Opening a Business in Latvia: SIA, IK or saimnieciskā darbība — What to Choose in 2026

Why the business structure decides everything from the start

Latvia ranks among the fastest EU jurisdictions to start a business: registering a company electronically in Uzņēmumu reģistrs takes a few working days. This very simplicity provokes the main mistake: an entrepreneur chooses a registration form at random, guided by a friend's advice or the first template found online, and after a few months discovers that the chosen form does not match the scale of the business, the tax regime, or the plans to stay in the country.

The cost of the mistake is not a fine but wasted time. Transitioning from saimnieciskās darbības veicējs status to sabiedrība ar ierobežotu atbildību (SIA) means creating a new legal entity, opening a new bank account, and pausing operations while registration takes place. Even more costly is the scenario where a company is registered purely as a foundation for a residence permit: the immigration service sees a formal registration with no real turnover or employees and denies continuation of status. Therefore, the choice of ownership structure, registration, and the founder's own status should be planned together, not sequentially.

Saimnieciskās darbības veicējs, IK or SIA

In Latvia, there is no single correct form to start — there is a form that fits your scale, risk, and investment plans. The difference between the three main options lies in liability for debts, the procedure for capital contribution, and the scope of reporting.

Saimnieciskās darbības veicējs — self-employed

The status of saimnieciskās darbības veicējs is registered with an individual through Valsts ieņēmumu dienests without creating a separate legal entity. This is the simplest and cheapest start: no statutory capital is required, accounting is kept in simplified form. The reverse side of simplicity is full personal liability: for debts or unperformed obligations, the individual's personal assets are at risk, not just the business assets. This form suits consulting services, freelance work, small retail, or crafts — areas where contractual risks are limited to the value of a single deal.

Individuālais komersants — individual merchant

Individuālais komersants is also a form without segregated statutory capital and without limited liability, but with mandatory registration in the commercial register, a business name, and a higher level of trust from banks than a simple self-employed person. The form is appropriate when turnover grows and partners demand official merchant status, but the owner is not yet ready for a full partnership structure with capital contributions.

SIA — sabiedrība ar ierobežotu atbildību

Sabiedrība ar ierobežotu atbildību (SIA) is the Latvian equivalent of a limited liability company. Founders' liability is limited to the amount of their contribution to the statutory capital; the company can hire staff without restrictions, attract investors, and sign contracts in its own name. The law provides for a variant SIA with reduced statutory capital — a decision that lowers the entry barrier for startups but imposes its own restrictions on profit distribution until capital reaches the standard minimum. This very flexibility makes SIA the most popular form among foreigners planning not one-off services but stable activity with growth potential.

The choice of form also affects the status of the founder: a stake in a company registered in Latvia and the status of an individual conducting saimnieciskās darbības veicējs appear differently in the eyes of the immigration service when it comes to grounds for a residence permit or work permit.

Registration in Uzņēmumu reģistrs

A company in Latvia is registered in Uzņēmumu reģistrs — the state register of enterprises. For SIA, the procedure consists of several mandatory elements.

• Founding documents — a founding agreement or decision of the sole founder, and articles of association describing the types of activities and management procedures.
• Statutory capital — is contributed to a temporary account, and after registration to a permanent company account; the reduced capital variant has its own reserve accumulation rules.
• Legal address — the juridiskā adrese must be a real address in Latvia, and the property owner must provide written consent for its use; without this, the registrar will refuse to enter the record.
• Declaration of beneficial owner — the company discloses the patiesā labuma guvējs, the natural person who actually controls the business; the bank verifies this when opening an account.
• Board — the register records who sits on the board and has the authority to represent the company without a power of attorney.

Once the registration is entered, the company opens a permanent bank account to which the statutory capital is transferred, and receives a registration number and legal entity status. In parallel, it is worth planning the tax regime and hiring the first employee — some decisions are easier to include in the articles from the start than to change later through a notary.

Type of activity, licences and founder status

During registration, the company specifies codes of economic activity — primary and secondary. This is not a formality: the code determines whether the activity falls under the general regime or requires a separate licence. Construction, transportation, food production, financial and educational services, alcohol or pharmaceutical trade — these are regulated sectors with their own requirements for personnel and premises. A company with formally specified activity codes but no actual licence cannot legally operate in such a sector, even if it exists in the register. A detailed breakdown of which types of activity require a licence and which require only notification to the regulator can be found in our article on licences and permits for business in Latvia.

The founder's own status as a foreigner is a separate issue. Registering a company in Uzņēmumu reģistrs does not automatically grant the right to live and work in Latvia. Owning a stake in a SIA or membership on the board alone does not confer the right to reside and work in the country. A separate ground is needed — a residence permit for commercial activity, with its own conditions regarding investment amount, number of jobs, or company turnover. If your goal is to obtain a residence permit through business, the immigration service will check whether the company conducts real activities: turnover, office, employees, and paid taxes from the first months of operation are the main evidence supporting continuation of status.

Taxes: UIN, IIN, microenterprise and VAT

After registration, the company registers with Valsts ieņēmumu dienests (VID) — the Latvian tax authority, which administers all major business taxes.

Uzņēmumu ienākuma nodoklis — corporate income tax

The peculiarity of the Latvian model is that uzņēmumu ienākuma nodoklis is paid not on profit earned but only on the portion the company actually distributes — from dividends. Profit that is reinvested in development is not taxed at this stage. The decision to pay dividends should be made with an accountant, as the timing of distribution creates the tax obligation.

Iedzīvotāju ienākuma nodoklis — personal income tax

Income of saimnieciskās darbības veicējs and individuālais komersants is taxed as personal income with the possibility of deducting documented expenses. The rate and thresholds are periodically reviewed, so current figures should be checked at the time of registration.

