In accordance with the activities which are going to be settled by a local or a foreign business person, one can choose a suitable entity such as a limited liability company,joint stock company, closed stock company, general or limited partnership. In compliance with the Civil Code and the Corporate Law which mention the rules and regulations for the above-mentioned business forms, our company formation specialists in Azerbaijan can help you register a company in Azerbaijan.
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The main types that can be set up in Azerbaijan
Azerbaijan offers multiple opportunities to foreign investors interested in opening companies here. They can first select the industry based on the size of their businesses, then they can choose the type of legal entity they will run it under.
The following types of companies can be registered in Azerbaijan:
- the sole proprietorship which is the simplest legal entity for a one-person business;
- the partnership which requires a minimum of two members and is suitable for small enterprises;
- the private limited liability company which is the most employed legal form in Azerbaijan;
- the public limited liability or joint stock company which is suitable for large operations;
- the branch, subsidiary and representative office can be employed by foreign companies.
Each of these legal entities has its own registration requirements which can be explained by one of our company formation agents in Azerbaijan. We can also help you set up any of the business forms presented above.
Limited liability company in Azerbaijan
A preferred business entity that is used for commercial purposes worldwide is the limited liability company (LLC), also available in Azerbaijan. An LLC in Azerbaijan can be established by at least one member and it is not subject to minimum share capital.
We remind you that in an LLC in Azerbaijan, the liability of the founders is limited to the amount of financial involvement in the company. Please consider that, when registering an LLC in Azerbaijan, all the documents must be translated into the Azerbaijani language. In this matter and in others related to the company incorporation in Azerbaijan, our consultants can provide assistance and complete information.
Foreign investors must also find out that the legislation in Azerbaijan provides another type of LLC, the additional liability company, which has the same characteristics as the LLC, the main difference being that the investors can assume their personal liability above the value of the participation at the company’s capital. Our team of lawyers in Azerbaijan can give you more details about the level of personal liability.
Joint stock company in Azerbaijan
A joint stock company (JSC) in Azerbaijan can be settled in two forms: open and closed. An open JSC in Azerbaijan can be registered by one or more persons or even companies. This entity is available and also suggested for large businesses, and furthermore, it is subject to transferable bonds.
We mention that in an open joint stock company in Azerbaijan, the stockholders are responsible for the obligations and debts of the company. As for a closed joint stock company in Azerbaijan, this can be set up in the same manner as an open JSC. The mutual capital in a closed JSC is divided into stocks, but the difference is that these are not transferable.
How to create a sole trader in Azerbaijan
The establishment of a sole trader is simple and easy as it does not imply the formal registration of a private limited liability company, for example. Even if this business form is available for all investors, it is mainly used by professionals such as crafters, dentists and accountants who can manage their own activities as small businesses or practices.
The creation of a sole trader does not imply registration with the Companies House, but with the local office of the tax authorities in the city the professional will complete his/her activity. The documents required for this purpose are the ID or passport (and residence permit in the case of foreigners) of the owner and a power of attorney for the representative completing the registration (where applicable). The sole trader will carry out the activities in his own name.
What must be noted about the Azeri sole proprietorship as a legal form is that the owner will have sole and extended responsibility for the obligations of the business. This means that in the case of debts, the trader will pay with his/her personal assets.
If you want to open a company in Azerbaijan as a foreign investor, we recommend a legal form that enables you to have limited liability.
Partnership in Azerbaijan
Business persons might be interested in opening a general or a limited partnership in Azerbaijan. In alimited partnership formed by two entrepreneurs, one has limited responsibilities and must deal with the firms’ future investments. The second partner is in charge of most responsibilities of thepartnership, including debts and obligations.
In general partnerships in Azerbaijan, all partners have the same rights and liabilities including for the debts and obligations. For complete information about the types of companies in Azerbaijan and the requirements when registering them, we invite you to request assistance from our team of company formation experts in Azerbaijan.
Foreign businessmen can also start the procedure of company formation in Azerbaijan for branch offices or representative offices. However, these two are not seen as entities with legal personality, being treated as sub-divisions of the parent company. It must be noted that the representative office can’t be used for commercial purposes.
Business forms for foreign companies in Azerbaijan
There 3 main types of legal entities that can be used to set up operations as a foreign company in Azerbaijan:
- the subsidiary;
- the branch office;
- the representative or liaison office.
The main difference between them resides in the degree of dependence on the parent company and the activities they can undertake.
