Starting a business in Armenia comes with an important first step: choosing the right corporate form, which will later shape the company’s taxation, liability, and governance. For most, the choice comes down to three options: Limited Liability Company (LLC), Joint Stock Company (JSC), or Private Entrepreneurship (PE). The following sections provide an overview of the three types to help choose the best corporate form for any company operating in Armenia.
- Limited Liability Company
The LLC is the most common business form in Armenia. It’s flexible, simple, and designed for small to medium-sized ventures.
Advantages:
Liability: One of the key advantages of an LLC is the limited liability that the owner holds. This means that the owner is not personally liable for the company, its lawsuits, or debts. The owner’s personal assets are protected and only what is invested is at risk.
Governance: A single founder or director can run the entire company, making this corporate form simple and easy to manage.
Registration: The registration usually takes about two working days, but with standard forms, the registration can be same-day.
Disadvantages:
Outside capital: Since LLCs cannot issue public shares, raising significant outside capital is more limited compared to a JSC.
Formalities: An LLC requires proper bookkeeping and payout formalities. Unlike in a PE, you can’t simply take profits out at will – founders must pay themselves through salary or declared dividends both of which will be subjected to tax. Read our article on “How to Pay Yourself In an LLC?” to learn more on this topic.
- Joint-Stock Company (Closed or Open)
The JSC is a more structured form, usually chosen by medium-to-large businesses that need a clear shareholding model. JSCs in Armenia can be either Closed (CJSC) or Open (OJSC), depending on whether the company’s shares are privately held or publicly tradable.
Advantages:
Ownership: Ownership is in shares, which can simplify equity distribution and the involvement of partners or investors.
Credibility: A JSC has a stronger corporate image compared to an LLC, which can help attract investors or clients.
Scalability: Particularly with an OJSC, companies can raise significant capital by offering shares to the public.
Disadvantages:
Complex Setup: A JSC must be registered not only with the State Registry but also with the Central Depository and licensed account operators for its shares. This adds extra time, cost, and paperwork compared to an LLC.
Governance: Has a more complex governance structure, and stricter reporting due to the number of different stakeholders.
- Private Entrepreneurship (Sole Proprietorship)
A PE is the simplest option, which is ideal for small traders or sole entrepreneurs.
Advantages:
Registration: The registration process is very quick, as it only takes minutes.
Governance: The owner is alone and makes all decisions without complex governance.
Maintenance: The maintenance is very easy, as there is a minimal need for reporting and bookkeeping obligations due to being the only stakeholder.
Disadvantages:
Liability: The owner’s personal assets can be seized if debts arise because the owner is personally liable for the company.
Limits: It might be harder for a PE to attract investors or scale into a large business.
| Limited Liability Company (LLC) | Joint Stock Company (JSC) | Private Entrepreneurship (PE) | |
| Participants | A minimum of one | CJSC: 1-49 OJSC: Unlimited | One |
| Liability | The owner is not personally liable for the company’s debts and lawsuits | The owner is not personally liable for the company’s debts and lawsuits | The owner is personally liable for the company’s debts and lawsuits |
| Governance | Simple | Formal | No legal separation between the owner and the company |
| Capital | No minimum capital requirement | No minimum capital requirement | No minimum capital requirement |
Which to choose?
The best legal form choice depends not only on the owner’s willingness to take a risk but also on the industry and turnover.
- LLC: For companies that want to be easily scaled, yet do not want excessive and complex governance an LLC can be considered the best option. For example, a Yerevan-based IT startup with 2 co-founders might prefer an LLC because it allows them to onboard investors and grow without heavy governance or personal liability.
- PE: For companies that are small, just starting out, have a low turnover or simply do not have enough capacities, a PE is often enough. For example, a small marketing agency might not need a complex structure, and a PE would be the best choice because it is simple, low-cost, and efficient. Once the annual turnover grows and staff is hired, switching to an LLC can provide with more opportunities and credibility.
- JSC: For larger, investment-heavy projects with high turnover (such as trading or manufacturing), a JSC would be the better option. For example, a manufacturing plant with foreign investors usually prefers a CJSC because of the shareholding clarity, which helps when multiple investors or serious partners are involved.
FAQs
- Can a foreign citizen register a company in Armenia?
Yes, foreign citizens and foreign legal entities can register companies in Armenia, but some documents require notarized translations and apostille/legalization.
- How long does it take to register a company in Armenia?
It usually takes 1-2 days to register a company in Armenia.
- Can I convert a PE to an LLC later?
Yes, when the PE grows it can be re-registered as an LLC.
- Is there a minimum capital required to register a company in Armenia?
No, you can open an LLC, a JSC, or a PE with no minimum capital requirement.
- Can foreign investors participate in an Armenian JSC?
Yes, JSCs provide shareholding clarity and make it easier to bring in foreign investors.
- Which tax system applies to my company after registration?
After registration, businesses must choose a tax regime (Turnover tax, or VAT) within 21 days. If the deadline is missed, the company automatically becomes a VAT payer.
In short, if you want to register a company in Armenia, a PE is your entry point, where the resources are limited and the company is run by the founder. An LLC is your growth vehicle, as it provides wider opportunities and credibility. It does, however, have a more complex structure compared to a PE. A CJSC is your long-term corporate structure, with the most complex governance and with the most number of stakeholders involved. If you want to choose the best corporate form for your company in Armenia and need further individual guidance, our team at Retrieve Legal and Tax will be glad to be of service in case of any inquiries. You can contact us via email: info@retrieve.am; or telephone: +374 41 777 332.