Mikrouzņēmumu nodoklis — microenterprise tax

Mikrouzņēmumu nodoklis is a simplified regime for very small businesses with limited annual turnover and number of employees: one payment replaces several tax obligations. The regime is attractive for small services and crafts, but over the years the legislator has narrowed the range of eligible activities and the turnover threshold, so before choosing it, current conditions should be verified.

Pievienotās vērtības nodoklis — value added tax

Registration as a pievienotās vērtības nodoklis payer is mandatory after exceeding the established annual turnover threshold; until then it is voluntary and makes sense if your main counterparties are themselves VAT payers. The threshold and rates are periodically reviewed, so the decision on timing should be coordinated with an accountant based on current figures.

First year: contributions, reporting, EDS

The first year is most difficult not because of the volume of transactions but because of the number of new obligations that arrive at once: registration as an employer, monthly payroll reports, VAT declaration for VAT payers, annual company report.

• Minimum mandatory social security contributions — one of the biggest surprises for newcomers: for a board member or employee, even with minimal or zero actual salary, in certain cases set by law you must pay contributions based on an established minimum rate, not the actual amount paid.
• Accounting — SIA maintains full accounting with original documents and preparation of financial statements according to established standards.
• Annual report — an annual financial report is submitted to the register by a specified deadline; missing the deadline means a fine and increased attention from supervisory authorities.
• Elektroniskās deklarēšanas sistēma (EDS) — VID's electronic system through which most declarations are filed; access requires an electronic signature or bank authorization, so this should be arranged immediately after registration, not the day before the first deadline.

A company with real operations, hired staff, and cash flows from the first months usually passes the first year without complications — this is the profile both the tax authority and the immigration service expect to see. A company that exists only on paper accumulates questions from both sides and eventually comes into the sights of an inspection; we write in detail about how Latvian authorities check businesses in our article on business inspections in Latvia.

Accountant handles the numbers, lawyer protects the business

Most entrepreneurs look for an accountant immediately after registration — and this is the right step: without one, it is impossible to file declarations on time through EDS, pay VAT, and close reporting periods. But an accountant handles the numbers, not the business. They record what has already happened: filed declaration, paid contribution, closed quarter. When it comes to matters where you need not calculate but make a decision and defend your company's position, the accountant's work ends where the lawyer's work begins.

A lawyer is needed precisely at the points where a mistake costs not a penalty but the business itself:

• Contract with a counterparty or landlord for juridiskā adrese — an accountant does not evaluate legal risks of contract terms; they determine whether the company can recover a debt or defend itself against a claim later.
• Denial of licence or permit — when a regulator denies a licence for a specific activity, you need a legally reasoned appeal, not a resubmission of the same documents.
• Inspection by VID or labour inspectorate — the business has the right to know the limits of the inspector's authority, receive an inspection report, file objections within the deadline; without legal support, a company often agrees with conclusions that could have been contested.
• Founder's status as a foreigner — questions of residence permit for commercial activity and status continuation are legal, not accounting matters. Remember: mere registration of a stake in a SIA or entry on the board does not replace a separate permit to reside and work.

This is why at Dorosh & Partners, accounting and legal support for business in Latvia is provided by one team under a single agreement, not two separate contractors who do not see the full picture of each other's work. The accountant closes the reporting period on time; the lawyer at the same time reviews contracts before signing, accompanies registration and changes in Uzņēmumu reģistrs, prepares the company's position for VID inspection, and handles the founder's residence permit questions so that business and personal status in Latvia move in the same direction. This support pays for itself not at the moment of registration but at the first disputed contract, first inspection, or first residence permit renewal. More details on the format of such business support can be found separately.

Frequently asked questions

What business form should a foreigner choose when registering in Latvia for the first time?

This depends on the scale of your plans and the founder's status. For solo activity with limited risk, the status of saimnieciskās darbības veicējs is suitable; for growing turnover — individuālais komersants; for business with hired staff and the prospect of attracting investment — SIA, possibly with reduced statutory capital at the start. The decision should be made with a lawyer, considering both the tax and immigration aspects of the matter.

Can I open a SIA in Latvia without a residence permit?

Formally, Uzņēmumu reģistrs will register a company for a foreigner without a valid residence permit. But conducting real activities in the country or obtaining a residence permit based on this company without a separate permit is impossible, so status should be resolved at the same time as business registration, not after it.

How much does it cost to register a SIA in Latvia?

The cost consists of state duty, statutory capital, legal address service, and related expenses. Exact amounts depend on the chosen capital variant and registration timelines, so a specific calculation is better obtained directly rather than relying on figures from the internet.

What happens if I fail to register as a VAT payer on time?

If turnover exceeds the established threshold and registration as a pievienotās vērtības nodoklis payer is not submitted, VID can retroactively assess tax together with penalties for the entire period of delay. Therefore, turnover should be tracked monthly, not at the end of the reporting year.

Will I have to pay social contributions if the company is not yet profitable?

In many cases, yes. Latvian law provides for a minimum assessment base for mandatory social security contributions for board members and employees, and this requirement does not always depend on the company's actual income. This is one of the most common surprises for founders, so the schedule of minimum payments should be calculated before registration.

Opening a business in Latvia is a procedure that can be completed independently if the ownership structure, registration, and founder status are agreed from day one. Where these elements diverge, the company faces problems not immediately but after several months — in the form of a residence permit denial, retroactive tax assessment, or a dispute with a counterparty that would have been simpler to foresee at the start than to resolve after the fact.

Матеріал має інформаційний характер і не замінює юридичну консультацію.