Starting a Business in Lithuania: Forms, Registration, and Taxes

Why business form decides everything

Lithuania is one of the simplest EU countries to register a business: a company can be incorporated online in just a few days. This very simplicity is misleading. A person registers the first form they find in a search, and a year later discovers that the structure doesn't match their business scale, tax status, or residence permit plans.

A mistake at the start costs not in fines but in time. Moving from individuali veikla to UAB means creating a new company, opening a new bank account, revising all contracts—and a pause in operations while everything is reorganized. The situation is far more costly when a company is registered merely as a basis for a residence permit: the migration service sees formal registration without turnover, employees, or real activity and refuses to extend it. This is why business form, registration, and founder status should be decided together from the start, not sequentially.

Individuali veikla, verslo liudijimas, MB, or UAB

Lithuania has no single "correct" form—only the form that matches your business scale and risk profile. The difference between these four options lies in liability for debts, contribution rules, and reporting scope.

Individuali veikla – sole proprietorship

Individuali veikla is registered as a natural person through an activity declaration or certificate. It is the simplest way to start: no charter capital required, accounting is simplified, and profit is taxed as personal income. The trade-off is full personal liability: the founder is personally responsible for business debts with their own assets. This form suits services, freelancing, small retail—where contract risk is limited.

Verslo liudijimas – business certificate

Verslo liudijimas is a license for a specific activity type from an approved list. A fixed upfront payment replaces income tax within a revenue limit. This mode suits seasonal or small-scale business with predictable income, but the list of eligible activities is restricted, and exceeding the revenue threshold means switching to another regime.

MB – mažoji bendrija (small partnership)

MB is a hybrid form between sole proprietorship and a full corporation. No charter capital is required, member liability is limited to their contribution, and one member can manage without hiring an external director. The number of members is limited, and MB cannot issue shares—it is designed for a small founding team, not outside investors.

UAB – uždaroji akcinė bendrovė

UAB is the Lithuanian equivalent of a limited liability company: charter capital is required, there is a formal management structure, full accounting is mandatory, and financial statements are published in the register. Founder liability is limited to capital invested; the company can hire staff without limits, attract investors, and sign major contracts. This is the form for businesses planning growth and working with banks, which view UAB status as the standard for trust.

The chosen form also affects the founder's status: the owner of a stake in a company registered in Lithuania and a natural person running individuali veikla appear differently to the migration service when applying for a residence permit or work authorization.

Registration with Registrų centras

Companies in Lithuania are registered with Registrų centras, the state register of legal entities. For MB and UAB, the procedure follows similar logic, though the required documentation varies.

• Founding documents – founding deed or agreement and articles of association describing activities, management, and share distribution.
• Charter capital – for UAB, a mandatory minimum must be transferred to a temporary account before registration; MB has no formal minimum.
• Director and founders – the register records who manages the company and who the ultimate beneficiary is; these details are later verified by banks and tax authorities.
• Legal address – a real address in Lithuania for correspondence; rented premises or a virtual office service are acceptable with the owner's written consent.
• Online registration – holders of an electronic or mobile signature submit documents via Registrų centras without a notary; without a signature, notarial certification is required.

After registration, a permanent bank account opens, charter capital is transferred from the temporary account, and the company receives a registration code and legal entity status. From this point, contracts, hiring, and tax obligations are in the company's name, not the founder's personal name.

At the same time, it is wise to plan your tax status—registration as a PVM payer, profit taxation mode, hiring the first employee—because some decisions are easier to embed in the articles at the start than to change later.

Activity type, licenses, and residence permit

Every company registers with economic activity codes—primary and secondary. This is not a formality: the code determines whether the activity falls under general rules or requires a separate license. Food production, transport, construction, alcohol sales, education, medical services, financial activities—these are licensed sectors with their own regulators and requirements for staff qualifications and facilities. A company with a "blank" activity code without a real license cannot operate legally in that field, even if registered. We have compiled a detailed breakdown of which activities require licenses in our article on licenses and permits for business in Lithuania.

Separate from this is the founder's status as a foreigner. Registering a company with Registrų centras does not automatically grant the right to live and work in Lithuania—these are two separate processes often confused. Before starting a business, you need legal status: a valid residence permit, temporary protection status, or EU free movement rights. If your goal is to obtain a residence permit through a business, remember the migration service's key rule: the company must be a real operating business, not a tool for documentation. Lack of turnover, office, or employees in the first months is a typical reason for permit refusal.

Taxes: VMI, PVM, and Sodra

After registration, the company is registered for tax purposes with Valstybinė mokesčių inspekcija (VMI)—Lithuania's tax administration. VMI administers corporate income tax, personal income tax for individuali veikla, and PVM, Lithuania's version of VAT.

Corporate and personal income tax

UAB and MB pay corporate income tax at standard or reduced rates for small business—exact rates and thresholds are reviewed regularly, so check current figures at registration time rather than relying on last year's data. Individuali veikla is taxed as personal income on a progressive scale with deductions for documented expenses.

