Business in Russia

If you read this article, you almost certainly know about business in Russia firsthand. But how do foreigners look at business in Russia? And what information can one provide them with about business in Russia?

There is a tendency nowadays that more and more children and teenagers in Russia want to become government or municipal employees, because now it virtually guarantees a stable future. But the number of adults who want their children to do business, has increased significantly compared to previous years.

This suggests that the attitude towards business in Russia has changed a lot. People began to understand that there are more opportunities to realize themselves in this area. People are also attracted by the prospect of financial well-being. Today we have the opportunity to observe the development of a huge number of startups in Russia with different scales and directions. However, the Russians are showing great interest in business abroad. This is a mass tendency concerning both young startup entrepreneurs and already established businessmen. One of the reasons for this phenomenon is a distrust of the state and its system of business checkout.

A limited liability company (LLC) and a joint-stock company (JSC) are organizational and legal entity forms that conducts its business under its own charter. The registration of LLC and JSC coincides in many points. Therefore, we consider the conditions, terms and cost of establishing a company on the example of LLC as the most common form of doing business in Russia. LLC is responsible for carrying out its obligations, has a separate budget and maintains accounting records independently. The operation of an LLC will be familiar to and understood by a foreign investor in many respects.

Benefits: A company member bears no responsibility for the debts of the whole company — his/her responsibility is limited to the size of his/her stakeholder share. LLC may apply a simplified taxation system (STS), which is beneficial to small and medium businesses, since the government has provided a preferential taxation for this type of organization. To register an LLC, a foreign citizen or a foreign legal entity may be a 100% stakeholder, i.e. sole proprietor.

When creating an LLC from scratch, a foreign founder can be sure that the development and business reputation of the company will depend entirely on him/her.

Conditions: A legal address, authorized capital (at least 10 thousand rubles), the general director and chief accountant are necessary for registration.

A foreign citizen who intends to become a founder of an LLC must legally reside in the territory of the Russian Federation, i.e. must have a commercial visa, permission to stay or residence permit.

Today, due to sanctions, counter-sanctions and currency fluctuations, competition in Russia has significantly decreased. This did not lead to an outbreak of new projects. But the existing enterprises began to expand and strengthen.

There is an electronic document management in Russia, but in practice it is not yet developed as much as in Europe. An interesting fact is that there are more accountants in Russia than in the whole European space. Doing business in Russia is difficult. By the simplicity of doing business, our country ranks 120th (out of 183).

The situation with a small-scale business in Russia is quite complicated. One of the reasons for this is "expensive money", i.e. in our country there are difficulties with loans. Even before starting a business properly, not yet received neither a product, nor, especially, profit, the businessman gets into debt. To just get the money in the bank is hard. A loan may be given, but on bail, which may be twice the amount of the loan. Although there are special business support programs and funds, sponsoring various startups.

The service industries are the most developed area for small-scale business in Russia. Various cafes and restaurants, shops and ateliers, delivery services and souvenir productions exist and develop in large numbers. Franchises are very popular, as they reduce risk and simplify work on business creation.

As mentioned above, the service industry is the most popular in our country. Both individuals and organizations of any level can be consumers here. Consider the most popular areas in the service industries.

• Catering. Restaurants, bars, pizzerias, cafes, snack bars, canteens and cooking shops — all these places are very popular. They vary in size, style and prices, but each of them will find its client.
• Housing and communal services. This is a very multi-faceted industry. This may include services for repair, maintenance and keeping of premises.
• Financial services. Today it is difficult for us to imagine our life without them. These are bank card servicing, money transfers, account replenishment, payment of pensions and salaries, etc.
• Information services. This includes both consulting services and various courses, schools, etc.
• Rental services
• Travel services
• Hotel services
• Transport services
• Entertainment services

A characteristic distinction of Russian business from almost any other is that, creating a business in Russia, the businessman is forced to fight not so much with competitors as with the state. Although, today there are various moratoriums on SME checks.

Theoretically, in Russia the laws are such that it is quite easy to create and develop business according to them. But in practice, the interpretation of these laws by different entities (for example, regulatory authorities) may be different. Today there are about 30 thousand different regulations, relating to business one way or another. Naturally, it is impossible to execute all of them, so there is even the so-called "principle of selective law enforcement". On the other hand, one can always find some violation. Therefore, you should not make enemies in the influential structures in any case.

The top governance of our country often talks about simplifying the conditions for running an SME. However, very few steps have been taken in this direction nowadays. The country has a heavy tax burden and a complex law system. This makes it difficult and high-risk to create a business in Russia.