Type of Companies in Greece

Type of Companies in Greece

In Greece, as in many countries, there are various types of companies and legal entities that can be formed, each with its own specific characteristics, legal requirements and tax implications.

Factors such as the level of liability the owners are willing to assume, the amount of capital they can invest, the size of the operation and tax considerations play a crucial role in determining the most appropriate type of company for a business venture.

Greek Limited Liability Company (Εταιρεία Περιορισμένης Ευθύνης – Ε.Π.Ε.)

A Limited Liability Company, known in Greece as a Εταιρεία Περιορισμένης Ευθύνης (E.P.E.), is a popular form of business organization among small to medium sized businesses due to its flexibility and the limited liability protection it offers its owners.

The shareholders of an E.P.E. are liable for the company’s obligations only to the extent of their contribution to the company’s capital. This means that the personal assets of the shareholders are generally protected if the company incurs debts or liabilities.

An E.P.E. combines the benefits of limited liability for its shareholders with the flexibility of management and operating structures. Entrepreneurs and investors establish a LLC in Greece to start or expand their business with reduced personal financial risk.

An E.P.E. may be formed by one or more persons who may be natural persons or legal entities. The company is managed by one or more managers, who may be shareholders or external persons appointed by the shareholders. The managers represent the company in all legal and business matters.

The minimum capital requirement for the formation of an E.P.E. is relatively low in order to facilitate small and medium sized enterprises. This should be fully paid at the time of incorporation and the contributions may be in cash or in kind.

The company must keep proper accounting records, prepare annual financial statements and hold annual general meetings. It must also have a registered office in Greece, which serves as its official address for legal purposes.

E.P.E.s are subject to corporate income tax on their worldwide income at the standard corporate income tax rate applicable in Greece.

Private Company (Ιδιωτική Κεφαλαιουχική Εταιρεία – Ι.Κ.Ε.)

A private company in Greece, known as Ιδιωτική Κεφαλαιουχική Εταιρεία (Ι.Κ.Ε.), is a relatively new form of business entity introduced to simplify the establishment and operation of small and medium-sized enterprises (SMEs) while providing limited liability to its owners. The Ι.Κ.Ε. combines elements of both capital companies (such as Sociétés Anonyme) and personal companies (such as Limited Liability Companies), with the aim of providing a flexible, efficient and less bureaucratic option for entrepreneurs.

The minimum capital requirement is set at a very low threshold (just one euro), making it an accessible option for start-ups and small businesses. Shareholders’ liability is limited to their contribution to the company’s capital, protecting their personal assets from the company’s debts and obligations.

The introduction of the Ι.Κ.Ε. in Greece was aimed at encouraging entrepreneurship by simplifying the legal framework and reducing the costs and administrative burdens associated with starting and running a business. Its flexible structure, combined with the protection of limited liability, makes it an attractive option for many entrepreneurs and investors.

Société Anonyme (Ανώνυμη Εταιρεία – Α.Ε.)

A Société Anonyme is one of the most common and prestigious types of companies in Greece, particularly suitable for large business ventures.

The Α.Ε. is characterized by the fact that its capital is divided into shares, which facilitates the raising of capital and the transfer of ownership.

Shareholders of an Α.Ε. are liable for the company’s obligations only up to the amount of their capital contribution, thus protecting their personal assets from the company’s debts.

The minimum share capital requirement for an Α.Ε. is set by Greek law and is intended to ensure that the company has sufficient resources to operate. This capital is divided into shares that can be publicly traded if the company is listed on a stock exchange.

The company is managed by a Board of Directors, which is responsible for managing the company’s affairs and representing it in legal and business transactions. The board of directors is elected by the shareholders.

There is no limit to the number of shareholders a joint stock company may have, making it an ideal structure for companies seeking to raise capital from a broad investor base.

The Α.Ε. is suitable for entrepreneurs and investors looking to establish a business with significant capital requirements and the intention to expand or go public. Due to its complexity and the strict legal and regulatory framework governing its operations, the establishment and management of an Α.Ε. requires careful planning and ongoing compliance efforts, often requiring professional legal and financial advice.

Sole Proprietorship (Ενιαίος Επιχειρηματίας – Ε.Ε.)

This is the simplest form of business, owned and operated by an individual with no distinction between the owner and the business entity. The owner is personally liable for all debts and obligations of the business.

General Partnership (Ομόρρυθμη Εταιρεία – Ο.Ε.)

A General Partnership, known as Ομόρρυθμη Εταιρεία (Ο.Ε.), is a form of business entity characterized by the personal involvement and liability of its partners.

This type of company is formed by two or more partners who are jointly and severally liable for the company’s obligations. It’s a flexible form of business because the management and profit-sharing terms are agreed upon by the partners.

The most notable feature of a Ο.Ε. is the unlimited personal liability of all partners for the debts and obligations of the company. This means that if the partnership cannot meet its obligations, the personal assets of the partners can be used to satisfy creditors.

