The answer to this question is unambiguous: the most convenient form of business entity is limited liability company. Many consider that if a person starts its business without partners then it will be easier for him or her to register as an individual merchant because there’s no need to pay the equity capital and the procedure of establishing such form is easier, but still I don’t recommend choosing this form. Some people simply don’t know that it is possible to be the sole owner of the business also in case of a limited liability company or a joint-stock company. The main problem is that if a person is registered as an individual merchant then he or she shall be liable for obligations of individual merchant with the whole of personal property. In case of a limited liability company or a joint-stock company a person is liable for the obligations of the company only with the invested funds and in the worst case with the company, but shareholder’s private property (such as real estate, cars, shares in other legal entities) is not subject to liability.
The next type of business entity is a joint-stock company. Joint-stock company acts publicly, if necessary its stocks are put up for sale and can be bought by any person. For example, in Russia there are open joint-stock companies and closed joint-stock companies. Situation in Latvia is slightly different. According to legislation of Latvia, a joint-stock company can be established as open joint-stock company, whose stocks are quoted on the stock exchange, and as closed joint-stock company, whose stocks are distributed among a limited number of stockholders or not distributed at all. I believe that in the course of time all joint-stock companies will be defined as open by the law.
Therefore, usually I recommend choosing the third type of business entity – a limited liability company. A limited liability company can be set up with just one person involved. Such person can be both sole shareholder, who owns 100% of the shares of the company, and member of the board of directors with representation rights. In spite of the fact that in a joint-stock company a stockholder and member of the board also can be the same person, it is still mandatory to form the council of the joint-stock company with the minimum number of three members. The equity capital of a joint-stock company may not be less than 25 000 lats. Moreover, a lot of additional documentation is needed in order to form a joint-stock company. It is necessary to convene meetings of the stockholders and publish information about the meetings in press. Therefore, I believe that if a person is not interested in the public sale of the stocks then he or she should choose a limited liability company as business entity. Nevertheless, if your business will start to prosper and the company will need additional money for expansion and further development, or you will simply decide to work at another level, it is always possible to restructure a limited liability company into a joint-stock company.
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