Founding of an association (2025)
This article will give you all the information you need about the process of setting up and registering a society, the documents required and the costs.
Setting up a company is an important step in any entrepreneur's life and one of the key issues is the share capital of the limited liability company. When setting up a limited liability company (LLC), the company is required to pay a certain amount of share capital.
This article will provide an overview of the different options for contributing share capital to an LLC, the advantages and disadvantages, as well as the differences between a small-capital and a full-capital LLC.
The article has been updated in accordance with the new amendments to the Commercial Law from 16.07.2025.
Share capital is the initial capital invested in a company when it is founded.
It serves as a guarantee for creditors and confirms the responsibility of the company's owners.
In Latvia, the minimum share capital of an LLC is €2,800, but it is also possible to establish a so-called low capital SIAwhere the share capital can range from €1 to €2,799.
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Only €25The share capital is payable in full until the company's application for registration is filed with the Register of Companies. The cash contribution must be paid into a suspense account.
The member or members shall pay the amount of the share capital into a suspense account (Opening a temporary account: Tips and solutions). If there are several members, each must contribute its share of the share capital.
Please note that when opening a temporary account, you will need the company's incorporation documents, memorandum or articles of association and articles of association. This means you will need to have Registration of the company SIA document.
The Registrar of Companies does not require documents evidencing the share capital contribution, if the share capital or part of it is paid up in cash and the cash investment does not exceed EUR 50 000. The founders will certify in their application to the Registry that a payment account has been opened in the name of the company to be incorporated and that the share capital has been paid up. The current KR4 form must be used.
There are different ways of contributing to the share capital of an LLC, each of which has its own characteristics, advantages and disadvantages.
This is the most common form of share capital contribution. The founders pay the authorised capital into the company's bank account. A cash contribution provides immediate access to funds that the company can use to start operations. The money paid in as share capital can be used for the company's business purposes.
A company can also be set up with a contribution in kind, where the capital is invested in the company's assets, such as machinery, real estate or other assets necessary for the company's operation. This option allows a reduction in the amount of money required for share capital.
The founders may provide a valuation opinion
If the total value of the economic contributions made at the time of the establishment of the LLC does not exceed EUR 25 000 and the economic contributions together amount to less than half of the share capital of the company, the valuation of the economic contributions and the opinion may be given by the founders.
In other cases, the Material Contribution shall be valued and an opinion given by a person included in on the list of valuers of property investments.
In this case, the share capital is paid partly in cash and partly in property. This can be an advantageous solution if the company needs both cash and equipment or other assets.
Cash and in-kind contribution (49%). In the case of the establishment of a limited liability company, where the total value of the pecuniary contribution does not exceed EUR 25,000 and the pecuniary contribution in total is less than half of the share capital of the company, the pecuniary contribution may be valued and an opinion given by the founders.
In Latvia, it is possible to set up a small-capital company with a share capital of less than the standard €2,800. This option has its advantages and disadvantages.
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Only €25Each year, a minimum reserve is built up by making a deduction of at least 25% from the profit for the year. The statutory reserve may be used to increase the share capital on the basis of a decision of the members' meeting.
Commercial Law There is no time limit for how long a company can have a share capital of less than €2,800, how long a company must build up minimum reserves or how long after incorporation it must increase its share capital.
According to Commercial Law 185.1, sixth paragraph, the company shall increase share capital up to €2,800 within three months if the company does not meet the characteristics of a small-capital limited liability company.
According to For the Commercial Code for a limited liability company, dividends are determined and paid in accordance with a resolution of the members' meeting. The members of the company may decide on the payment of dividends every 3 months after the payment of the previous dividend. It should be noted that the LLC must not have tax debts and the Company may pay out in extraordinary dividends not more than 85 per cent of the profits made in the period for which the extraordinary dividend is determined.
The URonline team will prepare and submit all the necessary documents on your behalf
Only €25Extraordinary dividend payment could be an important relief for service providers or micro-businesses, where wages can be waived under certain conditions.
Members of the company's board of directors do not have to have an employment contract and pay themselves a salary if the following conditions are met:
If the sole member of the limited liability company and the member of the board of directors himself provides a service and produces and sells goods in small quantities, he can pay himself dividends once a year or extraordinary dividends every 3 months.
Extraordinary dividends are prohibited in a small-capital LLC.
The corporation tax (CIT) on dividend payments is 20%.
The share capital of an LLC is an important element in the formation of a company, affecting its liability, credibility and development.
When choosing between a small and a full capital limited company, it is important to assess the company's needs, financial capacity and future plans. Cash and in-kind contributions offer flexibility but have their pros and cons, which are important to consider in order to make the right decision for the success of the business.
Yes, there are two main options in Latvia. The standard minimum share capital is €2,800. However, it is also possible to set up a small-capital limited liability company, with share capital ranging from €1 to €2,799. So, it is possible to start a business with a share capital of €1.
Yes, you can register an LLC without a physical office, but a registered office is a requirement. You can register a registered office in real estate owned by yourself, with the owner's permission in the property of friends or family members, or use a virtual office service. However, be careful with virtual addresses as they may have a low degree of reliability if a large number of companies are registered there.
After submitting all the necessary documents to the Register of Enterprises, the notary public examines them within one to three working days on average. The process may take longer if errors or omissions are found in the documents.
The most common problems that can cause the Register of Companies to delay or refuse registration are:
Incorrect application form (KR4).
One of the required documents is missing, such as the consent of a board member.
Documents are not signed with a secure electronic signature (eSignature) or not notarised (if sent by post).
No payment of the stamp duty or proof of payment.
The legal address does not have an accurate cadastral designation or there is doubt about the legal basis for its use.
