A wide variety of legal arrangements may be used to carry on business activity in Iran. Some of the more commonly used arrangements are corporations, limited partnerships, partnerships, co-ownerships, joint stock company and limited liability companies.
The selection of the appropriate form of business organization will depend in each case upon the circumstances of the investor, the nature of the activity to be conducted, the method of financing, income tax ramifications and the potential liabilities related to the activity.
Generally, one of the first issues faced by a foreign entity contemplating carrying on business in Iran is whether to conduct the business directly in Iran as an Iranian branch of its principal business, or to create a separate Iranian entity to carry on the business. We will provide you with the necessary information to establish the most suitable type of business in Iran. Consider the following information for establishing a company Iran:
- 100% Ownership of your company;
- Incentives of Free Zones of Iran;
- Foreign Investment Promotion & Protection Act;
Foreign investors can now establish their company with 100% ownership of the shares and control of their business. This can be an advantages to some of the companies willing to be more involved in the Iranian market providing them with more security and stability as a foreign investors. There are Two types of companies which can be registered for foreign investment opportunities:
Limited Liability Company
A limited liability company (sherkat ba massouliat mahdoud) is defined as a company formed by two or more persons for the purpose of trading. Liability is based upon the direct contributions of the partners to the partnership and not by share subscription. The formation of a limited liability partnership is deemed to have taken place when the capital in cash has been fully contributed and when non-cash contributions have been assessed and delivered. The name of the company must always include the phrase “limited liability” otherwise under the law the company will be considered as a general partnership.
Joint Stock Company
The Joint Stock Company is defined by the law as a company whose capital is divided into shares and the liability of whose shareholders is limited to the par value of their shares. As mentioned in the Foreword, the Joint Stock Company may be either a public company (Sherkat Sahami Am) or a private company (Sherkat Sahami Khass). The main difference between the two is that the public company may offer its shares and debt securities to the public while the private company may not. See Annex A for additional differences between the public and private companies. The shareholders of a joint stock company participate in the ownership, profit and losses, and distribution of assets in liquidation, in proportion to the shares held. As indicated above, the liability of each shareholder is limited to the par value of his shares and in the absence of fraud or other deceptive practices; there should be no recourse to shareholders for the liabilities of the company.
Foreign Companies can establish a branch of their company in order to conduct their business in Iran. The Branch will be a foreign company and act as a branch under mother company and may operate in the following areas of activities:
1) Offering after-sale services for the goods or services of the foreign company.
2) Carrying out the executive operations of the contracts concluded between Iranian persons and foreign companies.
3) Studying and preparing the necessary conditions for the foreign company’s investment in Iran.
4) Cooperation with Iranian technical and engineering companies for undertaking activities in third countries.
5) Participating the non-oil exports of the Islamic Republic of Iran.
6) Offering technical and engineering services and transfer of know-how and technology.
7) Engaging in activities permitted by government agencies legally authorized to issue permits, in areas such as offering services in the fields of transportation, insurance, inspection of goods, banking, etc.
A local branch office of a foreign company is the subordinate of the mother company which carries out the objectives and business transaction for the mother company. The operation of the branch office will be conducted under the name and responsibility of the mother company. The branch office is subject to Iranian laws in areas such as labor, social security, taxation, etc. The government protects the legal rights of a registered branch office as of the mother and domestic companies.
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