• Legal requirements for the creation of a company.

Generally speaking the main legal requirements to create your company will depend upon the business structure you consider for your business idea. Some of the factors that might have an impact on that decision can be the following:

- The extent of your obligations or liabilities within your company operations.

- The number of promoters of your business initiative. Some legal forms might require a certain number of partners taking part in order to reach legal registration minimum.

- Tax regime and fiscal obligations might also become a relevant factor when making the choice. It is not certainly the same situation at the start of your company, where the turnover is low and hopefully starting to grow than when you run a consolidated company reaching certain income thresholds.

- Type of activity might also influence your decision. In the sector we are addressing with this training fiche, crafts and CCIs, sole traders and limited companies are quite used though social enterprises are also being employed to operate in this sector.



You can find bellow a chart with the maincompanies’ types you can encounter and some of its main characteristics.

LEGAL FORM BUSINESS LIABILITY



SOLE TRADER You take your own decisions. Your run your business.

Generally speaking, they are easier to set up as they require less formalities. You have personal responsibility for your business debts and obligations.



LIMITED COMPANY They are formed by the directors of the company. In some cases, it might be only one director. They are more complex to set up than the former. As a Director your liability for debt will be limited to the capital you have invested in the business.



SOCIAL ENTERPRISES (COOPERATIVES) It is required a number of partners and the elaboration of the statues of the company. Each member of the cooperative has a vote. Generally, the liability is also limited to the capital invested at the start of the company.



Please, bear in mind that a wider range of types may apply depending on the country you wish to set up your business. For that purposes, we advise you to get in touch with national agencies that will provide assistance in these matters. Alternatively, you can have a look at Your Europe portal, where links to national support agencies for businesses are supplied and very useful. http://europa.eu/youreurope/business/start-grow/start-ups/index_en.htm#

Taking into account the differences in legal requirements that may arise depending on the legal form you have picked and the country you wish to set up your business, here are some formalities you may need to fulfil if you are thinking of starting your business:

Register for the appropriate Social Security System. In some cases, national authorities have in place specific Social Security Schemes for individuals to register to, either as sole traders or as directors of limited companies. In some other cases, these directors are classified as mere employees and therefore they need to be registered as such. Some member states apply turnover thresholds over which there is an obligation of registration. Again, you should contact national authorities to check out for the best formula.

Taxes and annual accounts. You need to register your company at your national tax office. Understanding your taxes obligations is key to ensure you run your operations smoothly and without any problems with tax public administration. Do not underestimate them. It is important to keep accurate records of all your operations, expenses and profits, as you will have to pay accordingly. At this point, professional advice from an accountant might be worthwhile as we do not have to be experts in all matters, and this is a complicated one. Not in vain, the Commission suggests that reducing tax compliance costs would improve the business environment for small firms and in its 2020 Entrepreneurship Action Plan, makes an invitation to member states to “…make the national tax administration environment more favourable to early stagebusiness. Reduce the cost of tax compliance by simplifying tax filing and taxpayment…”

Application for licenses. There is considerable variation in the number and type of licences required across the different member states. It also depends on the type of activity you are undertaking. The licenses may also stem from different administrative level, local to regional and national. However, you should take them into consideration as the lack of them may result in delays for the start of your operations.

Register for VAT. As you probably know by now, VAT stands for Value Added Tax, which is charged upon sales throughout the European Union. VAT is what you “extra” charge to your customers (output tax) and it is also what you “extra” paid to your suppliers (input tax). The difference is what you get – VAT refunds- or have to pay to your national tax administration.

The standard rate for VAT depends on each country national authority, though the European VAT Directives set the minimum standard VAT rate. In 2016 is at 15%. The 28 member states are otherwise free to set their standard VAT rates from that amount on. There are goods with a lower rate or even exempt items. The EU also permits a maximum of two reduced rates.You should check what rate applies to the goods you produce or the services you deliver. In some member states, for instance, cultural services have a lower VAT rate as it is an indirect way of promoting this sector.

You can register to get your VAT number from your national tax office. Normally, if you are registered for VAT and you make sales to other businesses, you must issue a VAT invoice — either in paper or electronic form. VAT is normally added to the price of the goods or services on your invoice. Your VAT identification number must be shown on all invoices you give to customers, as well as the amount of VAT being charged and other standard items. Though this rule has exceptions.

For cross border – VAT, when you buy or sell products or services within other EU countries, different rules apply. New legislation is currently in force for this type of VAT that aims to tackle fraud in cross border transactions. A distinction needs to be made whether we are dealing with goods or services. You do not charge VAT If you are selling products to other businesses with valid VAT number. If they do not have it, then you must charge it. They must provide that information beforehand or, alternatively, the EU has a database where you can verify businesses VAT number existence (VIES).

If you are selling your product to end users, you need to register in the country you are selling your product and charge the VAT in force in that country. You do not have to do so if the total amounts of sales in that country do not reach a limit set by each country that can be either 35.000 € or 100.000 €. For instance, in the countries where OER Craft project partners come from, the limit is, in all of them, of 35.000 €. Any sales over this amount will imply for your company to register for VAT in the country and apply the national rate, with the implications you might foresee.

On the other hand, if your company provide services, which is the case for many cultural and creative industries, you do not charge VAT but your business customer will have to pay it with their national applicable rate (reverse charge procedure). In any case, you can still deduct the VAT you had to pay in order to provide the services for that customer. Again, if it is an end-consumer the one you are providing your service for, you can charge VAT at your country rate, except for telecommunications, broadcasting and electronic services where the rule is to apply the consumer tax law.

All these rules have many exceptions. As you can see it might be worthwhile to look for professional assistance and expertise to help you through with these administrative issues

• The European Company.

The European Company, or Societas Europaea, consists of a public, limited-liability company regulated under EU law. It is a good idea for companies that have different activities in different EU countries. It also allows you to change your head offices to different countries without the need to dissolve it and start over again in another one and therefore reducing the costs.

Another interesting feature of this type of European company is that their employees must get involved in its management. However, to set a European Company up might be a bit expensive as one of its legal requirements is a minimum capital of 120.000 €, which is not very easy for the type of entrepreneurs and sectors we are dealing with in this training fiches. Nevertheless, it is worth noting because it represents a first attempt of setting a legal form beyond national legislation and that should be the trend for the rest of company’s types.

	TIME	COST
BELGIUM	1,5 days	517 €
CYPRUS	1-3 days	311 €
ITALY	1 day	2.000 €
ROMANIA	1-3 days	300 €
SLOVAKIA	10 days	166-332 €
SPAIN	3 days	464 €