1- SOLE PROPRIETORSHIP
A sole proprietorship is a business that can be owned and controlled by an individual, so you can register your business in the type of sole Proprietorship
it is good to start your business with the lowest cost but has unlimited liability regarding its owner
The legal status of a sole proprietorship can be defined as follows:
- It is not a separate legal entity from the business owner
- The business owner has unlimited liability (i.e. the business owner is personally liable for all the debts and losses of the sole proprietorship)
- It can sue or be sued in the owner’s name
2-PARTNERSHIP
The two categories of partnership:
• General partnership (Société en Nom Collectif – SNC)
• Partnership in commendam (Société en Commandite Simple – SCS).
a-Partnership
Partnerships are formed between two or more people.
The main characteristic of this form is the personal contribution of each partner since all the partners are personally liable for the company’s debts and obligations.No required capital is requested by law.
It must be registered at the commercial register since it is doing a commercial activity.
The company name includes the names of some or all of the partners and is usually followed by the words ‘and Co.’
A partnership in commendam is a limited partnership with two types of partners.
General partners who own and manage the business. These are liable for all their obligations.
Limited – or silent – partners are financial contributors and do not participate in the management. Their liability is limited to their contribution.
b-Co-Partnership (Société en Participation)
A co-partnership is a partnership known only to the parties concerned in order to achieve a certain project and, since it is secret, cannot be registered. An association agreement sets down the partners’ rights and obligations, as well as their participation in profits and losses. Each party is responsible for its own liabilities.
Despite their secrecy, the agreements inherent in co-partnership are enforceable at law in cases of dispute
3. LIMITED LIABILITY COMPANY
A Limited Liability Company, also known as LLC, is governed by Decree-Law No. 35 of August 5, 1967 and is commonly referred to in Lebanon as S.A.R.L (this is the French equivalent of L.L.C).
An S.A.R.L is founded by at least three partners and this number of partners can go from 1 up to 20.
An LLC minimum capital is set at five million Lebanese Pounds (approximately USD 3,333), noting that contributions may be in-kind or in-cash.
Since the company is of a limited liability, the partners are only liable to the amount of their contribution or parts to the company.
Partners in an LLC are not considered to be merchants and hence are not subject to the provisions applicable to merchants including the provisions of the Lebanese Code of Commerce.
Management of an LLC is given to one or many managers.
The manager can be a partner.The company’s denomination is always followed by the abbreviation “LLC”.
Limited Liability Companies are subject to the following taxes:
o 17% tax on corporate profit.
To be noted that there are no restrictions on foreign participation in limited liability companies except for certain sectors and activities. The company must necessarily appoint a lawyer with yearly retainer fees.
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4. JOINT STOCK COMPANY
A Lebanese Joint Stock Company known as JSC has to be constituted by a minimum of 3 shareholders.
The Liability of the shareholders is limited to their shares in the company.
The minimum capital for the JSC is LBP 30,000,000 (approximately USD 20,000), which can be in cash and/or in-kind contributions.
The company may call for public subscription and is allowed to issue financial instruments and bonds. and may issue financial negotiable instruments or bonds.
The Company management is entrusted to the board of directors which elects amongst its members a president. Board directors are elected by the general assembly of shareholders.
The number of board members is fixed between a minimum of 3 and a maximum of 12 and the majority of board members should be of Lebanese nationality.
There are no restrictions on foreign participation in joint stock companies except for specific sectors and activities (mainly the public sector, commercial representation, real estate under certain conditions, etc…
An auditor must be appointed by the company and the company’s name should be always followed by the abbreviation S.A.L.
A lawyer has to be appointed with yearly fees as per Lebanese laws. JSCs are taxed 17% tax on corporate profit.
5. OFFSHORE COMPANY INCORPORATION IN LEBANON
Offshore companies are one diversion of Joint Stock Companies. All shareholders and boards of directors can be foreigners.
The minimum partner numbers and capital requirement is the same as for joint stock companies but they can be denominated in foreign currency. The Offshore enjoys tax advantages and is subject to a flat yearly tax of one million Lebanese Pounds (667 USD) regardless of its turnover or profits.
Law 85/2018 allowed the incorporation of an offshore company by a single shareholder.
According to Article 7 of Law 19/2008, salaries and benefits paid to employees of offshore companies working abroad are exempted from the payroll tax. In this regard, the concerned companies are required to declare the salaries of all their employees, including those working abroad.
As for the chairman, he may be a non-Lebanese resident abroad and may operate without a permit. The company formation and registration take place in both, the Commercial Register and in a special register for offshore companies.
