Selection of legal form

The main features of a Closed Joint Stock Company (UAB) include:

1. Limited number of shareholders: UAB may be founded by one or more natural and/or legal persons, but the number of shareholders may not exceed two.
2. Restricted transfer of shares: Shares in a UAB are generally not freely tradable on the open market. The transfer of shares to other persons requires the consent of the current shareholders or the fulfilment of conditions stipulated in the company’s articles of association.
3. Limited liability of participants: UAB shareholders are liable only to the extent of their contributions to the share capital of the company. Their personal assets are not at risk due to debts or liabilities of the company.
4. Authorised capital: A company must have an authorised capital divided into shares. This capital is used to finance the operations and cover the debts of the company. The minimum amount of authorised capital is €1,000.
5. Organisational structure: UAB may have a management body, such as a board of directors, which makes the most important strategic decisions and manages the company.

The main features of MB:

1. Limited number of members: A Small Company may have a limited number of members, usually not more than 10, all of whom must be natural persons.
2. Liability of members: The members of a Small Company are liable for the company’s obligations only to the extent of their capital contributions.
3. Authorised capital: The minimum initial contribution for the establishment of a Small Company is only €1.
4. Management: The Small Company is managed by its members (founders) or by an appointed director. Major decisions, such as amending the articles of association or liquidating the company, require the consent of the majority of the members. A director may be appointed, but he is not a full-time employee – his work is based on a civil law contract for management services and he pays only the minimum social security tax.
5. Restrictions on activities: A small company may engage in any type of commercial and entrepreneurial activity, just like a Closed Joint Stock Company (UAB).
6. Accounting and Reporting: A small company must comply with record keeping requirements, submit financial reports and fulfil tax obligations, just like a Closed Joint Stock Company.

A joint stock company (AB) is a form of publicly traded company that is required to disclose its activities to the general public and to comply with more stringent accounting and reporting requirements. This form is mainly used by large companies that intend to conduct public offerings. In Lithuania, the minimum authorised capital for a joint stock company is EUR 25,000. The number of shareholders is not limited and shares may be freely traded on the open market. The management bodies of a joint stock company are the director, manager or the management board. The liability of the company’s participants is limited, i.e. shareholders are not personally liable for the company’s debts and obligations.

The main features of a joint stock company:

1. Authorised capital: A joint stock company must have an authorised capital divided into shares. It forms the financial basis of the company and can be used to cover debts or investments. In some countries there may be a minimum amount of authorised capital.
2. Limited liability of shareholders: Shareholders of a joint stock company are liable only to the extent of their investment in the shares. Their personal assets are not at risk for the debts and liabilities of the company.
3. Circulation of shares: The shares of a joint stock company can be sold, transferred or bought by others through the public market or private transactions. This creates liquidity for the shares and allows new investors to be attracted.
4. Board of Directors: A joint stock company is required to have a board of directors or similar body that manages the company’s operations, makes strategic decisions and employs executive directors.
5. Accounting and reporting: A joint stock company must comply with statutory accounting and reporting requirements, report financial data and fulfil tax obligations.
6. Public and Closed Companies: Joint stock companies can be public or closed. Public companies can issue shares to a wide audience and are subject to stricter reporting and transparency requirements than closed companies.
7. Trading on the stock exchange: Some joint stock companies may list their shares on stock exchanges, which gives them access to additional sources of funding and increases their visibility in the market.