Romanian Business Structures: Choosing the Right Legal Entity

Setting up a business in Romania starts with a fundamental choice: the legal form of your company. The structure you select affects your liability, tax obligations, administrative burden, and ability to raise capital. Romanian law offers several entity types, but most small and medium-sized enterprises opt for the limited liability company, known locally as the Societate cu Răspundere Limitată (SRL). Larger ventures may choose a joint-stock company (Societate pe Acțiuni or SA), while freelancers often register as authorised natural persons (PFA).

This guide breaks down the main options, their pros and cons, and the factors to consider before you register.

The SRL: The Workhorse of Romanian Business

The SRL is by far the most popular business structure in Romania. It offers limited liability, meaning shareholders are only responsible for the company's debts up to the value of their capital contribution. Key features include:

• Minimum share capital: 1 leu (though practical needs often require more).
• Number of shareholders: 1 to 50.
• Management: One or more directors, who may be shareholders or outsiders.
• Transfer of shares: Subject to pre-emptive rights of existing shareholders, making it suitable for closed ownership.

Because of its simplicity and flexibility, the SRL is ideal for small businesses, family enterprises, and subsidiaries of foreign companies. It also benefits from micro-company tax status if it meets certain criteria, such as revenue below a set threshold and at least one employee.

The SA: For Larger Operations and Investment

The joint-stock company (Societate pe Acțiuni) is designed for larger businesses that may seek public investment or have complex governance needs. Characteristics include:

• Minimum share capital: 90,000 lei (approximately €18,000).
• Shareholders: Minimum two, no maximum.
• Governance: A board of directors or a supervisory board and management board, with stricter reporting requirements.
• Shares: Freely transferable, which facilitates raising capital on the stock exchange.

An SA is more administrative heavy and often chosen by companies planning an initial public offering or operating in regulated industries such as banking or insurance.

Other Legal Forms Worth Knowing

While SRL and SA dominate, other structures exist for specific situations:

• PFA (Authorised Natural Person): A sole trader registration, not a separate legal entity. The individual is personally liable for business debts but enjoys simplified accounting and lower setup costs.
• II (Individual Enterprise) and IF (Family Enterprise): Similar to PFA but with slightly different tax and liability rules, often used by very small family businesses.
• SNC (General Partnership) and SCS (Limited Partnership): Partners have unlimited liability, making these rare for commercial ventures but occasionally used in professional services.

Factors to Consider Before Registering

Your choice should be guided by several factors:

• Liability: Do you need to protect personal assets? Choose an SRL or SA.
• Capital needs: An SA requires significant initial funding, while an SRL can start with almost nothing.
• Ownership flexibility: If you plan to bring in investors or sell shares easily, an SA is more suitable.
• Administrative burden: SRLs have simpler reporting than SAs, which must appoint auditors and hold regular shareholder meetings.
• Tax optimisation: Micro-company status is only available to SRLs, not SAs or partnerships, making it attractive for small profitable businesses.

Choosing the right structure is a decision best made with professional advice, as it affects everything from daily operations to exit strategies. Romanian company law is well established, and the registration process can be completed within a few days once you have the necessary documents.