A private unitary enterprise (PUE) is one of the most common forms of business in the Republic of Belarus. This organizational-legal form allows entrepreneurs to manage the enterprise solely, retaining complete control over its activities and decisions. However, despite the apparent advantages, the PUE has certain peculiarities to consider when choosing a form of ownership for your business.
In this article, we will consider in detail what constitutes a private unitary enterprise (PUE) and the main points associated with its creation, management, and termination. We will pay special attention to the analysis of the advantages and disadvantages of this form of entrepreneurship compared to other organizational-legal forms, such as limited liability companies (LLCs) and individual entrepreneurs (IE).
What they mean when they talk about the Private Unitary Enterprise
A private unitary enterprise (PUE) is a commercial organization created by a single founder (individual or legal entity) who is not vested with the right of ownership of the property assigned to it by the owner. According to the legal regulations in force in Belarus, the property of a PUE is indivisible and is not distributed by contributions, shares or units, as well as among the PUE’s employees.
Peculiarities of legal status and property relations
The property of a PUE is privately owned by the founder (or jointly owned by spouses) and is transferred to the enterprise on the right of economic management. This means that the enterprise can own and use this property, but it can dispose of certain types of property, especially real estate, only with the owner’s consent. For example, the sale, lease, or pledge of immovable property requires the owner’s consent.
The founder of a PUE has the right to withdraw any property from the enterprise for personal use. However, such withdrawal may be considered an individual’s income and subject to appropriate taxes.
If a PUE is established during marriage at the expense of the spouses’ joint property, the enterprise’s property may be considered their joint property. However, owners’ rights are realized through the activities of one of the spouses, who is formally the founder.
Thus, a PUE allows the founder to have sole control over the enterprise but imposes certain restrictions on the disposal of property, especially immovable assets.
Procedure for establishing and state registration of a PUE
Establishing a private unitary enterprise (PUE) in the Republic of Belarus requires compliance with certain requirements for the founder, preparation of necessary documents, and passing through the established registration procedure.
Requirements for the founder and constituent documents
1. Founder
A PUE is founded by a single person: an individual or a legal entity. The founder may be a resident or non-resident of Belarus. Certain requirements apply to the status of founders, which can be clarified independently or during consultation with our lawyer.
2. Memorandum of Association
The main founding document of a PUE is the charter, which is approved by the property owner (founder). The charter must contain the full name of the enterprise, its purposes and activities, and the founder’s rights and obligations.
3. Authorized fund
Legal norms do not establish the minimum amount of authorized capital for PUE; the founder independently determines its size. At the time of state registration of the PUE, the authorized fund must be fully formed.
Registration procedure: required documents and deadlines
1. Name approval
Before submitting the documents, obtaining a certificate of name approval from the registration authority is necessary. This procedure is free of charge, and the certificate of name approval is valid for one month.
2. Determine the location of the PUE (“legal address”)
A natural person who opens a PUE may use their residence as the legal address, provided the dwelling is in their ownership. However, this requires the consent of all other property owners (if any) and adult family members of both the owner and co-owners—other homeowners. An additional requirement is the owner’s permanent residence at the specified address.
It should be noted that when a PUE is located in a residential premises, utility payments are usually calculated at the rates established for organizations, not for individuals. If activities related to production, work performance, or service provision are planned at this address, the premises will need to be transferred to the non-residential fund.
3. Preparation of documents
The following documents will be required for state registration of a PUE:
- Application for state registration of the established form.
- Articles of Association are in two copies; their electronic version is in .doc or .rtf format.
- A document confirming the payment of the state duty (the amount of the duty is one basic unit – 42 rubles).
- Certificate of approval of the name.
- The founder’s decision on establishing the PUE, with information about the founder, the name of the company, the size of the authorized fund, and the powers of the director.
- 4. Submission of documents
Documents can be submitted to the registering authority or through a notary, who will transmit them electronically or in person, provided the founder has an electronic digital signature. If the documents for state registration are sent electronically, the state registration fee does not need to be paid.
5. Terms of registration
State registration of a PUE takes place on the day of submission of documents, provided that they are correctly executed. After registration, the company is automatically registered with the tax authorities, statistical authorities, and the Social Security Fund, Belgosstrakh. The registering authority enters information about establishing the PUE in the Unified State Register of Legal Entities and Individual Entrepreneurs (UGR). It issues the head of the PUE Certificate of State Registration.
Organizational structure and management of PUE
The management structure of PUE has its own features in comparison with other legal forms of business organization. The organizational structure and management of PUE are characterized by a high degree of control on the part of the founder, who determines the development strategy of the enterprise, appoints the head, and can create separate divisions to expand the business.
