Limited Liability Company (Shoqëri me Përgjegjësi të Kufizuar - LLC) in Kosovo

Limited Liability Company (Shoqëri me Përgjegjësi të Kufizuar - LLC)In Kosovo, a Limited Liability Company (LLC) is one of the most popular business structures, offering the advantage of limited liability for investors. Recognized as a capital-based company model, it is ideal for small and medium-sized enterprises.

1. Key Features

• Legal Status: An LLC is a legal entity separate from its shareholders.

• Liability: Shareholders are only liable to the extent of their investments in the company.

• Number of Shareholders: Requires at least one shareholder, with no maximum limit typically imposed.

• Capital Structure: The company’s capital is divided into shares, which can be transferred.

2. Advantages

• Limited Liability: Shareholders’ personal assets are protected from company debts.

• Flexibility: Offers flexibility in management and operations.

• Legal Entity: The company can enter into contracts, own property, and initiate lawsuits in its own name.

• Attracting Investment: It is easier to raise capital and attract investors.

3. Disadvantages

• Higher Costs: Setting up and managing an LLC is more expensive than sole proprietorships or partnerships.

• Tax Burden: In addition to corporate taxes, shareholders may also be taxed on dividend distributions.

• Legal Formalities: More complex legal and reporting requirements.

4. Establishment Process

A. Required Documents

1. Articles of Incorporation:

   • Should include the company name, address, business activity, capital structure, and shareholder information.

2. Proof of Capital Contribution:

   • Documentation showing the capital committed by shareholders.

3. Shareholders’ Identification:

   • Valid identification documents of all shareholders.

4. Proof of Address:

   • Lease agreement or deed for the company’s address.

B. Application Process

1. Name Registration:

   • The company name must include the term "Shoqëri me Përgjegjësi të Kufizuar" or "Sh.p.k."

   • The name must be registered with the Kosovo Business Registration Agency (ARBK).

2. Submission of Application:

   • Required documents should be submitted to ARBK either in person or through online systems.

3. Registration Fees:

   • Applicable registration fees must be paid.

C. Unique Business Identification Number (BIN)

• Once registration is complete, the company is assigned a Unique Business Identification Number (BIN).

5. Operation and Management

A. Management Structure

• An LLC can be managed by one or more directors.

• Directors are appointed by the shareholders and handle daily operations of the company.

B. Shareholders’ Rights

• Shareholders have voting rights proportional to their shares.

• Dividends are distributed based on the shareholders’ ownership percentages.

C. Reporting and Record-Keeping

• The company must submit annual financial reports and prepare tax declarations.

• Changes in shareholders or management must be reported to ARBK.

6. Legal Basis

• Article 75: Nature of an LLC.

• Article 80: Rights and Obligations of Shareholders.

• Article 88: Distribution of Profits.

• Article 92: Transfer of Shares.

• These provisions are regulated under the Kosovo Law on Business Organizations (Law No. 06/L-016).

7. Post-Establishment Obligations

A. Tax Registration

• An LLC must register with the Kosovo Tax Administration and file annual tax returns.

• Tax rates vary depending on the company’s business activities.

B. Notification of Changes

• Any changes to the company’s address, directors, or shareholder structure must be reported to ARBK.

C. Dissolution

• If the company is to be closed, it must follow the legal procedures and notify ARBK.

8. Example Scenario

Two entrepreneurs planning to launch a tech startup could opt for an LLC structure. They can benefit from limited liability protection while structuring their shares to attract external investors. As the company grows, additional capital can be raised to expand operations.

Conclusion

An LLC is a business model that offers the advantage of limited liability for shareholders while providing the flexibility to attract investments and expand. It is well-suited for businesses looking to scale and establish a professional presence in the market.