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Russia is a large economy and the European Union is Russia’s most important foreign trade partner. In the first half of 2013 imports from European countries to Russia increased by 3.6 percent. Every year new foreign companies step into the Russian market to sell their products and services to increase their revenues and profits. This article is intended to give you a rough overview about corporate forms that can be established in Russia and their specifics and can be used as a first orientation on the way of choosing the optimal corporate form for the Russian market.

To establish a business in Russia a foreign companies can choose between a representative office, a branch or a subsidiary. There are advantages and disadvantages between these corporate forms and choosing the right one is essential to have in the long term a company available that fits to your needs. In Russia it is quite complicated to change from one corporate form into another one.

A decade ago the most popular corporate form chosen by foreign companies was the representative office. They count as permanent establishment of a foreign company within Russia. Representative offices regularly don not have any business activities and are usually used for marketing activities and to initiate contracts with the foreign mother company abroad. Among Russian local business participants the representative office is not very popular nowadays as they consider the foreign company does not prioritize the Russian market sufficiently.

The branch is another corporate form. Being also considered to be a foreign entity established in Russia it usually has business activity, can import goods and have trade activity in Russia. Representative offices and branches are subject to currency control as they are considered as foreign companies. That means that any business with local companies exceeding USD 5.000 must be comprehensively documented and reported by the local Russian company. This process is very unpopular.

The most prioritized corporate form among foreign companies and Russian local businesses is nowadays the subsidiary Ish Smith Pistons Jersey , which can exist in the form of a Limited Liability Company (LLC) or Joint Stock Company (JSC). The LLC is the preferred form between those as it has only small capital requirements (RUB 10.000 or USD 350). Another positive fact is that the subsidiary is not subject to currency control. It is therefore very welcome for doing business among local Russian firms.

With respect to taxes the three legal forms are similar. Representative offices and branches are considered as a taxable permanent establishment in Russia. Therefore they have to calculate payroll tax and social securities fees and furthermore need to issue financial accounting statements at the end of each quarter and up to 15 other reports to be issued to different Russian authorities.

The financing of representative offices and branches at start-up stage differs from the financing of subsidiaries. Representative offices and branches can be financed easily from the mother company abroad as they are considered foreign establishments and are not subject to currency control. However, cash flows between the foreign mother company and the subsidiary are subject to currency control and there has to be legal reasoning like re-payment of loans or payment of dividends.

Depending on your products and services and your derived business strategy for the Russian market the one or the other corporate form might more fit into your business plans. Besides of choosing the right legal form, there are other considerations that have to be done before starting your business in Russia and it is recommended to visit a a busines.