The role and powers of the founder
The founder of PUE, as the owner of the enterprise’s property, has broad powers to manage and control its activities. He approves the enterprise’s charter, determines the main directions of its activities and makes decisions on key issues, gives consent to the participation of PUE in other businesses, appoints the head of the PUE, or concludes a contract with a management company. In addition, if provided for in the charter, the founder may withdraw property from the enterprise and independently establish a system of internal control and supervision over the enterprise’s activities.
Appointment and functions of the head of the company
The PUE’s founder appoints the PUE’s head (e.g., director) and concludes an employment contract with him. Instead of hiring the head of the PUE, the founder may employ a management organization or individual entrepreneur-manager and conclude a civil law contract with him. The head of the PUE is accountable to the owner of the PUE. The owner of the PUE – a natural person has the right to perform the functions of the manager of the PUE independently.
The head of the PUE (managing organization) carries out the current management of the enterprise, makes decisions within the limits of granted powers, and is responsible for their implementation. The founder determines the name of the manager’s position and fixes it in the charter.
Possibility to establish branches and subsidiaries
PUE can establish branches and representative offices to expand its activities. Branches and representative offices are not independent legal entities and act according to regulations approved by the parent company.
In addition, PUE may establish subsidiaries, which are independent legal entities. A subsidiary is established by transferring a part of the PUE’s property to it and acting on the basis of its own charter. The subsidiary is managed by a manager appointed by the parent company.
Advantages and disadvantages of doing business in the form of a PUE
Private unitary enterprise (PUE) – a convenient organizational-legal form for entrepreneurs seeking complete business control. However, along with the advantages, PUE has several limitations that should be considered when choosing a form of doing business.
Advantages of PUE
1. Simplicity of management
The founder of a PUE makes all key decisions independently, simplifying management and making the business more flexible. Unlike limited liability companies (LLCs), there is no need to call meetings of participants or coordinate actions with other owners.
2. Sole decision-making
There is no mechanism for distributing shares in PUE, so the founder retains complete control over the enterprise’s activities. This allows them to react quickly to market changes, make decisions on strategic development, and appoint or dismiss the head without coordination with partners.
3. Minimum requirements for the authorized fund
Unlike joint-stock companies, PUEs do not have mandatory requirements for the minimum size of the authorized capital. The founder can set it at his discretion, which reduces the initial costs of establishing the enterprise.
4. Possibility to work without an accountant
PUE can operate without hiring a chief accountant; when the PUE has less than 15 employees and the head (including when the founder is the head), PUE meets the following requirements:
Has higher or specialized secondary education, which gives the right to work as chief accountant of the organization, and work experience in accounting, reporting, and (or) audit for at least three years.
Does not have an unexpunged or unexpunged conviction for committing a crime against property and the order of economic activity.
Disadvantages of a PUE
1. Restrictions in the disposal of property
The property of a PUE belongs to the founder but is transferred to the enterprise on the right of economic management. This means that the PUE cannot freely dispose of property, especially real estate, without the founder’s consent.
The sale or pledge of real estate requires the owner’s consent, which may complicate the enterprise’s financial operations.
2. Difficulties in selling a business
Unlike LLC, where you can sell a share in the authorized capital, the sale of PUE means either a change of founder or reorganization into another form (e.g., LLC), which requires additional legal procedures.
Potential business buyers may be wary of PUEs because of the specificity of property relations and lack of separation of ownership.
3. Liability of the founder
If the PUE does not fulfill its obligations, creditors may demand recovery of property held by the enterprise.
In case of bankruptcy, the founder may bear subsidiary liability if it is proved that his decisions brought the enterprise to financial insolvency.
4. Limited opportunities for attracting investment
There is no mechanism for distributing shares in a PUE, so it is more difficult to attract an investor than in an LLC or JSC.
If the founder decides to attract co-investors, he must reorganize the PUE into another form, which requires additional time and financial costs.
Conclusion
A PUE is a convenient form of business for those who want to manage the company independently without involving partners and co-founders. It is characterized by ease of registration, flexibility in management, and the possibility of prompt decision-making. However, limitations should also be taken into account: a special procedure for the disposal of property, difficulties in selling the business, and limitations in attracting investment.
When choosing a PUE as a form of business organization, it is important to consider its peculiarities and plan in advance the possible ways of development, including potential reorganization in other legal forms. Timely consultation with lawyers and consideration of current legislation will help avoid risks and make the business more efficient.
If you need assistance in registering a PUE, as well as get advice related to other issues, we can do it professionally. Contact us to discuss the details and get expert support!