It offers the advantage of simplicity and direct control for partners who are willing to accept the risks associated with unlimited liability. It is suitable for small, closely-held businesses where the partners can work closely together and share the responsibilities of managing the business.

Partners in a Ο.Ε. operate on the basis of a partnership agreement, which is flexible in terms of management and profit distribution, but must comply with Greek commercial law. This agreement doesn’t need to be registered, but it is advisable to have a formal written agreement to avoid disputes.

Like other businesses, a Ο.Ε. is required to keep accurate accounting records, prepare annual financial statements, and comply with tax filing requirements.

A Ο.Ε. itself is not subject to corporate income tax. Instead, its profits are taxed directly in the hands of its partners at their individual income tax rates. This is known as “pass-through” taxation, where business profits are taxed only once at the personal level.

The unlimited personal liability aspect requires careful consideration and planning, so it is important for potential partners to seek legal and financial advice before forming a Ο.Ε.

Limited Partnership (Ετερόρρυθμη Εταιρεία – Ε.Ε.)

It is similar to a general partnership, but with two types of partners: general partners, who are fully liable for the debts of the partnership, and limited partners, whose liability is limited to the amount of capital they have contributed.

How to choose the best type of company in Greece for your needs

Choosing the best type of company in Greece for your needs involves considering several key factors related to your business goals, the nature of your activities, the level of liability you’re willing to accept, your financing needs, and tax implications.

Here’s a guide to help you make an informed decision:

1. Assess Your Business Scope and Goals

Determine the nature, size and scope of your intended business activities. A sole proprietorship or personal corporation may be appropriate for small-scale, low-risk activities, while larger, more complex operations may require a Societé Anonyme (Α.Ε.) or a private limited company (Ε.Π.Ε. or Ι.Κ.Ε.).

If you plan to expand your operations or seek public funding in the future, consider a business form that allows for growth and stock trading, such as a Α.Ε.

2. Consider Liability and Personal Risk

How much personal risk are you willing to assume? Structures such as sole proprietorships and general partnerships (Ο.Ε.) involve unlimited personal liability, whereas Ε.Π.Ε., Ι.Κ.Ε., and Α.Ε. offer limited liability protection, safeguarding personal assets from business debts.

3. Evaluate Financing Needs

Estimate your initial capital requirements and how you plan to meet them. Certain types of companies, such as Α.Ε., have minimum capital requirements, while others, like Ι.Κ.Ε., require only a nominal capital contribution.

If attracting investors is a key goal, a Societé Anonyme (Α.Ε.) might be more appropriate due to its structured governance and ability to issue shares.

4. Understand Tax and Accounting Implications

Different company types are subject to varying tax rates and regulations. Personal companies pass income directly to owners, who are taxed at personal income rates, while corporate entities like Α.Ε. and Ι.Κ.Ε. are taxed at corporate rates. Understanding these differences is crucial for financial planning.

The size and type of your business will also determine the complexity of your accounting and auditing requirements. Larger companies or those with more complex structures face more stringent reporting standards.

5. Consider the Complexity

Some company types, like Ι.Κ.Ε. and Ε.Π.Ε., are relatively straightforward and cost-effective to set up and manage. Others, like Α.Ε., involve more complex formation procedures, higher initial costs, and stricter ongoing compliance requirements.

6. Seek Professional Advice

Choosing the right type of company in Greece is a critical decision that can affect the legal and financial foundation of your business. Careful evaluation of these factors will help you select the most appropriate entity for your business needs, ensure legal compliance, and optimize for growth and profitability.

Of course, we are here to help you make the right choice for your business.

Branch Offices for Foreign Companies operating in Greece

Branches are a common way for foreign companies to establish a presence in Greece without forming a separate legal entity.

A branch of a foreign company in Greece operates as an extension of its parent company, which is based outside Greece. This structure allows the foreign company to conduct business activities in Greece under the legal umbrella of the parent company.

The branch is not a separate legal entity, but part of the foreign parent company. It operates under the legal and commercial umbrella of the parent company, which means that the parent company is fully liable for the actions and obligations of the branch.

It must operate under the name of the parent company with a statement that it is a branch.

The branch must appoint a legal representative resident in Greece, who is authorized to act and transact business on behalf of the foreign company.

The establishment of a branch in Greece requires registration with the General Registry of Commerce (G.E.MI.). Necessary documentation, such as the parent company’s Articles of Association, a resolution to establish the branch and the appointment of the branch’s representatives, must be submitted and often require official translation and legalization.

The branch is subject to corporate income tax in Greece on the income attributable to its activities in Greece. The tax rate is the same as for Greek corporations and is applied to the branch’s taxable income derived from its activities in Greece.

The income of the branch may be subject to double taxation – in Greece and in the country of the parent company. However, many countries have double taxation treaties with Greece that may provide relief from double taxation or allow a tax credit in the jurisdiction of the parent company.

Greece levies a withholding tax on certain remittances from the branch to the foreign parent, such as dividends, interest and royalties. The rate may be reduced under applicable double tax treaties.