Could you advise which forms of ownership and organizational structure are the most remunerative for conducting business in Russia now?

There is no univocal answer to the question asked. The choice of the form of ownership and organizational structure for conducting business completely depends on specific aims and conditions of future undertakings.

In European practice much attention is paid to tax exemptions. For instance, if one speaks about agricultural production, then the most advisable form for the establishment of business is a small agricultural Enterprise in the form of a production agricultural cooperative, conducting its business in the form of a company with an additional liability. Firstly, this may be preconditioned by the following: pursuant to the Decree of Russia's President No 198 it was recommended to the local self-governing bodies to grant plots occupied by real estate to the ownership of citizens who have withdrawn from production agricultural cooperatives free of charge for a possible establishment of their own businesses. Secondly, pursuant to the Letter of the State Tax Service No BZ-6-04/493 a small agricultural industrial Enterprise has a profit tax exemption. Thirdly, an agricultural Enterprise of the industrial type is granted those tax exemptions as granted to industrial agricultural Enterprises. And finally, fourthly, the procedure for, and terms for granting preferential special purpose credits, allocation of budget and other funds are applicable to the company with an additional liability as well as to the agricultural Enterprise established in the course of the restructuring, for instance, of the production agricultural cooperative. (Regulation of the Council of Ministers No 303).

With regard to the choice of form of ownership and organizational structure - the company with an additional liability, then one should consider the nature of relations between the participants and control over the assets of a legal entity.

In this instance, if there is a special, fiduciary nature of relations between the partners, then it is more advisable to choose the company with an additional liability. The company with an additional liability is the form of the limited liability company, which has its distinctive features. And namely, its participants bear a subsidiary liability for its obligations by their property to the equal extent of the value of their contributions made.

Article 94 of the Civil Code vests the participant of the company with an additional liability with two special rights: the right to withdraw freely from the company anytime regardless of other participants' consent and the right to receive a portion of the value of the company's assets which is equal to the ownership interest in the charter capital. Let's remind ourselves that the shareholder may terminate his membership in the joint-stock company and return the funds contributed by way of an assignment deed of the shares he owns. Thus, in view of the right to a free withdrawal, one could give his preference to the company with an additional liability. Moreover, the shareholder has no right to demand any payments from the cost of the assets and allocation of the portion in kind from the joint-stock company's assets. However, the withdrawing participant from the company with an additional liability may demand the value of a portion of the assets which are equal to his ownership interest in the charter capital. In essence, the withdrawing member becomes the creditor of the company, and the company - its debtor. Eventually, when choosing this form of ownership and organizational structure one should weigh up all the pros and cons. Thus, in accordance with the guidelines pertaining to the procedure for disposal of land shares and property shares approved by the regulation of Russia's Government No96 of 01.02.95, it is stated that a land share may be accepted as a contribution to the Charter capital of agricultural commercial companies and also the right to use a land share.

A contribution of a land share or the right to use a land share shall be made in compliance with the foundation documents. Consequently, upon expiry of the term the right to use a land share was contributed for to the charter capital, the owner of the land share keeps the option to allocate in kind of a plot as an offset for his share. In this instance, should the party withdraw from the company with an additional liability and demand the payment of his share, this may have a paralyzing impact, depriving the company of nearly all circulating assets (value of the plot) provided that the participants' property is not enough. Finally, this may lead to the 'winding up' of the business while legal grounds for 'cabbaging' the assets are precluded in the joint-stock company that in its turn may lead to essential restrictions of the shareholder's right. Concurrently, the joint-stock company has its advantages. Firstly, the participation in the joint-stock company does not envisage the obligation for the founder to take part in person in the company's business (if the founder does not take part in the business of the company, this does not serve the ground for his expulsion from the company). Secondly, should the liability be imposed on the participants of the joint-stock company or the limited liability company, they are not liable for common debts by personal property unlike in the company with an additional liability. This is not quite convenient for the businessman-beginner as it is unpredictable how the business of his company will succeed.

Thus, the choice of the form of ownership and organizational structure for conducting business depends entirely on specific aims and conditions of business projections, which should be considered in each separate instance.