Offshore companies’ formation and registration occur in Lebanon, however, they operate only in the Lebanese free zone and/or outside the Lebanese territory. However, they can have their headquarters in Lebanon and hold bank accounts in Lebanese banks.
Their object is the following:
- Negotiation and conclusion of agreements concerning goods and products located outside the Lebanese territory or in the Lebanese Free Zone
- Offering studies and consultations for the benefit of foreign institutions,
- Using free zone facilities in order to stock imported goods for re-exportation,
- Buying or renting real estate in Lebanon to the extent they are necessary for the operation of the offshore company.
According to the last amendment The added activities permitted to the offshore companies are:
- The administration of companies and institutions outside Lebanon including the export of services, and software of any kind to these institutions.
- Operations of three-sided trade or multi-sided trade and therefore negotiating and drafting contracts, shipping goods, and reissuing bills for transactions out of Lebanon or in the Lebanese free zone including the facility to store the goods in the free zone in order to export them.
- Doing activities related to maritime shipping.
- Acquiring shares of stocks in foreign corporations, companies, or institutions and borrowing from these institutions in which the offshore company holds more than 20% of its capital
- Acquiring or benefiting from rights related to agencies or commercial representation to foreign or non-residing companies or institutions.
- Opening of branches and representative offices abroad.
- The construction, investments, and administration of economic projects except those prohibited by law.
- The creation of accounts and use of financial services to finance its activities whether from local institutions or non-residents.
- The lease or acquisition of offices or real estate in Lebanon in relation to the activities of the offshore company.
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6. HOLDING COMPANY
Benefit from our Holding Company registration efficient services. The Holding Company is another diversion of the Lebanese Joint Stock Company and benefits from a very special tax treatment.
The minimum partner number and capital requirement are the same as for joint stock companies.
The capital can be held in foreign currency.
The holding company can be fully owned and directed by foreigners and the non-Lebanese Chairman of a holding company is exempted from work permit requirements.
However, The object of the holding company is strictly limited to the following:
- Buying and subscribing to shares in Lebanese or foreign joint stock or limited liability companies,
- Managing the said companies.
- Lending money to companies in which it holds a minimum of 20% shares and or guaranteeing such companies towards third parties. The holding company may for such purpose borrow from banks and issue bonds, provided that the total value of issued bonds does not exceed five times its capital and reserves.
- Holding and leasing patents, concessions, and trademarks,
- Acquiring movable or real estate assets that are necessary for the holding’s operations.
The Lebanese Holding company enjoys various important tax advantages: it is exempted from income tax on its profits and on the distribution of dividends.
An auditor needs to be appointed and as for all Lebanese companies a lawyer has to be retained with yearly fees.
7. BRANCH OF A FOREIGN COMPANY / REPRESENTATIVE OFFICE
A Foreign company wanting to do business in Lebanon can establish a branch which should have the same object as the mother company. The branch must first be registered with the Ministry of Economy and Trade followed by a second registration at the Trade Registry. A director for the local branch needs to be appointed and as well as a lawyer with yearly fees.
The foreign company may opt to establish a Representative Office in Lebanon.
However, the representative office’s activity is restricted and limited to the promotion of the head office’s services and products. Hence, a representative office may not engage in trade activities of any kind in Lebanon.
To set up a branch office / representative office, the foreign company’s Board of Directors must issue a proxy/power of attorney in favor of a Lebanese lawyer granting him the authority to register the company in Lebanon, to represent it, and to sign documents and do all the necessary measures on its behalf.
The documents needed are :
- The foreign Company’s By-laws and articles of incorporation (if applicable).
- The foreign company’s Certificate of Incorporation.
- The Corporate resolution of the foreign company, resolving to (i) set up the Branch in Lebanon, (ii) appoint a specific person as manager of the Branch and determine his powers, and (iii) appoint a Lebanese legal Counsel / Attorney to the Branch.
- A copy of the manager’s identification papers or passport as well as a copy of the lawyer’s “bar association” card (where applicable).
- Once the above original and legalized documents are sent to Beirut, they must be certified at the Ministry of Foreign Affairs and submitted for translation into Arabic by a competent translator.
What is the difference between a representative office and a local branch?
A representative office is an office that offers technical assistance in the market and handles public relations.
By law, This kind of office can not perform any commercial activity which could generate any business or profit. Therefore costs and expenses are to be borne by the outside foreign head office. Because of its nature, the representative office is not subject to corporate income tax.
A branch office can undertake in general any commercial activity, except that which by law requires a certain legal form or conditions and/or that which is exclusively reserved for Lebanese nationals and/or companies.
For these reasons, a branch office is subject to corporate tax.
Go ahead and kick-start your new company today with the minimum costs. Company registration in Lebanon with the help of our specialized lawyers is fast and easy.
