In Romania, when starting a business, one of the most common choices for entrepreneurs is to establish a Societate cu Raspundere Limitata (SRL), which translates to a limited liability company (LLC). This form of company offers a range of benefits, making it one of the preferred legal structures for small and medium-sized enterprises. But what is a SRL in Romania, and why is it such a popular choice?
This article will explore the SRL structure, its advantages, the steps required to establish one, and how an experienced law firm like Buju, Stanciu & Asociatii can assist you in the process.
What is a SRL in Romania?
A SRL in Romania is a type of business entity designed to limit the financial liability of its shareholders to the amount of capital they have invested. The company’s assets are separated from those of its shareholders, meaning that personal assets are generally protected from company liabilities.
This business structure is similar to an LLC in other jurisdictions, and it is governed by Romanian company law. SRLs can be set up by individuals or groups of individuals and are typically used for small and medium-sized enterprises. The SRL structure offers flexibility in management, tax benefits, and a relatively simple incorporation process, making it appealing to both Romanian and foreign investors.
Characteristics of a SRL in Romania
Several characteristics define a SRL, and understanding these can help you decide whether it is the right structure for your business.
- Limited Liability: The primary benefit of a SRL is that it offers limited liability. The shareholders are only liable for the company’s debts up to the value of their share capital. This means that in the case of bankruptcy or legal claims, personal assets are generally protected.
- Capital Requirements: The minimum share capital required to form a SRL in Romania is 1 RON (approximately €0.20), making it very accessible for entrepreneurs. Share capital can be increased depending on the specific needs of the company.
- Shareholders: A SRL can be formed by one or more shareholders, either individuals or legal entities. There can be a maximum of 50 shareholders in a SRL.
- Management Structure: The management of a SRL can be handled by one or more administrators. These administrators do not need to be shareholders, offering flexibility in terms of professional management.
- Taxation: SRLs are subject to corporate taxation in Romania. The corporate tax rate is 16%, but companies with an annual turnover of less than €1 million may qualify for a micro-enterprise tax regime, with rates between 1% and 3%.
Steps to Establish a SRL in Romania
If you’re wondering what is a SRL in Romania and how you can establish one, here are the basic steps involved:
- Choose a Name for the SRL
The first step in creating a SRL is choosing an appropriate and unique company name. This name must comply with Romanian regulations, and it is essential to verify the availability of the name through the Romanian Trade Register.
- Draft the Articles of Incorporation
The Articles of Incorporation, also known as the „Statut,” is the founding document of the company. It outlines the structure of the SRL, including the roles of shareholders and administrators, the distribution of profits, and other key aspects of the business’s operations.
It is advisable to have this document drafted by a legal professional, as any errors or omissions could delay the registration process or cause legal issues later on.
- Register the Company at the Trade Register
Once the Articles of Incorporation are drafted, the SRL must be registered with the Romanian Trade Register. This step requires the submission of several documents, including:
- Articles of Incorporation
- Proof of registered office (contract or ownership document)
- Copies of identification documents for shareholders and administrators
- Proof of share capital deposit
- Obtain a Tax Identification Number
After registration, the SRL will need to obtain a tax identification number (CIF) from the Romanian tax authorities. This number is required for conducting business and is necessary for paying corporate taxes and VAT (if applicable).
- Open a Bank Account
A SRL in Romania is required to have a company bank account for conducting its financial activities. The share capital must be deposited in this account, and it will be used for transactions related to the company’s operations.
- Register for VAT (If Applicable)
Depending on the nature of the business and its anticipated turnover, the SRL may need to register for Value Added Tax (VAT). Companies with an annual turnover exceeding €88,500 are required to register for VAT, while smaller businesses can opt for voluntary registration.
Why Choose a SRL in Romania?
Now that we’ve explored what is a SRL in Romania, it’s essential to consider why it may be the best choice for your business.
- Flexibility in Ownership and Management: SRLs offer flexibility in terms of ownership and management. Shareholders can be individuals or legal entities, and they can appoint professional managers to run the company if they prefer not to handle day-to-day operations themselves.
- Favorable Taxation: The corporate tax rate in Romania is competitive compared to other EU countries. Additionally, small businesses that qualify for the micro-enterprise tax regime benefit from even lower tax rates, reducing the overall tax burden on the company.
- Limited Liability Protection: One of the most attractive aspects of a SRL is the limited liability protection it provides to its shareholders. This structure ensures that personal assets are safeguarded in case of financial difficulties or legal disputes.
- Ease of Incorporation: Setting up a SRL in Romania is a relatively straightforward process. The minimal capital requirements and simple registration steps make it an appealing option for both local entrepreneurs and foreign investors.
The Role of Legal Support in Setting Up a SRL
Although the process of setting up a SRL is relatively simple, navigating Romanian business law can still present challenges, especially for foreign investors. An experienced legal team, such as Buju, Stanciu & Asociatii, can guide you through the process, ensuring that all legal requirements are met and that the necessary documents are correctly prepared and submitted.
Working with legal professionals can also help you avoid common pitfalls, such as incorrectly drafted Articles of Incorporation or issues with tax registration. Furthermore, a legal advisor can assist with ongoing legal matters, such as compliance, contract drafting, and dispute resolution.
Conclusion
Establishing a SRL in Romania is an excellent choice for entrepreneurs looking to start a business with limited liability, flexible management structures, and favorable tax conditions. The process of incorporation is accessible and straightforward, making it a popular option for both local and international business owners.
If you are considering forming a SRL and want to ensure that every step is handled professionally, Buju, Stanciu & Asociatii can provide expert guidance throughout the process. Their team of legal experts is well-versed in Romanian business law and can help you navigate the complexities of starting and running a successful company in Romania.
