We are witnessing a growing number of foreign entities—both legal and natural persons—seeking to establish a presence in the Serbian market. For that reason, many decide to set up a company, representative office, or branch in the Republic of Serbia. However, mistakes made during the process of company formation can significantly slow down operations. It is therefore essential to understand all relevant laws and regulations in advance.
When foreigners aim to establish a presence and conduct business activities in Serbia, it is only natural that they may not be thoroughly familiar with the applicable regulations and legal framework. As a result, inevitable mistakes, omissions, and oversights frequently occur. Over time, these mistakes can reduce efficiency and require additional time and resources to adjust to the optimal business model.
Mistakes when establishing a company in the Republic of Serbia
In this text, we will highlight some of the most common mistakes made when establishing business entities in the Republic of Serbia.
In addition to simply listing them, we will also provide suggestions on how to avoid such mistakes.
- Choosing the appropriate entity/legal form through which to enter the Serbian market and conduct business activities.
- Discrepancies between the Articles of Incorporation and the registration application.
- Opening an operational account with one of the commercial banks in the Republic of Serbia.
- Inadequate form of power of attorney in cases where the founder is not carrying out the incorporation personally.
- Payment of share capital.
Choosing the appropriate entity / legal Form
First, we will outline the different legal forms of business entities that exist in the Republic of Serbia and that can be established and registered:
- General Partnership (Ortačko društvo – OD)
- Limited Partnership (Komanditno društvo – KD)
- Limited Liability Company (Društvo sa ograničenom odgovornošću – DOO)
- Joint Stock Company (Akcionarsko društvo – AD)
In addition to the above legal forms of companies, there is another way of conducting business activity in Serbia — the sole proprietor (preduzetnik). Unlike the previously mentioned forms, this does not constitute a legal entity. Instead, it is a natural person who is duly registered and thereby allowed to carry out business activities.
Furthermore, there are two additional “forms” through which business activities can be carried out in Serbia:
- Branch (ogranak)
- Representative Office (predstavništvo)
Neither of these forms constitutes a separate legal entity. Instead, they represent ways in which a foreign legal entity can establish a presence and perform certain business activities in the territory of the Republic of Serbia.
Each of the forms mentioned above has its own specific features. Understanding these differences can be of great importance in choosing the most appropriate form for any foreign investor (whether a foreign natural person or a legal entity).
Legal Advice on choosing the appropriate legal form
For this text, we will make a comparison between a Limited Liability Company (DOO) and a branch or representative office.
Compared to the other forms mentioned, a DOO is the only structure that constitutes a legal entity in its own right. A branch and a representative office, on the other hand, are considered extensions of the founder (the “parent company”), which leads to the most significant differences:
- Operational Flexibility – A DOO is the most flexible structure from an operational standpoint. It can carry out not only its primary/registered activity but also any other activity permitted under the relevant regulations. A branch and a representative office are more limited in this regard. Why? A branch does not operate as an independent entity but exclusively in the name and on behalf of its founder (the “parent entity”). A representative office, on the other hand, may only perform preliminary and preparatory activities aimed at facilitating the business of the founder.
- Advantages of Choosing a Branch or Representative Office over a DOO – A branch or representative office is significantly easier to dissolve and deregister. These forms are more suitable when entering the market on a temporary basis, for the purpose of carrying out a single specific project, without long-term plans to conduct ongoing business in the Republic of Serbia.
Taking these differences into account allows you to make timely and informed decisions, ensuring that you establish the legal form best suited to your specific needs.
If you require assistance in choosing the appropriate entity or legal form, feel free to contact us. One of our services includes providing comprehensive legal advice to help you select the most suitable structure for your business in Serbia.
Discrepancies between the incorporation act and the registration application
The establishment/registration of any of the above-mentioned legal forms is carried out by submitting the appropriate registration application to the Serbian Business Registers Agency (SBRA), which maintains the official register of business entities in the Republic of Serbia.
To establish any of these entities, it is necessary to submit, along with the registration application, the corresponding incorporation document (such as an agreement, decision, or statute). When submitting the registration application, the information contained in the application must match the information provided in the incorporation act. Any discrepancy between the two constitutes grounds for rejection of the registration request.
Opening an operational bank account in the Republic of Serbia
Regardless of the chosen legal form for conducting business in Serbia, mere establishment/registration is not sufficient for commencing operations. In addition to incorporation, it is mandatory to open and maintain an operational bank account with a commercial bank in Serbia. It is important to note that the process of establishing or registering a company or other legal form is significantly shorter and more straightforward than the procedure of opening a bank account. Therefore, when planning the business activities of a newly established entity, one must take into account that the moment of registration does not mark the moment when the company becomes fully operational. Full operability is only achieved once the process of opening a bank account has been completed.
Inadequate power of attorney
The procedure of incorporation/registration before the Serbian Business Registers Agency (SBRA) may be initiated and conducted either by:
- the founder, or
- a person authorized by the founder.
Depending on who is authorized, the form of the power of attorney differs and must be attached during registration. For example, if an attorney-at-law is authorized, the power of attorney does not need to be notarized. For all other authorized persons, however, notarization of the power of attorney is required.
Our advice is to pay close attention to the form of the power of attorney in cases where the founder is not personally carrying out the incorporation or submitting the registration application.
Payment of share capital
Share capital must be determined and registered at the moment of incorporation. However, it does not have to be paid at the time of registration. Instead, it may be paid within the statutory deadline of five years, as prescribed by the Serbian Company Law. The incorporation act or the company’s decision may set a shorter deadline, but not a longer one.
Given that payment is not mandatory at the time of incorporation/registration, it is generally much simpler to make the payment later, once the company has an active bank account with a commercial bank. Our advice and recommendation is that founders should avoid paying in the share capital at the moment of registration and instead defer the payment until the company is fully operational.
Mistakes when establishing a company in Serbia: How to avoid them
The cases described above represent only some of the specific issues that may arise in the process of establishing a company (or other legal form), and we are confident that this information will be helpful to you during incorporation.
Given the overall complexity of the procedure and the large number of regulations that must be followed, mistakes made during company formation in Serbia can lead to serious complications. For this reason, it is essential to be well-prepared and to seek professional advice from experts before starting the process.
