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Registering a limited company in Montenegro
Limited companies (Montenegrin: ‘Društva sa ograničenom odgovornošću’ or simply ‘D.O.O.’) remain the single most popular company type in Montenegro. In the last year alone, Montenegro’s Census Bureau reported more than 9.000 newly formed businesses, most them established as limited companies.
Whether you’re a seasoned business owner or aspiring entrepreneur ready to expand into new frontier markets, registering a limited company in Montenegro is the first step towards setting your business up for success. Below, we’ll unravel all major benefits and key steps involved in the company formation process.
What is a limited company?
A limited company (D.O.O.) is established as a distinct business entity from its owners. It can enter into contracts, acquire assets like real estate, and sue or be sued. Its shareholder are only responsible for business debts and liabilities up to the value of their shares
As a corporation, the business generates profits and pays corporate income tax, while its shareholders are subject to paying taxes on their investments, in the form of dividend tax, which the company withhelds and pays in their name. Limited companies are:
- Legally distinct from its shareholders
- More complex business structures compared to sole proprietorships
- Asset protection tools, providing limited liabiity to its owners
While often incorporated as single-member or multi-member LLCs with up to a handful of shareholders, up to fifty members can join a limited company in Montenegro. Non-Montenegrin founders are allowed to own and operate a D.O.O. and are granted the same rights as local citizens. Nonresident directors are required however, to obtain a temporary residence permit.
How to Form a Limited Company in Montenegro
Setting up a limited company in Montenegro is a structured process that requires diligence and a thorough understanding of company, labor, and immigration laws. Prior to starting operations, you’ll have to appoint at least one director, list the company’s shareholders, and register it with the CRPS, Montenegro’s Company Register. Here’s a run-through of all steps involved in forming a limited company:
1. Deciding on a Unique Business Name
The first step in forming a limited company in Montenegro is to choose (and reserve) a unique business name, which is not too similar to any already registered businesses. It is recommended that you consult with an incorporation agent to make sure that the desired name is still available.
There are stipulations requiring to include the following specific designation within the name: ‘D.O.O.’ or ‘Društvo sa ograničenom odgovornošću’, signalling the business’s formal designation as a corporation. Business names consisting of racial, vulgar, or derogatory words are not permitted.
To make it easier to distinguish your business from others, consider using your personal name with an added suffix as the name for your corporation. For example, a company name like ‘Bill Meyer Advisory’ is very likely to be unique and not already being used.
2. Set a Registered Business Address
A crucial requirement for setting up a limited company in Montenegro is having a registered office address within the country. If you have not yet secured a physical business location, or, you prefer not using your residential address (which is not always allowed), consider opting for our Virtual Office service.
It is available for an annual fee of just 199,00€ plus VAT, ensuring that your business stays compliant with local regulations and maintains a credible presence in Montenegro. You’ll also be able receive official mail to this address, which we can then scan or forward to another address.
3. Appoint the Company Director(s)
Setting up a limited company in Montenegro requires the appointment of at least one company director, who can also be the company’s sole shareholder. The director is responsible for managing the day-to-day operations of the company on behalf of its owners/shareholders, and must ensure compliance with local laws and regulations.
To qualify, the director must apply for a work and temporary residency ID, and maintain residency in Montenegro throughout the entire tenure. Any individual aged 18+ with at least a high school diploma is eligible, with no other specific qualifications asked for.
However, it should be noted that individuals with criminal records and undischarged bankcrupts are restricted from applying for a residence permit, and thus being appointed as a company director.
4. Draft and File the Articles of Association
A crucial step in the company formation process is to draft the Articles of Association, a foundational document that needs to be signed by all shareholders. It entails:
- The business name and address
- The business activity code (purpose of the corporation)
- The name and passport number of the company director(s)
- The shareholder structure: number and value of stocks to be issued
The Articles of Incorporation further define the rights, responsibilities and liabilities of the director(s) and shareholders, how day-to-day operations are managed, how profits are distributed as dividends to the shareholders, and more. The share value, which can be as low as 1,00€, constitutes the extent to which a shareholder can be hold financially liable to the company.
5. Draft and Notarize the Memorandum of Association
The Memorandum of Association (or simply Memorandum) is the second foundational document that also must be filed with Montenegro’s Company Register during the filing process. Unlike the Articles of Association, it also needs to be certified by a public notary in Montenegro.
The Memorandum regulates the limited company’s external affairs whereas the Articles of Association covers predominantly the business’s internal workings. Besides containing general information about the business, its shareholders, and its authorized share capital, the Memorandum lays out the company’s powers and limitations.
6. Register for VAT (Optional)
While you will be automatically issued a tax identification and registration number during the company formation procedures, you may also opt to receive a VAT number as well. This is commonly done by businesses that plan to buy taxable capital assets, or, engage in trade right away.
