Shelf company acquisition in Latvia
A business in Latvia is a great alternative to offshore companies due to the adoption of numerous changes in regulations and laws by Latvian government during the past years. Companies in Latvia attract foreign entrepreneurs and investors, who are searching for a sustainable and developing business structure and a possibility to enjoy several tax optimization options for their businesses.
While there is a possibility to incorporate your own company, there is another alternative – you can buy an already existing company. A company that has been incorporated some time ago and currently is inactive is called a shelf or readymade company. Shelf companies are either “clean”, which means that since the incorporation no business transaction has ever taken place in this company, or a company with its own history, which means that it has a previous operational and financial history.
Advantages of acquiring a shelf company
Clean companies are typically established for a sole purpose to be sold after some period of time. The key advantage of such shelf company is that the new owner of the company can be completely sure, that it has no debt or other liabilities from the previous owners. Meanwhile, companies that have been operating previously may have some liabilities and investors should do their own due diligence to make sure that they are not purchasing a shelf company with large debt. Nevertheless, companies with a previous operational history have their own advantages as well. For example, a readymade company with already existing business history is more credible and it is easier to obtain a loan or even open a bank account. Some manufacturers, as well as governments, prefer doing business with a company showing longevity.
If comparing to a possibility to incorporate your own company, shelf company might be the right strategy due to following reasons:
- Urgency – incorporating a new company takes time and resources. In case you want to start trading as soon as possible, a shelf company allows you to start business operations almost immediately after the acquisition of the shares.
- Image and credibility – often, companies that have been registered recently look unreliable to conduct business with. Meanwhile, a shelf company registered some time ago helps to create a reliable image.
- Compliant to formal requirements – in some cases in order to acquire certain business projects, a company has to have a certain age.
Procedure of a shelf company acquisition
The procedure of shelf company acquisition in Latvia is relatively straightforward process and it is typically taken care of by the service provider you have chosen to purchase a shelf company from. Limited Liability Company is the most common legal type of business in Latvia as its shareholders have no personal liability for the company’s liabilities except from the invested capital. Generally shelf companies in Latvia are provided with an active registration number, VAT number, no previous activity and share capital of 2,800 EUR already registered. The latter can vary for different service providers and you should make it clear before choosing your shelf company.
The Latvian shelf company acquisition can be carried out either by scheduling a notary appointment or remotely issuing a power of attorney signed digitally with an electronic signature. Generally, all documents are prepared by the service provider and only the shareholders’ passport copies, addresses of residence and the company’s new name (if wanted) and contacts are required from the client’s side. When all documents are ready and signed by the service provider, they submit the application to Commercial Registry where it takes up to 5 business days to process all changes. For an extra fee, it is possible to hurry up the process to 1 business day. After the Commercial Registry has finished processing the changes, the service provider forwards all legal documentation to the new shareholders and your business can start operating.