Starting a Business in Greece

Recently, there has been considerable discussion among interested parties regarding the establishment of a business in Greece and the legal structure that the company they plan to set up will adopt. What should they choose? Why should someone establish a Limited Liability Company (IKE) instead of a Private Company (EPE)? Is it better to establish a single-member IKE or a sole proprietorship? Does the administrative cost of a company (e.g., IKE) serve as a deterrent in selecting it as a legal form?

All of these are legitimate questions that we face every day from different stakeholders. In the midst of a torrent of information, some struggle to make a decision or end up choosing a legal structure that does not serve their interests.

For a specialist to adequately address the questions above, they need to take various factors into account to provide a thorough answer. While the final decision lies with the entrepreneurs, they must understand all the available options offered by Greek legislation in order to choose the most suitable solution for their needs.

At Accountwave, we consider the selection of a legal structure by our clients to be as crucial as the core activity of their business. We have dealt with many companies that, due to their partners’ poor choice of legal form, encounter issues during their operations that are frequently hard to resolve.

Company Formation – Types of Businesses According to Their Legal Structure

At this stage, it is important to present the primary options among the legal forms available under Greek law. Firstly, the law categorizes companies into two main groups: personal companies and capital companies

• Sole Proprietorship
• General Partnership
• Limited Partnership

• Private Limited Liability Company (LLC)
• Single-Member Private Limited Liability Company (Sole-Member LLC)
• Limited Liability Company (LLC)
• Single-Member Limited Liability Company (Sole-Member LLC)
• Public Limited Company (PLC)

The first issue examined in such cases pertains to the number of partners involved. How many potential partners are there? The law allows us to establish a company even with a single partner (Single-Member I.K.E. or Single-Member E.P.E.)

What is the financial status of the partners? It is common and reasonable for partners with significant real estate and movable assets to be reluctant to engage in personal companies, as their participation risks exposing their entire wealth.

Liability of Partners in Company Formation

• General Partnership (GP): In a general partnership, the partners are liable for the company’s obligations to third parties without limit, each with their entire personal assets
• Sole Proprietorship: The owner of the business is personally liable to third parties without limit.
• Limited Partnership (LP): The general partners are liable without limit with their personal assets, while the limited partners are liable only up to the amount of their contribution to the company’s capital.

• Private Limited Liability Company (LLC) & Single-Member LLC.: The liability of the partners is limited to the amount of their contribution to the company’s capital.
• Limited Liability Company (LLC) & Single-Member Limited Liability Company (Sole-Member LLC.): The liability of the partners is limited to the amount of their contribution to the company’s capital.
• Public Limited Company (PLC): The liability of the shareholders is limited to the amount of their contribution

Concerning the mandatory accounting books that businesses must maintain, it is important to note that they are classified into two categories: Single-Entry Books and Double-Entry Books

Single-Entry Books, or as they were previously known, books of income and expenses.

Single-entry books are kept by personal companies (sole proprietorships, general partnerships, and limited partnerships) until they reach an annual turnover limit of €1,500,000. If the revenue of these businesses exceeds this limit in a fiscal year, they are required to submit an application to the relevant tax office in the following year to change their accounting method to double-entry.

Double-entry books provide a comprehensive accounting depiction of a company. Capital companies are mandated by law to maintain double-entry books, regardless of their revenue.

Additionally, as previously mentioned, personal companies are obligated to maintain double-entry books if they exceed the specified revenue, or they may choose to do so voluntarily if desired by the partners or business owners

A crucial factor for an interested party when selecting a legal structure is the tax they will need to pay on their business profits.

For legal entities, the tax they will have to pay is set at 22% (for the fiscal year 2021), starting from the first euro.

For individuals, the tax will be calculated according to the income tax scale defined by the Income Tax Code, as follows:

• 9% for profits from €1 to €10,000.00
• 22% for profits from €10,001.00 to €20,000.00
• 28% for profits from €20,001.00 to €30,000.00
• 36% for profits from €30,001.00 to €40,000.00
• 44% for profits over €40,001.00

In summary, reviewing the above points, it becomes clear how complex the process of establishing a company can be, particularly when choosing the right legal form for someone looking to start their own business. There are also additional factors that must be considered on a case-by-case basis to ensure the interested party can make the most informed decision for their business.

If you are in the process of setting up a company, reach out to us by completing the interest form below. We will contact you to collaboratively determine the most suitable legal structure for your business.