Small partnership

Small Partnership (MB) – The law on small partnerships came into effect on September 1, 2012, establishing a new legal entity form – the Small Partnership (MB). This is an attractive business model, especially for young entrepreneurs, as it requires no minimum capital, involves lower taxes, and simpler bookkeeping.

A Small Partnership (MB) is a private legal entity with limited civil liability, and all members (up to 10) must be individuals. The name of the partnership must include words indicating the legal form, such as “mažoji bendrija” or the abbreviation “MB.”

There is no need for a minimum capital; instead, contributions can be assets owned by members, transferred to the partnership (e.g., computers, furniture, money, etc.). However, services or labor cannot be contributed.

There are two possible management structures:

  1. Members’ meeting
  2. Manager of the Small Partnership

The management organs of the Small Partnership are specified in the partnership’s statutes.

Formation of a Small Partnership:

  1. Conclusion of a partnership agreement (when there are two or more founders)
  2. Conclusion of a founding act (when there is a single founder)
  3. The partnership agreement must specify:
    • Partners of the partnership
    • Registered address
    • Partnership name
    • Partnership manager
    • Contribution of each member, value of the contributed assets
    • Procedure for making and approving transactions
    • Procedure for compensating the founding expenses
    • Person authorized to act on behalf of the Small Partnership

When the management organ of the Small Partnership (MB) is the members’ meeting, the agreement must specify the representative of the Small Partnership, along with their rights and duties. The agreement is signed by all members of the partnership or their authorized representatives.

The statutes of the Small Partnership are a document that the partnership follows in its activities. If the management organ of the Small Partnership is the members’ meeting, the statutes must indicate that the partnership is represented by the representative of the Small Partnership.

Member taxes of the Small Partnership – Each member of the partnership pays a 20% income tax rate on themselves once a year, based on the declared income related to employment relationships or income equivalent to them.

Taxes and contributions are paid on the funds withdrawn by members for their personal needs, which are declared as income related to employment relationships (or income equivalent to them):

  1. Social security contribution – 26.3% (paid once a month, not later than the last day of the month), if funds are not received, the contribution is not paid.
  2. Personal income tax (PIT)
  3. Health insurance contribution (HIC)

When the Small Partnership does not engage in business activities and does not withdraw money for personal needs, members of the partnership pay contributions equal to 9% of the minimum monthly wage each month.

Taxes of the Small Partnership:

    1. Corporate income tax – 15% (when the number of employees does not exceed 10 people, and income does not exceed 300,000 EUR, a 5% corporate income tax is applied).
    2. If the remuneration for services provided or goods sold over the last twelve months exceeds 45,000 EUR, registration as a VAT payer is mandatory.