This depends on the amount of the share capital and the type of contribution. If the share capital is paid in cash and the amount does not exceed EUR 50 000, the Registrar of Companies does not need to see the documents evidencing the share capital contribution. The founders simply have to certify in the application (Form KR4) that a temporary account has been opened and that the share capital has been paid into it.
The main problems relate to the valuation of the investment. An incorrect or inappropriate valuation of the contribution may lead to a refusal of registration. It is important to remember that a pecuniary contribution cannot be, for example, a commitment to provide services or anticipated profits. If the value of the investment exceeds certain thresholds, an independent valuer's opinion is required. However, if the total value of the investment made in setting up the limited liability company does not exceed EUR 25 000 and is less than half of the share capital, the founders themselves can give an opinion.
he main difference is the size of the share capital. The share capital of a full-capital limited liability company must be at least €2,800, while that of a small-capital limited liability company can be, for example, €1. A general partnership has several advantages, such as greater credibility in the business environment, the possibility to pay extraordinary dividends and the possibility for one person to own several such companies.
There are a number of specific restrictions for a small-capital LLC, non-compliance with which may lead to refusal of registration. Common problems:
The number of founders or members exceeds five.
A founder or member is not a natural person.
A member of the Board is not a member of the company.
One of the members is already registered in another small-capital LLC.
The share capital is attempted to be paid up by means of a pecuniary contribution, which is not allowed in a small-capital LLC.
The Commercial Code does not set a specific time limit for how long a company can be a small-capital LLC. However, there is an obligation to build up a minimum reserve each year, with at least 25% of the annual profits being paid into it, until the share capital reaches €2,800. If a company ceases to meet any of the characteristics of a small-capital LLC (e.g. the number of members exceeds five), it is obliged to increase its share capital to €2,800 within three months.
If the share capital is paid up in cash and the amount does not exceed EUR 50 000, a separate certificate from the bank or payment institution need not be submitted to the Register of Companies. The founders must certify in the application form KR4 that a temporary account has been opened in the name of the company to be incorporated and that the share capital has been paid into it.
Yes, the money paid in as share capital can be used for the company's business purposes once the company is registered and the temporary bank account is made permanent.
There are usually no problems if the process is carried out correctly. The shareholders' meeting must decide on the share capital increase. This can be done either by making additional cash contributions or by using the accumulated minimum reserve. Once the decision has been taken and the share capital has been paid up, an application for change must be submitted to the Registrar of Companies.
This is an important risk to take into account. Owners of small-cap LLCs have increased personal liability. If the company is declared insolvent, its members are jointly and severally liable for the company's liabilities with their personal assets for the difference between the existing share capital and the statutory minimum share capital of €2,800.
Mistakes often occur when the type of company is incorrectly reflected in various documents or when the cadastral designation of the registered office is incorrect.
The Register of Companies may refuse registration if the documents submitted do not comply with the requirements of the regulatory enactments or if the information contained therein is unclear. Often not all the required sections are filled in or there are inconsistencies between different documents (e.g. the memorandum and articles of association).
Legislation changes, and so do the forms. If you submit an application on an old form, it will be rejected.
Always download the latest versions of the forms (e.g. the KR4 form) directly from the Register of Companies' website before filling in the documents.
Registration requires a registered office. Problems arise if the address does not correspond to the National Address Register or if the property owner's consent has not been obtained. If the property has several owners, the consent of all is required. Sometimes an address is given where it is not actually possible to receive correspondence, which can cause problems with public authorities in the future.
For the establishment of a full-fledged LLC (with share capital above EUR 2,800), you need to open a temporary bank account and make a share capital contribution before submitting the documents to the Register of Companies. Errors occur when the contribution is not made in full or by someone other than the founder.
The founders apply for registration in the hope of paying in the share capital at a later date. The law requires that the share capital must be paid up in full into a provisional bank account by the time the application is submitted.
First, you need to prepare the articles of incorporation, go to the bank with them, open a temporary account, pay in the share capital and then sign and submit the application to the Registrar of Companies.
The founders themselves value the pecuniary contribution in cases where the law requires the opinion of a certified valuer (e.g. where the value of the pecuniary contribution exceeds EUR 25 000 or represents more than half of the share capital).
Study the provisions of the Commercial Code carefully. If you have the slightest doubt as to whether you can value an investment yourself, you should get a certified valuer from the list maintained by the Commercial Companies Office.
Make sure the documents are in the correct format.
Documents must be signed with a secure electronic signature and time stamp.
Before submitting the documents, you must make sure that the amount of the stamp duty is correct and that you have paid it. Any incorrect or overpaid amount can be recovered by applying to the Companies Registry.
If the UR finds an error, the notary public postpones the decision for up to 30 days, pointing out the deficiencies. It is important to react promptly to such decisions and make the necessary corrections so that the registration process is not delayed and stamp duty is not lost.
Attempts are made to register a small-capital LLC with a legal person as the founder, or to appoint a person other than the founders to the board.
It should be remembered that only natural persons can be founders (maximum five) and members of a small-capital LLC, and the board must be made up of these same members.
After starting up, entrepreneurs do not know or forget that every year at least 25% of the profits of a small-capital Ltd. must be paid into a mandatory reserve until the share capital reaches €2,800. This money cannot be paid out in dividends.
The accounts must provide for a minimum reserve from the first year of operation. Failure to do so could lead to problems with the State Revenue Service and personal liability.
The URonline team will prepare and submit all the necessary documents on your behalf
Only €25Website of the Register of Companies (UR): [https://www.ur.gov.lv/]
State Revenue Service (SRS) website: [https://www.vid.gov.lv/]
Commercial Law: [https://likumi.lv/]
This article will give you all the information you need about the process of setting up and registering a society, the documents required and the costs.
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