PVM – value added tax

Registration as a PVM payer becomes mandatory after exceeding the annual revenue threshold; before that it is voluntary and makes sense only if your business partners are also PVM payers. The threshold and rates change, so the timing of registration should be coordinated with current figures, not last year's numbers.

Sodra – social insurance

Sodra administers contributions to pensions, health, and social insurance. Directors, employees, and individuali veikla operators must pay contributions under established rules and minimum calculation bases, which also change annually. Unpaid Sodra contributions are among the most common debts that surface when renewing residence permits or during company checks.

First year in business and reporting calendar

The first year is complex not because of business scale but because of the number of new obligations imposed simultaneously: reports to VMI, PVM declarations for payers, Sodra reports for each employee, annual financial statements, which for UAB are published in the register.

• Reports to VMI – income tax and, if applicable, PVM declarations are submitted on schedule; missed deadlines mean penalties, and repeated delays attract tax authority scrutiny.
• Sodra reports – monthly employee data and contribution payments; Sodra debt blocks background checks and affects the founder's social guarantees.
• Annual financial statements – balance sheet and profit/loss report; for UAB, these follow set standards and are submitted to the register by the deadline.
• Member meetings – annual approval of statements, which for UAB is a formal but required procedure with minutes.

A company with real activity, employees from the start, and consistent account movement typically sails through the first year without problems—this is exactly the profile both tax authorities and the migration service expect to see. A company existing only on paper accumulates questions from both sides simultaneously.

Accountant keeps the numbers, lawyer protects the business

Most entrepreneurs seek an accountant immediately after registration—and rightly so: without one, you cannot file declarations on time, pay PVM, or report to Sodra properly. But an accountant keeps numbers, not business. He records what has already happened: filed declaration, paid contribution, closed accounting period. When it comes to decisions where you must act, not calculate, and defend your position, the accountant's role ends where the lawyer's work begins.

A lawyer is essential at points where a mistake costs not penalties but the entire business:

• Contracts with business partners or landlords – an accountant does not review legal risks in contract terms, liability of parties, or grounds for termination; these clauses determine whether the company can later recover a debt or defend itself against a claim.
• License or permit denial – when a regulator refuses a license for an activity type, you need a legal appeal with proper arguments, not just resubmitting the same documents.
• Inspections by VMI, Sodra, or labor authority – during an inspection, your business has rights: know the inspector's authority limits, receive the findings in writing, file objections within the deadline; without legal support, companies often accept conclusions that could have been appealed.
• Founder's status as a foreigner – residence permit duration, extending status through business, compliance with migration requirements—this is a legal matter, not accounting, and must run in parallel with business operations, not after problems arise.

This is why at Dorosh & Partners, business accounting and legal support in Lithuania is managed by one team under a single agreement, not two separate contractors who don't see the full picture. The accountant closes each reporting period on time and correctly; the lawyer simultaneously reviews contracts before signing, oversees Registrų centras registration and changes, prepares the company's position for regulatory inspections, and handles the founder's residence permit issues—so business and personal legal status move in the same direction, not at odds. This integrated support pays for itself not at registration, but at the first contentious contract, the first inspection, or the first permit renewal—that is where you see the difference between a company merely registered and a company that is actively managed. Learn more about this business support format separately.

Frequently asked questions

What business form should a foreign entrepreneur choose for their first Lithuania registration?

It depends on your business scale and founder status. For solo work with limited risk, individuali veikla works; for a founding team without outside investors, MB; for business with employees and growth plans, UAB. Make this decision with a lawyer, considering both tax and migration factors.

Can I register a company in Lithuania without a residence permit?

Formally, Registrų centras will register a company for a foreigner even without a valid residence permit—legal entity registration and the founder's migration status are formally separate. But you cannot conduct real business activity or obtain a residence permit based on the company without proper status. So resolve your legal status at the same time as registration, not after.

How much does it cost to register a company in Lithuania?

Costs include the state registration fee, notary services if you lack an electronic signature, charter capital for UAB, and a legal address service fee. Amounts change, so request a specific calculation for your case rather than relying on figures from the internet.

What happens if I don't register as a PVM payer on time?

If your company's revenue exceeds the legal threshold and you have not registered as a PVM payer, VMI can assess back taxes with penalties for the entire period of delay. Monitor your revenue monthly, not just at year-end.

Can I later convert individuali veikla to UAB?

Yes, this is a common path: many entrepreneurs start with individuali veikla and move to UAB after growing revenue and hiring. Formally, this is not "conversion" but creating a new legal entity and transferring activity, so plan this transition ahead to avoid downtime with clients and your bank.

Starting a business in Lithuania is a process you can navigate independently if your business form, registration, and founder status align from day one. When these three elements pull in different directions, the company faces problems not immediately but months later—in the form of permit denial, back taxes, or disputes with partners that were simpler to foresee at the start than to resolve afterward.

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