2019 updates :
IN 2019 the Lebanese Parliament has enacted three new laws: Law 81 (2018) on electronic transactions and personal data; Law 85 (2019) on offshore companies and single-member offshore companies; and Law 126 (2019), which amended the code of commerce law from 1946.
The main purpose of these laws is to create an ecosystem where companies and startups can prosper and develop, as well as one that is attractive to foreign investments, in order to expose the Lebanese market to international standards and scale. Law 81 was established to create legal controls to protect individuals’ actions, as there was no legislative framework in which e-transactions could be carried out despite these being daily processes in Lebanon. It is a reform that arose alongside the European Union’s General Data Protection Regulation (GDPR), which seeks to protect EU citizens’ data in all jurisdictions. Law 81 is beneficial for the economy in that it allows for e-trading and e-commerce to happen more easily in Lebanon, and between Lebanese companies and those abroad.
Updates for a digital era
Law 81 can be split into seven parts; the first being the legal requirements on electronic documents and evidence, such as giving the e-signature and e-documents the same power as a handwritten signature and document. The second part covers electronic commerce; it outlines the responsibilities required for all e-commerce practitioners, and covers the e-banking sector. The third part tackles the legal necessities on public communication through electronic supplies, which means that it highlights the responsibilities of the data host and covers the process of providing information online to the public anonymously. The fourth part sets out the national administrative, technical, and legal requirements given by international domain names registration entities. The fifth part states the purposes and boundaries of processing personal information, detailing the obligations and responsibilities of individuals handling the data. The sixth part covers amendments to the penal code, in addition to tackling crimes related to IT systems and bank cards. Finally, the seventh part offers transitional necessities related to the present law by stressing the importance of BDL in licensing electronic signatures and integrating them in the financial and banking sector, while making sure they do not contradict with other laws, especially the banking secrecy law of 1956.
Investment friendly
Law 85 updated Decree 46 (1983) due to the importance of offshore companies in attracting Lebanese and foreign executives to invest in Lebanon. The law’s update, of course comes in the context of Lebanon’s hope for potential offshore oil and gas reserves. This updated law outlined the activities in which offshore companies are allowed to practice. Moreover, this law has ratified the establishment of a single member offshore company in Lebanon, in which a single shareholder manages the company either by themselves or by appointing another director. This single member, being a legal entity or a natural person, is responsible for signing individually on all the company’s decisions, given that they have all the powers and responsibilities usually granted to the board of directors and the general assemblies of the shareholders.
Changes to the code
The major innovation was Law 126, which, after 73 years, reforms and amends a large portion of Law 304 (1946), the code of commerce. Law 126 does not replace the code of commerce but exists to be used in conjunction with it, with its amendments superseding relevant articles in the original law. This updated law was enacted to meet local and international standards and evolutions in need. These amendments introduce new legal concepts that reform commercial acts in Lebanon. Law 126 opens the local market to a global market by encouraging foreign investments and by integrating several amendments made to adapt to the changing business environment in Lebanon and globally.
First, the law reforms certain formalities such as integrating electronic usage in daily transactions within the procedural framework, such as deposits and registrations before the trade register. In cases where a company has not been established within six months, the law also allows the founders to recover the deposited amount as capital from the bank accounts.
Second, the law undertakes several procedural amendments for joint stock companies, such as requiring that one-third instead of two-thirds of board members are Lebanese. In addition, the law separates the roles of the chairperson of the board of directors and the general director to ensure that each role’s responsibilities within the company are clearly defined.
Moreover, it tackles Lebanese limited liability companies by allowing a natural person to establish a single partner limited liability company (SARL). The law also provides reforms regarding the transformation of a company, repartition between the bare ownership and usufruct—the right to use and take advantage of a thing possessed. Regarding bankruptcy, it introduces protections for the estate of the spouse of the bankruptcy. In addition, it adopts the regulations of mergers and demergers of a company.
Global depository receipts (GDRs)—defined in the Financial Times glossary as “negotiable shares issued by depositary banks that represent ownership of a specific number of shares in a company and can be traded independently from the underlying shares”—have grown in prominence in recent years as the favored implement through which companies from emerging markets choose to raise capital. It was important, therefore, to integrate and adopt a new amendment that covers these: Article 28 of Law 126 includes the regulations of the preferred shares and article 458 tackles GDRs. Moreover, these articles were integrated to allow foreign firms to have their stock trade in the domestic market by removing several steps, as well as to ease domestic investor purchases of foreign securities.
The above reforms are a step toward stability and growth and put Lebanon on the right track, which is a path toward an improved future and a modernized contemporary business law that would serve to attract investors and create a perpetual growth economy.
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