How to Open IT Company in Lithuania?
With the growth of the digital economy, Lithuania has quickly established itself as an international hub for IT talents, attracting both local and global startups from around the world. Lithuania is a center of advanced technologies in the field of IT solutions, software development, solutions based on artificial intelligence (AI), FinTech, and GovTech. Lithuania’s IT industry is well known for its high-quality and well-developed infrastructure, active ambitious young talents and promising technology companies.
Lithuania has the largest IT industry in the Baltic States with outstanding potential for both local and foreign expanding enterprises. A growing variety of companies in the IT sector offers fintech, game dev, AI, data storage, EdTech, and cybersecurity solutions. The Lithuanian government supports innovations in the IT sector.
Electronic guides – help for business start-ups in Lithuania
In Lithuania, there are also electronic guides for those who are starting or have recently started a business, electronic guides working on the question-answer principle. Based on the information provided by you, the e-guide will form a list of electronic services required for your business and provide information about the necessary permits or requirements for your business.
- Choosing a business form – after completing this e-guide, you will be provided with basic information about the business form that is suitable for you and its buildup.
Comparison of organizational and legal forms of business in Lithuania
In order to start a business in Lithuania, you need to legalize the business, that is, to register the appropriate form of doing business. IT services in Lithuania can be provided with a certificate of self-employment (independently) or after the establishment of a legal entity (after the registration of a company). A self-employment certificate is issued at the Tax Inspectorate (VMI) free of charge. The income is taxed after the end of the fiscal year for the previous calendar year.
To compare different forms of business in Lithuania, the following 3 elements are usually distinguished: The level of responsibility, the possibility to easily involve family members or other partners in their activities and the possibility of paying money.
Currently, the most popular forms of business in Lithuania are a small business (MB) and a closed joint stock company (UAB). It should be noted that individual enterprise (IĮ) is the only form of business in which the owner of the company is liable to the extent of his or her personal property. The buildup of individual entrepreneurship (IĮ) is recommended if the business is an individual business, designed for 1 person, and the chosen type of activity is risk-free. If the business fails, the owner of the individual enterprise (IĮ) will have to be personally liable for the unfulfilled obligations of the company.
MB or UAB?
One of the essential elements of why individuals decide to establish a MB is that there is no requirement here for an initial contribution, compared to UAB, where the authorized capital must be at least 1,000 euros. Both of these legal entities have limited liability, which means that companies are liable for their debts and obligations with the company’s property, and not with personal assets or property. One of the advantages of a small business (MB) is the possibility to attract family members, business partners to MB without hiring them. Unlike UAB, MB members (including the head) work without an employment contract, which means that wages are paid to them under a civil legal contract for the work performed. If the services have not been rendered, wages may not be paid. It is not difficult to involve partners in business – unlike UAB, where transactions for the transfer (sale or donation) of shares must be carried out, which often have to be notarized, when selling 25% or more of the shares owned, for example. As for the payment methods, MB is much more flexible, since in the case of UAB, money is paid through wages (including remuneration for the head) and dividends after the financial year. Meanwhile, a small business can pay participants the remuneration due to them through funds for personal needs, through an advance profit, and the head can additionally withdraw funds for services rendered.
UAB is a globally accepted form of business that is easily recognized by entrepreneurs abroad. If there are larger plans to attract investments in the future, then it is better to register a company in the appropriate UAB form.
B2Lithuania (Enterprise Lithuania) is a platform designed for companies looking for a reliable partner in Lithuania. Here you can find detailed information about Lithuanian manufacturers and service providers from various business sectors. Establishing a new contact has never been so easy, since you can directly contact a potential partner, organize a video meeting or put forward a public request. It’s all free of charge. The B2 Lithuania platform is full of companies of both organizational and legal forms.
To search for business partners, you can also try the database of foreign partners in Orbis.
Advantages of Lithuania as a country for starting an IT business
Startups are supported at the state level, and the state is actively involved in opening and running a business.
- The infrastructure is well-developed. For example, office rental prices are lower than in other European countries, and the state is also engaged in the construction of new offices for business.
- Lithuania is home to many highly qualified specialists in all areas of IT. These are not only Lithuanians, but also immigrants from other CIS countries and Europeans. Plus, the government is interested in attracting new personnel from abroad and is making every effort to do this.
- There are average and below average wage requirements. Yes, you can find competent and qualified employees with experience here, and you can pay them less than you would have to in Europe.
- Most of the Lithuanian population speaks Russian. This will be a plus both at the initial stages and in the subsequent work. By the way, the Lithuanian language is not necessary to open a company at all – English is enough, especially if you plan to develop in the European sector.
- Business in Lithuania is easy access to European clients. The state supports those who use Lithuania as a springboard to enter the European market.
Steps for opening an IT company in Lithuania
Step 1. Choosing the form of ownership.
According to the Joint Visa Application Center’s website, there are six forms of ownership in Lithuania: