Accreditation of branches and representative offices

LLC is a legal entity capable of carrying out activities in accordance with its own Articles of Association, including the ones, which are not carried out by a foreign company. It is responsible independently for its obligations, while being managed by the founders, in this case – by the parent foreign company. The company has a separate balance sheet and maintains accounting reports independently.

In addition, the new legal entity will be able to apply the simplified tax system (USN). Small and medium-sized companies often switch to this system, since it is essentially a preferential tax regime.

Registration of an LLC is a relatively quick and low-cost process: the state duty is 4,000 rubles, and it takes 5 working days from the moment of submission of documents to receipt of the certificate.

Currently, LLC is the most popular legal form to set up a business: by the beginning of 2018, 3.5 million limited liability companies were created, of which 388 thousand were opened in 2017.

A branch and representative office of a foreign company are the establishments of the foreign company operating at its direction outside the location of the parent company and performing all or part of its functions. In their activities, these units are subordinate to the company that founded them, and the parent company is responsible for their obligations.

An important difference between a branch and a representative office is that the representative office can only engage in marketing and advertising, as well as representing the interests of the company, i.e. a representative office is vested with a minimum amount of powers and is not entitled to conduct entrepreneurial activities. Its task is to advertise and promote the goods (works, services) of a foreign company, spread information about it, search for potential partners, conclude contracts, resolve conflict situations, etc.

Along with this, the branch can carry out the same business activities as the parent foreign company. Moreover, branches can perform the same actions as Russian companies: they can open and close accounts with Russian and foreign banks, enter into transactions, sign contracts, register trademarks.

Branches and representative offices are managed by the appointed heads / directors of these establishments. The parent company, each branch individually or one of them can keep the accounting reports of one or several branches and submit documents to the tax service.

When a branch or representative office is opened, a foreign company will be considered a non-resident, and its taxation will be regulated by a bilateral agreement on avoidance of double taxation. If an office is rented by a branch / representative office in Russia, VAT is not included in the rent in accordance with the Tax Code of the Russian Federation. Material support for branches and representative offices is carried out at the expense of the property and assets of the parent company. The transfers of such property and assets between the parent company and branches / representative offices take place within the company itself, so such transfers are much simpler than, for example, in the case of the transfer of property of a foreign company to a subsidiary in the Russian Federation. This also applies to bank transfers. Thus, a foreign company will be able to transfer funds to cover expenses associated with activities in Russia more quickly.

To start working, branches and representative offices apply for an accreditation procedure that lasts 15-20 business days and requires payment of a state duty of 120,000 rubles.

Branches and representative offices are essentially a form of presence on the Russian market, popular with medium and large foreign businesses. Dealing with these branches and representative offices, Russian customers understand that they are contacting representatives of a well-known brand, whose reputation and reliability are well known.

Foreign companies also enter the Russian market through distributors. In the framework of such cooperation, foreign companies rely on their abilities to distribute and sell goods, and a client base is gained by foreign companies indirectly through distributors. The search for such distributors is usually conducted by small and medium-sized businesses at various thematic events (exhibitions, forums, etc.). As a result of such cooperation, supply contracts are concluded, and a foreign company sells its products to a distributor, who then sells them in Russia.

Working with distributors is the best option for those foreign companies that are just starting to explore the Russian market. Since in Russia they do not have full-time employees and a mechanism for marketing products, it is better to contact those who know the needs of customers and will be able to provide them with goods.

In the end, it should be said that the choice of the option for foreign business to enter the Russian market depends on the intended goals, the size of the business and the specifics of production. It is very important to decide on a suitable option, since the company's commercial success in the Russian market directly depends on this.