Types of Companies in Montenegro
Interested in establishing a company in Montenegro? Aspiring entrepreneurs can choose from four main types of companies, each with its own opportunities and challenges. Selecting the right structure for your business is crucial, as it will determine everything from day-to-day operations and personal liability to, of course, the amount of taxes you pay.
You must take enough time and consult with a professional filing agent before starting your business to avoid unnecessary delays, additional costs, or unintended tax and legal consequences. Read on to learn more about the different company types available in Montenegro and how to choose the right one for your business goals.
Limited Liability Company (D.O.O.)
The Limited Liability Company (Montenegrin: Društvo sa ograničenom odgovornošću or simply D.O.O.) is by far the most common and popular company type in Montenegro. It is an independent legal entity, offering asset protection and limited liability to its shareholders, and as such, it can be loosely compared to a US C Corporation, rather than a US LLC.
A Montenegrin D.O.O. can be established as a single-member company with a start-up capital of just 1.00€ and must have at least one company director and shareholder who can also be the same person. Here are some additional points to consider:
- The company director must apply for residency in Montenegro if they are a non-Montenegrin national.
- Montenegrin LLCs can generate profits, pay corporate income tax, and be held legally responsible.
- They offer shareholders the strongest level of asset protection.
- D.O.O.s are subject to two levels of taxation: corporate income tax at the company level and personal income tax (dividend tax) at the shareholder level.
- They can raise capital through the sale of shares.
- Company directors must hold a school-leaving certificate, which can be an elementary, high school, or higher education diploma.
- All employees, including the director, must receive at least the minimum monthly salary.
- D.O.O.s can have both natural persons and legal entities as shareholders.
Sole Proprietorship (Sole Trader)
Choosing to incorporate as a D.O.O. may not always be the best option for all new entrepreneurs in Montenegro. While it shields you from personal liability, some might initially only need a simpler business structure. Registering as a sole proprietorship (Montenegrin: Preduzetnik) is often easier to set up and does not require formal incorporation.
Becoming a sole trader can be a wise choice for simple, low-risk businesses that are not dependent on outside financing, such as freelance writers, programmers, and web designers, plus prudent entrepreneurs who want to test the waters first before fully committing to a more formal business setup.
Sole Proprietorship vs D.O.O.
Limited Liability Companies (D.O.O.) and sole proprietorships are two entirely different company types available to entrepreneurs located in Montenegro, with each having its own advantages and disadvantages. To learn more, check out our detailed Sole Trader vs Limited Company guide. Here are the key differences:
Partnership
Whereas sole proprietorships are a valid option for single founders, partnerships (Montenegrin: Ortačko društvo) take the idea of a simple business structure a step further, allowing two or more entrepreneurs to jointly own a business, share its profits, and be personally liable for the actions of their partners as well as for any business debts incurred.
In a business partnership, the responsibilities are always shared equally, and profits usually are as well – though not always. To set up a partnership, all partners must sign an agreement and submit it to Montenegro’s Business Register (CRPS) in Podgorica.
Given that partnerships are treated as pass-through entities by the Tax Administration of Montenegro, profits must be declared by the individual partners in their personal income tax returns (GPP-FL). Here are some additional things to consider:
- The partners in a partnership are not formally employed; as owners, they share in the profits, losses, and liabilities of the business.
- Each partner must pay a share of their monthly income as salary taxes and social security contributions.
- Each partner can apply for a temporary work and residence permit in Montenegro.
- Since a partnership cannot issue shares, raising investment capital is more difficult compared to LLCs or JSCs (joint-stock companies).
- For residency purposes, each partner must provide proof of education, at least an elementary school diploma.
- Partners can be either natural or legal persons.
Joint-Stock Company
Very few companies in Montenegro are voluntarily organized as joint-stock companies (Montenegrin: Akcionarsko društvo / AD), largely due to the much higher incorporation and operating costs, the lengthy and complex formation procedure, and the heightened due diligence requirements compared to other company types.
However, under Montenegro’s Companies Act, certain companies are required to be registered as joint-stock companies, including banks, insurance companies, brokerage firms, and gambling companies. This business structure is often chosen by larger companies because it allows them to raise substantial capital through public stock offerings. Here are some additional things to consider when it comes to JSCs:
- Stocks in an AD are owned by its shareholders, who may freely buy and sell shares in the company (unless otherwise agreed).
- Shares of public joint-stock companies are traded on the Montenegro Stock Exchange (MNSE) in Podgorica.
- The liability of shareholders is limited to their invested capital.
- Additional capital can be raised by issuing new shares.
- The minimum share capital required to form a joint-stock company in Montenegro is 25,000€.
Non-Profit Foundation & Organization
Unlike the four main company types mentioned above, nonprofit foundations (Montenegrin: nevladine fondacije) and nonprofit organizations (Montenegrin: nevladine organizacije) do not operate primarily to make a profit from the services they provide. NGOs in Montenegro commonly engage in charitable, educational, cultural, or social activities.
Because the work of nonprofit entities serves the public interest, they may apply for tax-exempt status, meaning they do not have to pay taxes on any profits they generate. However, they are still required to follow organizational principles similar to those of a regular limited liability company, as dictated by their Memorandum and Articles of Association.
Here are some more things to consider when establishing a nonprofit foundation or organization in Montenegro:
- A nonprofit foundation can be established by one or more founders, with or without residency in Montenegro, whereas a nonprofit organization requires at least three founders, one of whom must be a resident of Montenegro.
- Nonprofits must be listed on the NGO Register (Registar Nevladinih Organizacija).
- Every NGO and nonprofit foundation is obliged to apply for a Tax ID number.
- If an NGO or foundation plans to engage in any commercial activity, it must also be registered with the CRPS.
Compare all Business Types
Compare the general characteristics of each company type using the table below, and determine which business structure is best suited to help you achieve your business or nonprofit goals in Montenegro:
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