Russian legislation imposes certain requirements on the location of a Russian company. Our article will disclose the criteria a legal address should meet, as well as highlight some of the problematic issues regarding its choice.
What is a legal address and why does a company need one?
According to Russian legislation, a legal address of the company is the location of its director, in legal terms also known as the «sole executive body»[1]. Although the definition appears to be quite comprehensive, the legal address is considerably important to any company.
First of all, it is required for company’s registration. Any Tax Inspection will definitely refuse to accept registration documents if no address is designated.
Furthermore, legal address is also necessary for fiscal purposes. A company is registered with a specific Tax Inspection depending on its location and will subsequently send its reports to this this exact body.
Finally, the address is essential for interaction with contractors, customers, state and municipal bodies, and generally with all citizens and legal entities. Letters arriving at the designated address are considered to be received even when the organization is not actually located at it. All risks in this situation are borne by the company. In the worst-case scenario, a business may be liquidated by the initiative of Tax Authorities and its shareholders are not exempt from liability either.
Underlying issues
First of all, the address should exist (naturally) and be as precise as possible. As of lately, the Tax Authorities have been especially inquisitive about organizations, whose stated addresses do not specify the exact office/room of their location. For example, a company registered under «Moscow, Tverskaya Street, building 211» is more likely to draw attention than «Moscow, Tverskaya Street, building 211, office 1». If an address is too vague, the company will likely be troubled to make it more specific – a process that may take time and money.
Other issue to be aware of is an «address of mass registration», that is an address used by several companies at once. A rule of thumb is: approximately 5-6 companies located at a single office significantly increase the risk of it labeled as such. A company registered at an address of mass registration is bound to draw negative attention from Tax Authorities, servicing bank and will suffer a blow to its reputation – few companies will desire to deal with an organization deemed untrustworthy.
Furthermore, businesses that are leasing an office greatly depend on a conscientious landlord who will diligently process the official correspondence that is sent to the legal address. A timely receipt and response to letters of government agencies and business partners have an enormous impact on the company’s operation and activities. It is strongly advised to establish a reliable and effective cooperation with a landlord to avoid unexpected or troublesome situations.
Solutions:
First option, a company may, in theory, use a residential location (e.g. a flat) for registration as a legal address. Thus, a shareholder or a director are able to register their home address as a legal address, however, this decision may come at a cost. There are instances when a Tax Inspection may refuse registration, considering that residential quarters are not meant for business activities. This option is also a serious breach of confidentiality, as any person will be able to see the exact home address of a shareholder or director, besides, it limits the scope of activities a company may conduct.
Second option, a company may buy office premises. This will certainly relieve a company of certain issues, mainly providing it with more freedom to manage the office by itself. On the other hand, acquiring an office is undeniably a costly endeavor and requires time and efforts to conduct a prior due diligence and the registration process concerning the transfer of property ownership.
Finally, a company may lease an office or a workplace inside that office. Either variant will provide a company with a legal address and thus shield the business from unwanted attention from the authorities. By leasing a single workplace of approximately five square meters, the company is on the same legal footing as the one occupying a whole office. Naturally, a workplace would cost less than a whole office, which makes this option considerably more popular, especially for smaller businesses.
The leasing option appears to be the most advantageous: most property owners who offer such services also undertake to receive correspondence and assist in office management (e.g. cleaning the premises, providing WIFI and office equipment). They also support their tenants in legal matters when it comes to address registration. The most important in this scenario is to build a relationship of trust with the landlord, which will ensure a productive cooperation for the future.
We hope that
this article has provided an insight into the importance of legal address for
Russian businesses. If you are interested in obtaining a legal address for your
company, please contact Ausserer & Consultants for a free consultation.
Ausserer & Consultants offers offices and workplaces for lease in an «all
in one» package, including personal workplace, WIFI, office equipment and more.
[1] Civil Code of the Russian Federation: clause 2, article 54