The subsidiary is a totally independent type of company that can be created by foreign companies interested in expanding their operations in Azerbaijan by adapting its services or products to the local market. This implies the subsidiary to be treated as a domestic business with the foreign company acting as a sole shareholder. In this case, the liability of the business will fall entirely on the subsidiary without affecting the foreign mother company.
The opposite of the subsidiary is the branch office which depends entirely on the parent company. A branch office will be created as a satellite business that is restricted to completing the same activities as the parent company. In this case, the entire responsibility in case of debts or other obligations will fall on the parent company. In most cases, the branches are used by companies in the banking and insurance sectors which are very well regulated.
The representative or liaison office is the simplest form under which a foreign company can prospect the Azeri market in order to establish if it suits the expansion requirements of the overseas enterprise. Through the liaison office, the parent company can start the preparations to set up commercial operations in Azerbaijan.
A representative office is not considered a legal entity, which is why it can be set up in just a matter of days, just like the branch office.
If you need help in choosing a type of company to open in Azerbaijan, our local consultants are at your service with information and assistance.
What are the documents for opening an LLC in Azerbaijan?
Since the most common way to open a company in Azerbaijan is through an LLC, we will present the documents investors should prepare upon the incorporation of this company type. Companies in Azerbaijan must be registered with the Ministry of Taxes, where they will have to submit a standard application form.
The company’s statutory documents must be prepared for the purpose of incorporation, and they have to be submitted with this institution as well. The institution must be informed on the person who will act as a representative of the company. The investors, who will act as shareholders, must prepare their personal data and if the company’s founders are represented by foreign companies, the company’s incorporation documents and the certificate issued by the Trade Registry operating in the country of origin must also be presented.
The registration of the company is bound by the payment of a registration fee, and the receipt attesting the payment must be added at the file containing all the required papers. Local institutions will charge different fees based on the legal entity selected for incorporation; more information on how to register with the Legal Entity Registration Department, operating under the Ministry of Taxes, can be provided by our team of specialists in company formation in Azerbaijan.
What are the advantages of opening a company in Azerbaijan?
Azerbaijan offers a set of competitive advantages to foreigners interested in opening a company here. The country has very good credentials amongst all the economies of the world and it must be noted that it ranks as the 18th economy at a global level with regards to the easiness of starting a business (as revealed by the Doing Business Report, 2018 edition, carried out by the World Bank). The report analyses the business environment of 190 jurisdictions.
Businessmen interested in company formation in Azerbaijan should also be aware of the fact that the commercial legislation applicable in this country provides the right of starting a local business with 100% foreign ownership. Foreign investors are also allowed to establish joint ventures with almost no restrictions regarding the rights of the company’s founders, shareholders, financing methods, and other important matters that can be of interest for those seeking to expand on a foreign market.
Assistance in choosing a type of company in Azerbaijan
If you want to open a company in Azerbaijan and need information in order to simplify the process of making a decision, you can send your questions to our agents who will answer them. We can also offer the necessary support once you decide on a business form and start the incorporation procedure of the selected business form on your behalf based on a simple power of attorney.
What is the basic tax system in Azerbaijan?
All company types available in Azerbaijan are liable to taxation. The local legislation distinguishes between personal taxation, applicable to natural persons obtaining a taxable income from activities developed in this country, and corporate taxation, applicable to legal entities developing commercial operations here. Our team of consultants in company formation in Azerbaijan can offer advice on the local tax system; below, you can find the highlights of the corporate tax and the withholding taxes charged in this country:
- the corporate income tax, applicable to legal entities or to branch offices of foreign companies, is charged at a rate of 20%;
- starting with 1st of January 2013, the corporate income tax is exempted from payment in the case of resident entities registered in industrial and technological parks, the tax exemption being available for a period of 7 years since the moment of registration;
- companies in Azerbaijan with a yearly turnover of up to AZN 200,000 can be registered as simplified taxpayers;
- simplified taxpayers offering trading services will be taxed at a rate of 6% on their yearly profits;
- businesses operating in the catering industry are taxed at a rate of 8%;
- Azerbaijan applies withholding taxes, interest being taxed at a rate of 10%, rent, and royalties at 14%, while financial and insurance services are taxed at a rate of 4%.
Considering that the taxes applicable to local businesses can vary based on their annual income, but also on their legal entity, we invite you to contact our team of consultants in company registration in Azerbaijan for in-depth information on the applicable tax system. Our team can present additional information on the company types available here, as well as on the documents one must prepare upon the incorporation of a specific legal entity.