Congratulations, you're about to start your own company! In the following material you will find out what steps you must take if you want to establish a legal entity, what documents you need and what the procedures you have to take into account are.
To properly start a business, an important step you must take is incorporate the legal entity under which you will operate. Below you will find useful information about the types of entities that are available, but also about the documentation required for their incorporation.
LLC or Sole Proprietorship (PFA)?
The most commonly used forms of organization for entrepreneurs at the beginning of their journey are: Sole Proprietorship (PFA), limited liability company (LLC) and non-profit association, also informally known as NGO.
This is a form of organization suitable, in particular, for freelancers in a specific field, as it requires proof of studies and/or professional experience in the field you wish to operate in. The establishment of a Sole Proprietorship is carried out through the Trade Register Office with jurisdiction over the professional headquarters you declare.
The Sole Proprietorship can have no more than 5 types of activities/NACE codes (the national classification of economic activities) in its scope of business.
A Sole Proprietorship does not have legal capacity, which means that its assets are the same as the assets you hold as individual.
If you want to have a business in the true sense of the word, your goal is to make a profit, you want to have a larger number of scopes of business and, perhaps, several shareholders, then the legal entity that is most suitable for you is a limited liability company.
An LLC is one of the most common forms of legal organization because it is very flexible and accessible. You can set up an LLC even if you do not have several shareholders, you can be the sole shareholder.
Another important person in the structure of a limited liability company is its director. The director is the legal representative of the company, the one who represents the company and takes legally binding decisions for the company. This means that he is the one who can sign contracts, for example, on behalf of the company, as well as all the accounting documents. But all these powers also come with great responsibility: if something goes wrong with the company's business, the director is the one responsible for it.
What steps do you have to take to set up an LLC?
1. Choose the name of the company
The preliminary procedure for checking the availability of the company name and reserving it can be carried out physically at the Trade Register of the County Court with jurisdiction over the registered office of the company or online, on the Trade Register portal (http://portal.onrc.ro ), but only during a dedicated time slot, currently after 6:00 p.m..
2. Draft the Articles of Incorporation of the company
The most important document you will need to set up the company is the company's Articles of Incorporation. This is a kind of user’s manual with all the information about the shareholders, directors, registered office, share capital of the company and any other information required by law. The law applicable to companies is Law 31/1990 on trading companies. We recommend that you read it carefully before making the decision to become an entrepreneur. :) An even better idea is to have a lawyer draft your Articles of Incorporation, so as to make sure ensure that it complies with the law.
3. Choose the Registered Office of the Company
You can establish the registered office of the company in an apartment or in a house. You will need either a rental agreement or a commodatum (gratuitous loan) agreement whereby the use of the respective space is assigned to the company. The Trade Register Office will also request copies of the ownership deed of the respective real estate property and the consent of the neighbors located in the immediate vicinity of your apartment (upstairs, downstairs, left and right neighbors). Moreover, if you want to establish the registered office in an apartment, you will use the same form to obtain the consent of the owners' association of the building where the apartment is located. The neighbors and the owners' association consent is only necessary if you declare that you carry out an economic activity at the registered office, but if no economic activity is carried out at the registered office, then the respective form is no longer necessary. If you don't have a location, you have the option of resorting to a law firm who can host your registered office for no more than 1 year, in which case you will carry out the activity outside the registered office or in a business unit.
4. Choose the NACE codes
You will also have to choose the codes of the NACE list that best suit your business. You will have to choose one code as the main scope of business and any number of codes as secondary scopes of business. You can include in your Articles of Incorporation codes that you will not operate under from the very start.
If you want to add NACE codes in the to the Articles of Incorporation codes later on, you will have to pay a certain fee to the Trade Register Office for that, so it would be wise for you to include on the list as many NACE codes as possible from the beginning. From all these codes you will choose the ones you will activate. In order to activate them you will have to fill in a standard form statement whereby you will declare which NACE codes you will actually operate under and where you will carry out such activity: at the registered office, in a business unit or at third parties. By this statement you also represent at your own risk that you meet all the legal conditions for carrying out the respective activities, so find out in advance what they are, for each and every individual NACE code.
5. Draft the Shareholders Statement
You will also have to give a statement that you meet all the conditions to be a shareholder or single shareholder and director of an LLC, before a notary public, a lawyer or before an officer of the Trade Register Office. The Director will also have to submit a signature specimen, before a notary public, a lawyer or before an officer of the Trade Register Office. All signatures applied on the documents submitted to the Trade Register Office will be compared with the respective signature specimen. You will also have to give a statement regarding the actual beneficial owners of the company in front of a notary public, but which is no longer mandatory if the shareholders are natural persons and they are the beneficial owners of the company. Such statements can also be submitted as an own risk statement until August 15, 2021.
6. Choose the bank for depositing the share capital
The minimum share capital for establishing an LLC is RON 1 (until recently, it was RON 200), regardless of how many shareholders the company has. You will have to choose a bank where you will have to deposit the share capital and enclose the proof of the deposit to the company establishment file. Afterwards, you will have to return to the bank with the establishment documents issued by the Trade Register Office, i.e. the registration certificate, the establishment decision, the confirmation of company details, and you will be able to convert the deposit account into a current account which you will be able to use for the company's current business.
All these documents, together with certified copies of the shareholders’ and the director’s identity documents and registration application, will have to be filed in a folder and numbered. The documents can also be submitted online, on the Trade Register portal (but only if you have a qualified electronic signature issued by an authorized supplier).
7. What happens after the documents are submitted?
The Trade Register Office will also automatically check the shareholders’ and the director’s, tax records therefore, if you suspect that you may have offences registered on your tax records, check this before submitting the documents to any financial administration office that issues tax record certificates. If you do not have a "clean" tax record, you will not be able to set up the company and you will lose all the money paid as charges and you will have to start over. The total costs for registering a company with the Trade Register Office start from RON 122 and may increase depending on the number of shareholders and other variables.
You will find all this information and others regarding the establishment of a company on the website of the Trade Register Office, i.e. www.onrc.ro, in the Registrations/Legal entities section.
Setting up an Association
If you are a social entrepreneur, you will have to set up an Association.
It can be set up established at the District Court within jurisdiction over the registered office of the Association and must have at least 3 founding members and an initial patrimony of at least RON 200. The reservation of the Association name shall be carried out through the Ministry of Justice and costs RON 36.
For the drafting of the Association’s Articles of Incorporation and Bylaws (you need two separate documents in this case, unlike for LLCs), we recommend you to contact a lawyer, because they must be certified by a lawyer or notarized. The lawyer can also help you with the customization of the content, to make sure the association will operate as smooth as possible.
The conditions related to the capital and registered office are similar to those applicable to LLCs, with the only difference that the consent of the neighbors and of the owners' association are mandatory.
Moreover, when establishing an association, you will have to submit a notarized beneficial owners statement and the tax records of the members of the board of directors, as well as certified copies of the identity documents of all members.
Most courts also require a DVD with the scanned and .doc version of the incorporation documents.
The stamp duty for establishing an Association is RON 100.
To find out more about setting up an Association, you can go access Courts of law portal, and look for the information regarding the granting of the legal capacity to associations and foundations on the page of the court with jurisdiction over your registered office.