If you are considering broadening your market by entering the Russian Federation, see to it that you understand the intricacies of doing business in Russia. You will be encountering new regulations, working with Russian counterparts and competing with local businesses.
You’ll need to analyze a considerable amount of data, understand the different cultures and carefully pinpoint your target locations across the country.
Here are some fast facts about Russia:
· Even with the Soviet Union’s dissolution in 1991, Russia (Russian Federation) is still a vast country. It comprises 22 republics spanning almost all of Northern Asia and a large portion of Eastern Europe.
· Russia is the world’s largest country by area, covering 17,125,200 square kilometers or 6,612,100 square miles.
· The country is home to 145.9 million (2019 estimate).
· There are 11 different time zones in Russia.
· By world standards, the Russian economy ranks 12th by nominal GDP.
· In terms of purchasing power parity (PPP), it ranks sixth-largest in the world.
· Russia is an emerging market and a part of the BRICS group that includes South Africa, China, India and Brazil. Among the five countries, Russia has the second smallest population after South Africa, but the country’s consumers are the richest among the BRICS group.
· Moscow plans to be an international finance center, allowing legal and financial companies to grow.
· Russia exports a wide variety of products. The most popular industries are pharmaceuticals, engineering, education and elearning, and consumer and retail products.
Languages Spoken in Russia
When considering doing business in Russia, it is good to know that you will only use the country’s official and national language, which is Russian. However, various states within
the Russian Federation use 27 other official languages. Likewise, immigrants speak their native languages at home and when communicating with their peers.
Why Choose Russia to Start a Business?
The country presents many opportunities and benefits to people who are willing to start doing business in Russia. It is one of the 10 largest economies in the world. It is an emerging economic market. The Russian economy receives a boost from the country’s initiative to provide mortgages and consumer loans and an increase in the use of industrial capacity. The improvement in the economy allowed Russia to pay off a sizeable portion of its foreign debts. It now has the most significant foreign currency reserves, trailing Japan and China.
Business and investor confidence in the country increased due to the government’s revitalization of its efforts. They are putting more structural reforms and instituting macroeconomic policies. Specific business opportunities are available in the power industry, pharmaceuticals, retail and telecommunications. To encourage economic activity after the financial crisis that swept the nation, the government offers various tax incentive packages.
Understanding the Russian Market
If you’re looking to start doing business in Russia, you will need plenty of advice and ideas to penetrate this emerging market. To truly understand the Russian market, begin with how to start a business in the country.
Starting a Business in the Russian Federation
You have to go through several processes to start a business in this country. Initially, consider the right business idea and some legal issues you need to pass.
1. Visa Requirements
You should see to it that your immigration status allows you to start or operate a business in Russia. To begin doing business in Russia, you should be a holder of a residence permit and the required visa. The visa will allow you to be self-employed, open a business or hold a company position that involves making decisions regularly.
If you are a non-resident, you can join a Russian company as a shareholder. People holding permanent or temporary residence permits are allowed to start a business in Russia.
If you do not have a residency permit and you still want to start a Russian business, you can apply for a Russian Work Visa and become self-employed. However, this option requires you to have a Russian General Directory of Migratory Affairs invitation. Another opportunity to start doing business in Russia is to open a company that will create jobs and generate revenue. You must secure a Russian Business Visa to use this option.
If you come to Russia as a foreign investor, you will have the same status as the locals. However, you will still be given restrictions in the insurance and banking sectors, land purchase and specific investments in economic groups that have a strategic status to the country.
2. Business Plan
To ensure the long-term sustainability of your business venture, perform thorough research of the market and prepare a solid business plan. You should base your business plan on extensive market research to see to it that the products or services you are going to offer will be profitable,
3. Understand the Types of Companies
A part of your plan to start doing business in Russia is to understand the types of companies available in the country. You should learn the legal structures and features of each company type.
· Limited Liability Company. The most common type is the Limited Liability Company (OOO), which is a private company. The shareholders’ ceiling in this type is 50. Each shareholder should contribute R10,000 (minimum). The shareholders can pay half of the share amount during registration. To ensure smooth operation and outline the rights and responsibilities of the members, an LLC operating agreement is crucial. All shareholders are liable for the debts incurred by the company up to the amount of the registered capital. A foreign company or individual can be a shareholder or the founder of a company or companies under the OOO. But a foreigner needs a specific residence permit/visa to become a company director or board member.