What comes after Incorporation?
Setting up your limited company with Adricom is straightforward and efficient. Our customer-centric approach generally ensures that your company is formed within 4-6 working days. Here is a brief overview of the next steps you need to take after incorporation:
Apply for Temporary Residency
By law, every limited company is required to have a resident director – an individual who is either a Montenegrin citizen or a foreigner. Non-Montenegrin directors will have to obtain a temporary residence permit before bank accounts can be opened in the company’s name and the business can start operating, i.e. issuing invoices and start receiving payments.
Make a Company Stamp
While Montenegro’s Company Act does not officially require the use of stamps stating the company’s name in business transactions anymore, they are still commonly used for certifying documents. When setting up a company through Adriacom, the price of a stamp is already included in our formation packages.
Open a Business Bank Account
Opening a business bank account for your limited company with a Montenegro-based bank to handle your company’s finances a is legal requirement. All our clients are offered free assistance with the opening of a local business bank account. This service includes an introduction to a dedicated corporate banker, documentation assistance, accompaniment to the branch, and updates on the application status.
Register of Beneficial Ownership
Montenegro’s Register of Beneficial Owners is an electronic database providing information about the individuals who directly (or indirectly) control corporations registered in Montenegro. Maintaining compliance with this register is a (recently introduced) legal requirement.
Company owners can either file their beneficial ownership data online through a portal or appoint their accountants to do so in their names. It’s necessary to submit this information immediately upon company formation to avoid any breach of your statutory duties and potential penalties.
Obtain Necessary Licenses
Obtaining business licenses goes beyond simply registering your business. Business licenses are permits issued by either federal or municipal authorities, allowing Montenegrin businesses to stay legally compliant when conducting business in a particular field that is regulated.
For example, if you plan to establish a travel agency in Montenegro, you must obtain a license from the Ministry of Tourism before you can start operating. In the same way, the highly regulated hospitality does also require licensing at the local level to be in compliance with rules and regulations.
Register with National Insurance
As a company owner, you must make sure that your employees, including yourself as the director, have proper coverage for sickness, unemployment, and retirement. Registering with Montenegro’s health and social security system is done after residency has been granted.
The Benefits of a Limited Company
The major benefits of trading as a limited company are limited liability protection and potential tax efficiency. There are also several lesser-known reasons why you should consider choosing this company type over the sole trader structure.
Limited Liability Protection
Limited companies provide liability protection to shareholders, meaning that the owners are not personally held accountable for the company’s debts and liabilities. This also means that the shareholder’s personal assets are always protected from creditors, which is an important benefit of LLCs over sole proprietorships or partnerships.
Potential Tax Advantages
Limited companies may also offer greater tax savings because corproate income tax rates are generally lower than personal income tax rates, which is particularly beneficial when profits are left within the corporation (i.e. they are no distributed as dividends to shareholders), allowing for strategic tax planning.
What’s more, limited companies may easier deduct losses and a broader range of allowable expenses, including charity donations, repairs & maintenance, depreciation, bad debts, employee salary, fringe benefits, and medical insurance.
Other Advantages
- Ownership interests are easier to transfer through the sale of shares
- The life of a limited company can extend beyond that of its founders
- Raising capital is easier: additional funds can be accessed by selling shares of stock to other individual or corporate investors (up to 50 shareholders)
- Higher credibility in the eyes of business partners: limited companies are often perceived as more professional than sole traders and partnerships
- Available tax and investment incentives
Frequently Asked Questions
How long does it take to register a company in Montenegro?
Registering a limited company in Montenegro can take anywhere between 4-10 business days for in-person and postal applications. You can already start the company formation process from abroad by sending us a notarized and apostilled power of attorney so that we can file the company in your name, and then come personally to Montenegro for the bank account opening and residency application.
Can I register a limited company in Montenegro if I am not a Montenegro resident?
Every limited company needs to have a resident director. This can either be you or another Montenegro resident. In the majority of cases, this means that you, as the founder, will have to apply for a temporary residence permit in Montenegro once the company has been successfully established.
How are limited companies taxed in Montenegro?
The corporate income tax rates in Montenegro are marginal and progressive, with rates ranging from 9% to 15%. Corporation tax is paid on your limited company’s taxable annual profits. If you, as the owner, wants to pay out this after-tax income to yourself, you would need to pay an additional 15% dividend tax. Read more about taxes in Montenegro.
How Adriacom can help
Adriacom makes it simple to incorporate and set up your limited company in Montenegro so you’re ready to open business bank accounts, start hiring your team, and invoicing customers as quickly as possible. Provide us with your desired company name, details about the owners and director(s), the planned business activity, and then we’ll quickly incorporate your limited company. Start your Montenegro LLC today!