When you decide to start a business, the legal and administrative procedure is the first thing you will face. You need to be well informed about the options and choose the best option that fits your business goals. The establishment of a Limited Company (Ltd.) and a sole proprietorship differs in administrative procedure, prices and fees, taxes, costs for changing registration, closing costs, etc.
In both cases, it will be required that your company has the address at which it will be registered.
After going through the administrative procedure, you are left with fiscalization and VAT registration, in case you estimate that the business will produce more than 50.000 BAM of profit per year.
The benefits of founding S.P. are: the lower cost of registering the business, the fact that you are not in the VAT system which is greatly reducing the cost of your products and services. It is not even necessary to have an office, you can do your business from home.
The biggest advantage of establishing an Ltd. is that the liability of founder is limited to the amount of capital invested in founding the company. The downsides are higher founding costs, more complicated procedures and higher costs for closing the business.
To start a company in the Republic of Srpska, it is necessary to choose the type of business activity you would like to perform. There are two options and it is very important to know the characteristics of both, and to choose the best solution based on the business plan.
A limited company, or Ltd. (d.o.o. in the local language), is one of the options for the company registration. It is a legal entity in which the founder’s responsibility for the obligations of Ltd. is limited to the founding stake. The simplest form of registration is a situation where one person, as the founder, registers an Ltd. with a founding stake of 1 BAM.
A sole proprietor (S.P.) is an individual who performs one of the entrepreneurial activities, and bears the responsibility for the obligations of the business with all his property. Closing costs for the S.P. are significantly smaller than for the Ltd., while the Ltd. has a wider range of activities that can be chosen and performed.
When registering a company in the Republic of Srpska, we usually choose between two options: a limited company (Ltd. or d.o.o. in the local language) or a sole proprietorship (S.P.). The differences are large and it is very important to know them.
A limited company (Ltd.) is one of the company types defined by the Law on Business Companies of the Republic of Srpska. In legal terms, it is a legal entity, and the founder’s responsibility for the obligations of the Ltd. is only up to the founding stake. On the other hand, S.P. is an individual who performs one of the entrepreneurial activities defined by the Regulation on Entrepreneurial Activities, published in the “Official Gazette of the Republic of Srpska”. The individual bears the responsibility for his business obligations with his entire property. Other differences are mostly related to administrative procedures, prices and fees, taxes, costs for changing registration, closing costs, etc. Closing costs for the S.P. are significantly smaller than for the Ltd., while the Ltd. has a wider range of activities that can be chosen and performed.
In establishing the limited company there are two scenarios. The simplest form of registration is a situation where one person, as the founder, registers an Ltd. with a founding stake of 1 BAM. If the company has more than one founder, or the founding stake is greater than 1 BAM, there are certain differences in the processing of the necessary documentation. But let’s start in sequence.
The first station is the notary office, where the following documents should be obtained:
Once all the above mentioned documents have been collected and certified by a notary (or municipality, in some cases), the following must be obtained:
Once all these documents have been collected, they must be submitted to the Intermediary Agency for IT and financial services (APIF) that will obtain unique identification number (JIB) of the new business entity from the Tax Administration. All documents will then be forwarded to the District Commercial Court. When submitting the application, there is a fee of 35 BAM to be payed to the APIF.
Within two days upon receiving the documentation from the APIF, the District Commercial Court is obliged to make a decision on the company registration in the court register and, if everything is in order, it will issue the registration decision.
After obtaining the registration decision from the District Commercial Court, the newly established limited company receives a notification on the classification of business entities by activities, from the APIF.
On this occasion, a fee must be paid for the publication of the registration decision in the “Official Gazette” (usually between 20 and 50 BAM).
After receiving the registration decision from the court, a company stamp can be made, and then a request for the obtained JIB certificate is submitted to the Tax Administration.
The last step is happening at the bank. All the above mentioned documents must be submitted to the bank for opening a bank account. Also, a request for transferring the founding capital to the new account of the company must be submitted.
It should also be mentioned that the above scenario is primarily intended for those who are planning to start their own business for the first time, and for that reason it is somewhat simplified. Other scenarios are possible, such as, for example, the one in which the company founders give away a property as a founding capital, or the other in which a company is automatically estimated to have more than 50.000 BAM in annual income, and thus it is obliged to enter the VAT system.
The decision on a sole proprietor registration is made by the department of economy of the city or municipality, the so-called registration authority, based on the following documentation:
After submitting these documents, the registration authority is obliged to issue the registration decision within two days, if the documentation is valid.
Upon receipt of the decision, the official seal can be made, which costs between 20 and 50 BAM.
Within five days from the day of issuing the registration decision, the entrepreneur is obliged to file the taxpayer and / or the contribution payment application to the Tax Administration, and on that occasion it is necessary to submit:
Whether you decide to start an S.P. or a limited company, if you complete all the above steps correctly, the process of registering your business is complete. After going through the administrative procedure, you are left with fiscalization and VAT registration, in case it is estimated that the business will produce more than 50.000 BAM of profit per year.
And, of course, it is mandatory that every company has an official address at which it will be registered.
Institutional support, finantial incentives, subventions, tax exemptions - all aim to build better business environment for you.
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Position is important. Good connection with the rest of Europe makes it much easier to build a business in the Republic of Srpska.
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