Lawpractice

Company formation

The formation of companies is an integral part of modern economic activity, offering significant advantages over sole entrepreneurship. Apart from the lower tax rates (which can be as low as 22%), companies provide the ability to continue operations even if a partner withdraws or passes away.

The success of a company depends greatly on its proper formation and the drafting of a well-structured Articles of Association. The Articles of Association act as the company’s foundation, setting out the operational rules, relationships between partners, and their rights and obligations. Just as the Constitution is essential for states, the Articles of Association serve the same purpose for companies.

Since the law grants certain rights to partners to regulate their relationships, if they do not take advantage of these opportunities, their corporate relationships will be governed exclusively by the provisions of the law. In many cases, this is not desirable for many, if not all, partners.

With standard Articles of Association, a company can be established quickly; however, it will often need to be modified afterward to reflect the partners’ intentions and regulate their relationships, always within the limits allowed by the law.

In Greece, companies are divided into two main categories:

capital-based companies (e.g., Public Limited Company, Limited Liability Company, Private Capital Company);
partnerships (e.g., General Partnership, Limited Partnership).

Capital-based companies have the advantage of being considered more reliable in the market (especially Public Limited Companies). Additionally, partners are only liable to the extent of their investment in the company, meaning their personal assets are not linked to the company’s liabilities. Therefore, if the company incurs debts, creditors cannot, usually, pursue the personal assets of the partner.

This does not apply to partnerships, except in the case of Limited Partnerships, but only for the limited partners. In all other cases, partners in partnerships are personally liable for all of the company’s debts.

Each choice has its pros and cons. For example, a disadvantage of capital-based companies is that they may incur higher accounting costs, which may be acceptable if the company’s profits (from lower taxation, or other reasons) cover these expenses.

The choice of the appropriate company type depends on the nature of the business, its growth strategy, and the geographical scope of its activities. The corporate vision must be considered to ensure the company has a solid foundation.

In some cases, such as when the company’s activities are not based in Greece, it may be more beneficial to establish a company in other jurisdictions, such as Cyprus, the UK, the USA, etc.

Our office handles the establishment of companies in Greece, assists with company formation in other countries through our external partners in various countries, drafts Articles of Association for companies in Greece, and provides advice on selecting the best corporate structure based on the needs of each entrepreneur and business.

Contact us for more information, or to begin the company formation process or the drafting, or modification of your company’s Articles of Association.