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Classification of enterprises

Classification of enterprises

According to valid legal norms of Republic of Lithuania, all enterprises established in Lithuania are provided a status of a legal entity. According to the goals of their establishment, legal entities are divided to private and public legal entities. The main goal of establishment of private legal entities is satisfaction of private interests and profit making. According to their legal form, such legal entities are considered joint-stock companies of limited liability, joint-stock companies, individual (one-man) enterprises, partnerships and so on, if the principal goal of their activities specified in the constituent documents is profit making. Public legal entities are established for satisfying the public interests. Such legal entities include state-owned and municipal enterprises and organizations as well as public institutions, religious communities and so on.

Both citizens of Lithuania and citizens of foreign states may establish a legal entity in Republic of Lithuania. Establishment of a legal entity includes the following phases: conclusion of pre-incorporation transaction, choosing a name for the enterprise, opening an accumulation account at a bank (the Authorized Capital of the enterprise shall be transferred to the said account; then the accumulation account shall be transformed into a current account), preparation and signing of the incorporation documents, notarization of the documents, and registration of the enterprise in the Register of Legal Entities.

In Republic of Lithuania, usually joint-stock companies of limited liability, joint-stock companies and individual (one-man) enterprises are established. An individual enterprise is a legal entity of unlimited civil liability; for its incorporation, no minimum value of the capital is set. The principal imperfection of the legal entity of this type is that the assets of the owner of the legal entity are not separated from the assets of the legal entity. This means that in case of a failure, the owner will be liable to the creditors both to the full extents of the assets of the legal entity and the own assets, i.e. when the assets of the legal entity are insufficient for fulfilling the liabilities, the owner of the legal entity shall use the own assets. A joint-stock company and a joint-stock company of a limited liability are the types of legal entities that incorporation requires a formation of an Authorized Capital divided to parts (shares). The minimum Authorized Capital for incorporation of a joint-stock company amounts to 40’000 EUR and the minimum Authorized Capital for incorporation of a joint-stock company of a limited civil liability amounts to 2’500 EUR. It should be emphasized that both a joint-stock company and a joint-stock company of a limited civil liability are legal entities of limited civil liability. This means that such a legal entity shall be liable to its creditors only to the extent of the assets of the legal entity (the assets of the owners are separated from the assets of the legal entity).

In addition to legal entities, their branches and representative offices may be established in Republic of Lithuania. In case of incorporation of a representative office, a branch of a legal entity, the legal norms of Republic of Lithuania allow providing all the rights of the principal legal entity to its branch; however, a branch shall not be provided any rights that are not provided to the principal legal entity. In case of incorporation of a legal entity, the legal norms of Republic of Lithuania provide it a finite list of rights of a legal entity, namely: to represent and protect the interests of the legal entity, to enter transactions and to carry out other actions on behalf of the legal entity as well as to carry out import and export operations upon certain condition.

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