholders and oversees and controls the activities of the company during the period between general meetings. The JSC`s Board is subordinated to the general shareholders meeting and presents an annual report regarding its work and regarding the JSC in general. The structure and the number of the Board are determined by the general meeting of shareholders, but can not be less than 3 people. In JSCs with a number of shareholders below 50, the functions of the Board are exercised by the company’s general meeting of shareholders.

The Executive body is the management body of the joint stock company, ensuring that the decisions of the general meeting of shareholders and the Board`s decisions are executed. The Executive body reports to the general meeting of shareholders and to the Board. The Executive Body may be collegial (The Executive Committee) or unipersonal (general manager). In situations when JSC has both an Executive Comitee and a General Manager, the general manager usually acts as head of the executive committee.

The Censor Committee exercises control over financial and economic activity of the society. The censor committee is subordinated only to general meeting of shareholders and is elected (named) for a period of 2 to 5 years. Censor committee members can be either shareholders or third parties, the only condition is that their number must be odd.A defining characteristic of joint stock companies is that the JSCs have the right to issue securities: shares and bonds. The share confirms the right of its owner (shareholder) to participate in JSC`s management, to receive dividends and a share of the JSC`s property in case of liquidation.The JSC is entitled to place ordinary and preferential shares. An ordinary share allows its owner the right of one vote at general meetings of shareholders, the right to receive a share from dividends and a part of the company’s property in case of its liquidation. The property rights of the owners of ordinary shares may be executed only after satisfying all the property rights of the owners of preferential shares. The preferential share gives its owner the additional rights (privileges) against the owner of an ordinary share regarding the announced dividends (the order and amount of dividends to be received), and regarding the order of receipt of the company`s assets, distributed in case of JSC`s liquidation. Preferential shares don`t allow its owner the right to vote. The bonds confir preferential rights to their holders to receive a part of the JSC revenue in the form of interest or other profit. The holders of bonds are considered creditors of JSC.

Advantages/Disadvantages

The main advantages of the joint stock company as a legal form are:
  • the owner is liable in the limit of the amount of belonging shares. The company has in property assets that are separate from the assets of shareholders and which are exposed in its independent balance sheet. The company is liable for its obligations with all the belonging assets. The company is not liable for obligations of its shareholders;
  • joint stock companies have the longest lifetime compared with other legal forms, determined by free and unhindered transmission of property through transactions of shares sales;
  • existence of the possibility for attracting additional financial resources by issuing bonds.
The JSC`s disadvantages are determined by:
  • existence of multiple and sophisticated formalities for the creation and establishment of joint stock companies, in comparison with other legal forms because, in addition to registering at the State Registration Chamber, it is necessary to organize the shares issue and state registration of these shares at National Security Market Commission;
  • higher expenses for registration;
  • as a rule, the minimum share capital provided by law for JSC is 20000 lei, opposed to the limited liability company – at least 1 leu. For certain categories of JSC the law may require higher minimum capital (banck, insurance companies, etc.);
JSC will have the obligation to inform the public about their securities and financial activity if:
  • the share capital of JSC exceeds 500000 lei and the number of shareholders is more than 50 and / or the shares issued by JSC are listed on the Moldovan Stock Exchange;
  • JSC is a bank, insurance company, investment fund or private pension fund;
  • JSC is in process of privatization;
  • JSC placed publicly its securities within the period of placement;
  • other JSCs that are regarded as entities of public interest.

Taxation

Joint stock companies are legal entities that calculate and pay income tax in the amount of 12% from taxable income. Additional to this tax, there have to be paid a tax in the amount of 6% from dividends, whether the beneficiary of dividends (associates / founders) is resident or non-resident of the Republic of Moldova. Therefore, stock companies calculate and pay a general “corporate” income tax in total amount of 18%.

Conclusions

In conclusion, the joint stock company as legal form is one of the most suitable for entrepreneurial activity of considerable volumes in Moldova, offering to foreign investors, different possibilities of practicing various activities of different complexity. Among the most important strengths of the JSC as a legal form, is the shareholders limited liability to the value of the shares belonging to the shareholder, including the situations when shareholders are non-residents of RM (whether being individuals or legal entities).

It is worth mentioning that the joint stock company is the only possible form of legal organization for such sectors as: banking, investment, stock exchange and insurance in Moldova.

General Partnership (GP)

The general partnership is a company founded by two or more legal entities and (or) individuals who decide to associate their property with the purpose of joint performance of entrepreneurial activity under one firm on the basis of the Constitutive Act between them. The GP`s members have unlimited joint liability with all their property for the company’s obligations, except the goods which, in accordance with the law, are not subject to prosecution. The general partnership is not liable for the obligations of associates which are not related to GP`s activity.

Founder(s)

Moldovan and / or foreign individuals and/or legal entities.

Number of

founders / partners

From 2 to 20; When the number of shareholders exceeds

20 persons, the GP shall be reorganized or liquidated.

Share capital

No minimum capital requirements are regulated.

Capital

contributions

The partners’ contributions to the capital of GP may be both cash and in-kind.

The partners shall transfer their contributions in the period and manner regulated by the Constitutive Act of GP.

Liability of shareholders

The partners are liable for the activity of GP with all their assets.

