If you decide to become an entrepreneur, the first question you will have is: „Which type of company is the best for me?”.

In this article, we will offer you the resources to make an informed decision: the SRL (Romanian version of LLC, Limited Liability Company) versus the PFA (Romanian registered sole trader).

What is a SRL?

The SRL, acronym for „Societate cu Răspundere Limitată”, is governed by Law no. 31/1990 regarding companies. However, we have to make a distinction: SRL – D (or debutante SRL) is another form of SRL, made especially for beginning entrepreneurs, who are supported by the state and are exempted from a few taxes.

You can only be a SRL-D in the first 3 years of activity, after that you must convert to a SRL. Also, you can only open a SRL-D for your first company. Otherwise, you are not considered a business debutante.

According to Emergency Ordinance no. 6/2011 for stimulating the establishment and development of micro-enterprises by debutants entrepreneurs, you lose the status of debutante entrepreneur by law on December 31st, 3 years after the date of registration.

However, a SRL-D is not very useful, unless you have employees in your firm. Besides that, all the money you potentially save when opening SRL-D will have to be paid back, even in a larger amount, when you convert your SRL-D to a SRL after 3 years.

In conclusion, we usually recommend entrepreneurs to set up SRL companies, not SRL-D, even in the beginning.

What is a PFA?

PFA is another type of company, acronym for „Personă Fizică Autorizată”. It is the equivalent of a registered sole trader and is governed by Emergency Ordinance no. 44/2008 regarding the economic activities of PFA, individual enterprises and family enterprises.

How can I set up a PFA or SRL?

Both the SRL and PFA can be set up by submitting a set of documents at the Trade Registry. You can find out more about this list of documents for PFA here and SRL here.

Do I need to prove experience in my line of work to open a company?

If you choose the PFA, you must prove you have prior professional training or work experience in that specific field of work. You have to submit documents like diplomas, certificates and so on.

On the other hand, for a SRL you don’t have to prove any experience.

How much share capital should I have in the beginning?

For setting up a SRL you must have at least 200 lei (approx. 45 Euro) share capital in the bank. On the other hand, the PFA does not require any minimum amount in share capital.

How many employees can I have?

For a SRL you can have as many employees as you want, but a PFA you can have maximum 3 employees.

Can I have associates?

You can have maximum 50 associates in a SRL. But you cannot have any associates in a PFA, because it is a sole enterprise.

How many activities can I have on my company ?

You can have as many activities as you want on a SRL, in the form of CAEN codes (similar to the international NICE codes). For example, if you want to carry out veterinary activities, you will have the main CAEN code 7500.

The PFA can carry out maximum 5 CAEN code activities.

Do I need a bookkeeper for my company?

The bookkeeping for PFA is more simple, you can even do it yourself if you have some patience and are willing to deal with it. But for the SRL it is mandatory to have a registered accountant to do your bookkeeping.

How much taxes do I need to pay?

The taxes for PFA are quite high, approx. 1/3 in total. On the other hand, a SRL only pays 1% income tax  (if you don’t have employees) or 3% (if you have minimum 1 employee), plus tax on dividends.

Do I have access to company income whenever I want?

Not really. If you have a PFA you can access your company money whenever you want and use it for personal expenses.

But for a SRL you must wait until you issue dividends and only then can you use company income for personal expenses. Dividends can be awarded either quarterly or annually.

If I have debt on my company, am I liable with my personal assets, as well?

In the case of a SRL, which is a limited liability company, as its name entails, you are only liable with your firm’s assets.

But for as a PFA in debt, you will have to cover these sums also with the personal assets.

If you would like to address more questions or if you need a legal consultation, you can contact us at office@rrpb.ro or by accessing our site www.rrpb.ro for more information.

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