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  • Cristina Lefter

S.R.L. and S.A. Impact of the choice of company form on business development.

An article from the series: The Entrepreneur and their Business in Romania

The first step in conducting entrepreneurial activity is to choose a corporate form. The most commonly used are SRL (limited liability company) and SA (joint stock company). The optimal variant for a start-up entrepreneur's business should be chosen according to a number of factors, including: available capital, number of partners/shareholders, but (perhaps most importantly) the entrepreneur's intention regarding the destiny of the new company.

S.A. and S.R.L. at a glance

Probably the easiest way to understand what the common and distinguishing features of S.A. and S.R.L. are is to include them in a (non-exhaustive) picture like the one below:

Shareholding structure

Shareholding is the composition of the partners or shareholders in a company. It may be relevant for a company seeking to attract funding either from private individuals (such as angel investors) or from venture capital firms. Given that, by assumption, the company is in the early stages of its development, the importance of the people involved in realising the founders' vision is crucial.

Financing options and potential obstacles linked to the corporate form

The options available to a company to raise finance from outside the sphere of its shareholders/owners depend to a large extent on the type of company. While both limited liability companies and joint stock companies can access the services of crowdfunding platforms (which I wrote about here) or obtain loans from third parties - convertible into shares or stocks or not (which I wrote about here), other forms of financing are reserved only for joint stock companies (e.g. issuing bonds or raising finance by listing on Romanian or foreign capital markets).

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