Foreign investors and company owners like Armenia’s rapid economic reforms, as well as its safety, freedom, and openness. Many people opt to travel to Armenia to register a business as a first step in breaking into the market.
Limited liability, setup and maintenance costs, privacy, number of shareholders, management structure, and exit alternatives are some of the tax and non-tax issues to consider when choosing the correct form for your firm.
Private Entrepreneur (PE)
A PE is an individual who has been assigned a tax ID by the State Registry. A private equity investor is not a firm (it is not a separate legal entity), and his obligation is not limited to the assets invested in the company. In other words, a PE’s business and personal assets are not segregated, and he could be held personally liable for any business-related obligations. On the plus side, this type of business is the simplest and least expensive to start and run (no taxes on dividends, simplified accounting, etc.). It is best suited to smaller firms run by a single person.
Limited Liability Company (LLC)
In Armenia, the most popular business structure is an LLC. It provides limited responsibility to its shareholders, who are not individually liable for the company’s debts, as the name implies. The LLC is popular because it is straightforward to set up and maintain, has a basic management structure, and has fewer corporate formalities. The maximum number of members (shareholders) is 49. You can also form an Additional Liability Company (ALC), which is similar to an LLC but differs in that the shareholders are personally accountable for the company’s debts to the degree stipulated in the articles of incorporation.
Joint-Stock Company (JSC)
A joint-stock corporation is a business structure that works well for medium and large companies with multiple stockholders. This is a more powerful organization that gives shareholders greater privacy and gives them more alternatives for organizing the company’s share capital and management. Shares in an open JSC (OJSC) can be freely transferred, and shareholders have no preemptive rights to purchase shares.
Partnership
A partnership can be formed as an agreement between the partners or it can be registered as a separate legal body (contractual partnership). Partnerships are less regulated and provide greater flexibility. Unlike an LLC or a JSC, which are administered by a single director (CEO), a partnership can be managed by multiple partners. Either a general partnership or a limited partnership can be formed. Limited partners are passive investors who cannot lose more than their investment, but general partners are individually liable for the business’s debts. Although a contractual partner is not required to be registered, the tax office must be notified of its formation.
Cooperative
A cooperative is a group of workers who have one vote and share earnings based on labor rather than capital contributions. This is a one-of-a-kind corporate structure that is better suited to smaller employee-owned enterprises that place a higher priority on work than capital. Agricultural cooperatives are subject to special rules.
Private Equity Fund
A private equity fund is a type of investment vehicle that invests in real estate, securities, and other assets. A private equity fund is registered with the Central Bank of Armenia and has significant tax advantages, such as an annual tax rate of only 0.01 percent of its net assets, tax-free profit distribution, and so on.
Branch Office (BO)
In Armenia, a branch office is a geographical unit (division) of a foreign corporation. It is an extension of a foreign firm, not a separate legal entity. In Armenia, branch offices must register with the State Registry and obtain a taxpayer identification number.
Subsidiary
A subsidiary is a locally registered firm (LLC or JSC) owned entirely or partially by a foreign corporation. Armenian law governs all corporate transactions. The foreign shareholders will not be able to contact the subsidiary’s creditors due to the limited liability.
