After the European Court had passed its decision about the freedom of settlement of companies some years ago, this kind of company boomed in Austria, Germany and other EU member states. For such a company will have been established for few Euro in the internet, without high nominal capital having to paid in – and without a notary or short trip to the Island being necessary …
In the meantime, the attractiveness of this legal form has been reduced drastically. On the one hand, the opportunity of establishing an Austrian GmbH at much lower costs has been created by enabling the foundation of a “Private Limited Company vested with a right of charter / foundation privilege”. On the other hand, the imminent “BREXIT” leaves a feeling of insecurity: At the moment, the future destiny of British companies with Austrian owners and managers is more than uncertain.
What is a British “Limited”?
Just like the GmbH, the Private Limited Company is an incorporated firm. It is not the shareholder(s) that bear(s) liability with his or her (their) property but only the company itself. The minimum capital for the Austrian GmbH amounts to EUR 35,000.00 (if the “right of charter / foundation privilege”) is availed of, at least the partial amount of EUR 5,000.00 will have to be paid in immediately; within 10 years, cash inpayment will have to be filled up as to reach EUR 17,500.00). A “Limited” can already be established with a minimum capital of GBP 1.00 (approx. EUR 1.30) – however, a minimum capital to the amount of EUR 100.00 is, at least, recommended.
Establishing a “Limited”
The company will be established in England. This can be done over the internet – there are many providers, who are more or less respectable and reliable. An English notary won’t be necessary. Apart from very few restrictions, the name of the company can be chosen freely. However, the name needs to contain the word “Limited” (or “Ltd.”). There are hardly any legal restrictions for the company name. Therefore, a company called “ABC Limited” would also be possible. Furthermore, it will, at least, be required to nominate a “Director” and to install the “registered office” in England – a registered office in Austria won’t be admissible. It is true that the nomination of a Secretary has no longer been absolutely required for some years. Nevertheless, it definitely remains recommendable. Once the company has been registered at the Companies House in Cardiff, the “Limited” will have been established and will have the legal capability of acting (www.companieshouse.gov.uk). As a rule, the foundation period in England amounts to few days, the monetary transactions and postal services requiring most of the time.
Quite obviously one thing should be noted: If the “Limited” is to become active in Austria permanently, the rules of the Trade Regulation Act alone will make it necessary to establish an “autonomous branch office” in Austria. This branch office, (which will, in reality, often be the factual registered office of the company), must absolutely be registered in the Austrian Company Register. This registration requires authenticated translations and authenticated signatures as well as additional comprehensive documents and involvement of an Austrian notary. This registration can take some weeks. Quite often some months will pass – this depends on the Company Register Court, the consultant’s professionalism and the quality of the documents presented.
In fiscal terms, a “Limited”, whose factual registered office is located in Austria, is on a completely equal footing with the Austrian GmbH. This means that this company is liable to pay corporate tax (tax rate: 25%) and will also be obliged to pay a minimum corporate tax to the amount of € 1,750.00 a year. This definitely means that a “Limited” is put at a disadvantage over a newly founded Austrian GmbH, whose minimum corporate tax amounts to € 500.00 a year in the first five years and to € 1,000.00 a year in the following five years.
Just like the GmbH, the “Limited” will be obliged to maintain double-entry bookkeeping. In England and in Austria, consolidated annual accounts, which are drawn up acc. to IAS/IFRS (International Accounting Standards / International Financial Reporting Standards) or UK GAAP (Generally Accepted Accounting Principles of the United Kingdom), will have to be submitted to the respective Company Register on schedule. In case of small companies, there won’t be any obligation to have these annual accounts audited by an English auditor. Taxation in Austria is subject to the rules of Austrian fiscal law.
A “Limited & Co KG” offers legal and fiscal rooms for manoeuvre – even for one-person businesses. Such a company is an Austrian unincorporated firm, where a “Limited” assumes liability. What, however, should be noted that it will, in this respect, be a question of two separate enterprises (“Limited” and “Limited & Co KG”) and that this will therefore necessitate a higher administrative expenditure. Nevertheless, the advantages of this model will prevail in many cases.
Advantages of the “Limited” over the GmbH
The “Limited” is well-known internationally. It is easy to establish it in England. The original capital needed is low. The company name can be chosen freely. It is easy to add shareholders and/or increase capital. English company law is company friendly and simple. It is relatively easy to dissolve the company. The fiscal rooms for manoeuvre may be higher.
Disadvantages of the “Limited” over the GmbH
In Austria, the “Limited” is not known so much and is confronted with a certain suspicion among public authorities and business partners. There is a higher risk of undercapitalization, the minimum capital being so low. Registration in the Austrian Company Register may take long. The current costs are higher because of the company’s “double residence” in England and Austria. The company is subject to English and Austrian law alike.
Grazer Treuhand (Trust Company) – your consultants for the British Limited
There are no legal forms that are good or bad in abstract terms – there only are legal forms that are “suitable” or “not suitable” for your business in concrete terms. It is all about your business – therefore, companies should not be established over various internet agencies without availing of specific consulting. Even before a company is established, sound and comprehensive legal and tax consulting will be indispensable for success, in particular when it comes to avoiding later aha experiences (“light bulb moments”) right from the beginning. Our consulting for the Limited will provide you with tailored information on the advantages and disadvantages if you are interested in a “Limited” model. It is not free of charge. Still it will pay off, in any case.
We have represented “Limited`s” and “Limited & Co KG´s” to our client’s utmost satisfaction for many years. We will also be pleased to take over permanent representation of your “Limited”. And we will also support you in establishing your “Limited” by bringing you together with our partners. This will enable you to find exactly the interlocutors you are looking for – the Foundation Agency or Secretary just as much as the Austrian notary.