Governing bodies

The law does not regulate a mandatory corporate structure of GP. Such structure shall be regulated by the Constitutive Act of GP

The advantages of choosing this legal form are:
  • reduced formalities related to the formation of the company;
  • reduced expenses for registration;
  • absence of a legal provision regarding the minimum amount of share capital.

This legal form is not recommended for beginners in business because it requires complete trust between partners / business associates, proceeding from the simple fact that each partner is responsible for the debts / obligations of the GP, even if these obligations are caused by the actions of another partner.

Limited Liability Partnership (LLP)

The limited liability partnership is an entreprise founded by two or more legal entities and (or) individuals who have associated their property with the purpose of joint performance of entrepreneurial activity under one firm on the basis of Constitutive act between them.

Founder(s)

Moldovan and / or foreign individuals and / or legal entities.

Number of

founders / partners

At least one general partner and one limited partner.

The maximum number of members is not regulated by law.

Share capital

No minimum capital requirements are regulated.

Capital

contributions

The partners’ contributions to the capital of LLP may be both cash and in-kind.

Liability of

shareholders

The general partners are liable for the activity of LLP with all their patrimony. The limited partners liability for the activity of LLP shall be limited to their participation in the LLP’s capital.

Governing bodies

The law does not regulate a mandatory structure of LLP.

Such structure shall be regulated by the Constitutive Act of LLP.

In Moldova, the number of entrepreneurs who choose this form of legal organization is very low, and the major causes are the following: the general partner has unlimited and joint liability for obligations of the LLP, and the limited partner, although allocates financial resources, can not participate in the administration of the LLP.

Coops of production & entrepreneur

Coops of production

Coops of production are created by its members in order to perform in commun production activity, or other business activity, mainly based on their personal work.

Founder(s)

Moldovan and / or foreign individuals of at least 16 years old.

 Moldovan and / or foreign legal entities may not create a cooperative of production.

Number of

founders / partners

At least 5 members; The maximum number of members is not regulated by law.

Share capital

No minimum capital requirements are regulated.

Capital

contributions

The members’ contributions to the capital of a Coop may be both cash and in-kind. The member shall contribute to the capital of the Coop in the period and manner regulated by the Constitutive Act of the Coop.

Liability of

shareholders

The members` liability for the activity of Coop shall be limited to their participation in the Coop’s capital.

The main advantages of the cooperative are:
  • administration and management of coop is based on democratic principles;
  • lack of any legal provisions regarding the minimum size of share capital;
  • unit of labor interests and mutual economic contribution of coop`s members;
Coop`s disadvantages are:
  • may appear endless and fruitless discussions regarding the decision-making;
  • misunderstandings can occur between members regarding the contributions and revenue sharing, which could lead to liquidation of the coop.

Coops of entrepreneur

Coops of entrepreneur is characterized by the following: The services and goods of Coops shall be delivered/performed mainly to its members. The goods and services aquired by Coop for its activity shall be aquired mainly from its members.

Founder(s)

Moldovan and / or foreign individuals of at least 16 years old and / or legal entities.

Member of a cooperative of entrepreneurs may be only an individual / legal entity performing business activity.

Number of

founders / partners

At least 5 members.

The maximum number of members is not regulated by law.

Share capital

No minimum capital requirements are regulated.

Capital

contributions

The members’ contributions to the capital of a Coop may be both cash and in-kind. The member shall contribute to the capital of the Coop in the period and manner regulated by the Constitutive Act of the Coop.

Liability of

shareholders

The members` liability for the activity of Coop shall be limited to their participation in the Coop’s capital.

The cooperative as legal form of entrepreneurship is preferred by people who have certain qualifications to operate jointly.

General Conclusions

The range of options is very various and only a good knowledge and understanding of these options, correlated with a realistic vision, taking into consideration the market situation and your expectations and possibilities can lead to carrying out an optimal choice, because the ideal organizational-legal form possessing just advantages, does not exist. Therefore, the establishment and the choice of the legal form for the future business must be made in accordance with the proverb: “measure twice and cut once “, taking as a basis the options provided by the legislation in force.

Comparison criteria

Individuals performing independent activities

Individual Enterprise

Peasant Farm

Limited Liability Comapany

Joint Stock Company

Legal status

individual

individual

individual

legal entity

legal entity

Number of founders / partners

one individual

one individual, members of a family

one individual, members of a family

min. 1,

max. 50

unlimited

Liability

unlimited

unlimited

unlimited

according to belonging share capital

according to belonging shares

Minimum share capital

does not exist share capital

does not exist share capital

does not exist share capital

1 lei

20000 lei

Founding documents

request to the territorial State Tax Service

founding decision

founding decision

statute,

constitutive agreement

statute,

constitutive agreement

Accounting and reporting

single entry accounting system without presenting the financial statements

single entry accounting system without presenting the financial statements until their registration as VAT payers

single entry accounting system without presenting the financial statements until their registration as VAT payers

double entry accounting system with presenting simplified or complete financial statements

double entry accounting system with presenting simplified or complete financial statements

Taxation

1% from income from independent activities

-7% from annual taxable income that does not exceed 31140 lei;

-18% from annual taxable income that exceeds the amount of 31140 lei.

7% from taxable income

12% from taxable income or 3% from income from operating activities + 6% from dividends

12% from taxable income + 6% from dividends