Type of Romanian companies

Under Romanian law a commercial company can take one of the five legal forms provided by the Company law from 1990. It can be a general partnership (SNC), a limited partnership (SCS), a limited partnership by shares (SCA), a limited liability company (SRL) or a joint stock company (SA). Firstly a SNC or a general partnership, is the oldest type of company known. In the commercial and legal parlance of most countries, a general partnership or simply a partnership, refers to an association of persons or an unincorporated company with major features as: created by agreement, proof of existence and estoppel; formed by two or more persons; the owners are all personally liable for any legal actions and debts the company may face; it is a partnership in which partners share equally in both responsibility and liability. secondlyIn a SCS or limited partnership the associates are fully responsible for their social obligation. Its mandatory to have at least two partners. One of the limited partners is an administrator and the other one can only deliberate and decide without being able to administrate. In a SCA the partners have identical statuses as the ones in the SCS, just that in this case there are shares involved. A limited liability company (SRL) is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions. LLCs do not need to be organized for profit. Often incorrectly called a "limited liability corporation" (instead of company), it is a hybrid business entity having certain characteristics of both a corporation and a partnership or sole proprietorship (depending on how many owners there are). An LLC, although a business entity, is a type of unincorporated association and is not a corporation. The primary characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it shares with a partnership is the availability of pass-through income taxation. It is often more flexible than a corporation and it is well-suited for companies with a single owner. It is important to understand that limited liability does not imply that owners are always fully protected from personal liabilities. Courts can and sometimes will pierce the corporate veil of corporations (or LLCs) when some type of fraud or misrepresentation is involved.[1] A joint-stock company (SA) is a type of corporation or partnership involving two or more individuals that own shares of stock in the company. Certificates of ownership ("shares") are issued by the company in return for each financial contribution, and the shareholders are free to transfer their ownership interest at any time by selling their shareholding to others. In modern company law the existence of a joint-stock company is often synonymous with incorporation (i.e. possession of legal personality separate from shareholders) and limited liability (meaning that the shareholders are only liable for the company's debts to the value of the money they invested in the company). And as a consequence joint-stock companies are commonly known as corporations or limited companies.

In both SRL and SA the liability of an associate/shareholder towards third parties in case the company incurs debts is limited to his investment to the registered capital of the company and neither an associate nor a shareholder ca be called on to contribute beyond the amount of his contribution. The most frequently used types of companies in Romania are the limited liability company (SRL) and the joint stock company (SA). The joint stock company is the most complex type of company, in Romania. Its shares can be quoted on the stock market and the owners of the company can sell their shares without the consent of the other associates. The main advantages of the joint stock company are: - the associates are held responsible only for the social capital, - the company can be listed on the stock market, and it can attract large amounts of money for expansion, - this type of company can have any object of activity ruled by the Romanian law. However, the joint stock company also has some disadvantages: - it takes a long time and much money to set up the company. Also, there are specific steps that have to be taken: there have to be at least five founding members, the public subscription of the social capital has to be done , the general meeting of shareholders has to take place and to enact the articles of incorporation, - the management is more complicated than the one of the limited liability company, as the leading formations of such a company are: the censors, the board of directors and the general meeting of the shareholders, - the minimum amount of the social capital is higher than the one for the limited liability company, about 25.000 euro. - as an effect of the transferability of the stocks, anyone can obtain a large part of the business, and the associates may come to have less control upon the direction of the company. The limited liability company is a type of company where the social obligations are granted with the social patrimony, and the associates are only held responsible for their share capital. The advantages of setting a limited liability company are: - the creditors of the company cannot seek the personal goods of the associates for covering the debts of the company, they can only seek the social shares; - it takes only about one week to do all the formalities for setting up such a company in Romania; - the minimum amount of the social capital is about 60 euro; - the limited liability company is the only type of company, according to the Romanian law, that can have just one associate. He/she can found or can be part in as many limited liability companies as he wishes, but he/she can only be the sole associate of one limited liability company. On the other hand, the maximum number of associates is 50, and no one can become an associate without the approval of the other; - the management of the company only consists of the general meeting of associates and the administrator, so the decisions can be taken easier and faster; - the control upon the business can be done by each one of the associates, whenever he/she wants.

There are also disadvantages in forming a limited liability company: -this type of company cannot work as a bank, an investing fund, an insurance company. For both foreign or Romanian investors there are different forms a company may take, considering their needs and domain they wish to be active in.