· Joint-Stock Company. This type can be a closed (ZAO) or open (OAO) company. The OAO is a public company, while ZAO is a private company. An OAO can have over 50 shareholders and shares are transferable freely to the
public. Each shareholder can contribute a minimum of R100, 000 to the company’s capital. Other permissions and liabilities are similar to the OOO.
· Partnership. If you are opening a small business, this type is a suitable option for you. General partnerships provide equal rights and liabilities according to the agreement. Debts can be covered by personal assets. The partners share in the management of the business. Limited partnerships require the general partners to share liabilities for the profits and debt, and use their assets to cover costs. The responsibility of the limited partners extends only up to the amount of their business capital contribution.
Other types of companies include sole ownership¸ branch (of a foreign company) and registered office. The latter means the office is only in Russia as a representative of an overseas business. It is not allowed to have any commercial activity.
4. Business Name and Address
Similar to other countries, the name of your company should not be the same as any of the names of local Russian companies. You must choose the appropriate site when you are planning to start your business in Russia and use it as your company address.
5. Prepare the Foundation Papers
Depending on the type of company you choose, you should prepare the following documents:
· Full name of the company including abbreviations
· Company founders’ names and signatures
· Amount and nature of the contributions of shareholders
· Rules of company management
· Legal responsibilities of management and shareholders
· Directors’ details (if needed)
6. Incorporation of the Company
After the preparation of the essential documents, you need to incorporate your business in Russia. Submit the following documents to the Federal Tax Service’s registration office.
· Application for registration with the notarized signatures of the incorporators
· Foundation documents
· Proof of legal status of the founders
· State registration fee receipt
The Federal Tax Service will review your application and notify you of their decision within five working days. If your application is accepted, your business will be registered for taxation. Seven days after your application, you will receive the following:
· Certificate of State Registration (Certificate of Incorporation)
· Tax certificate
· Business tax identification number
· Copy of your business foundation papers stamped with the seal of the business registration department
· Extract from the Russian Common State Register of Legal Entities
7. Open a Bank Account for Your Business
Have copies of your official documents sent by the Federal Tax Service (FTS) notarized and submit them to the bank. You will need notarized copies of:
· Tax and incorporation certificates from the FTS
· Founding documents
· Business license in Russia
· Notarized signatures of incorporators and shareholders and documents that confirm the authority and identity of the business account signatories
Doing Business in Russia – The Rules
Study the rules mentioned here, as they will help you navigate the normal work conditions in Russia.
· Understand that corporate and personal security is a critical issue. You should, therefore, conduct background checks of local/foreign subcontractors and employees.
· Hire a legal firm when doing business in Russia to protect you from the lack of regulations regarding business loss reimbursements, recovery of damages and fraud. Intellectual property laws in Russia are still in the development phase.
· See to it that you know the person/s attending a business meeting as the business system is hierarchical.
· Russians favor direct talk, and it is beneficial to mention the profitability factor early in the meeting. But see to it that you do not compromise too much because your Russian counterparts see it as a weakness. Learn to hold out a bit but know how to gauge the situation. A glass of vodka typically seals a closed deal.
· As a foreigner, Russians expect you to be punctual for meetings. However, do not expect the same from them.
· There are official and ‘unofficial’ systems in Russia when dealing with government bureaucrats. Aside from exercising patience, money and small gifts go a long way to move things along.
· Be aware of petty thefts and corruption.
· Exercise flexibility when dealing with Russian colleagues and subordinates. Try to convince them regarding your ideas and proposals. Improve productivity through motivation. Allow them to voice their concerns. You must make them feel secure.
Social Customs and Business Etiquette
Russians are very hospitable and consider it an honor if they invite you to their home. As usual, there are some rules to follow.
· When you receive an invitation to a Russian’s home, see to it that you bring a gift, such as chocolates, cake or wine. When giving flowers, avoid yellow roses, which indicate separation and bad luck. Likewise, the flowers should be in odd numbers.
· Wait until you have entered the home before you kiss the cheeks or shake hands. Russians believe that making the customary gestures for greeting while in the doorway brings bad luck to them. You typically remove your gloves before you shake the hands of the persons you meet. In some households, it is customary to remove your shoes before entry.
· Be sure to dress well if you are a host or a guest.
· During the gathering, see to it that you actively participate in the ongoing conversation.
· Accept the food and drinks they offer. Since Russians love to drink, it is for your benefit to learn how to tactfully refuse the beverages.
· Learn the unique way Russians offer a toast. When you are the host, they will expect you to give toasts in the same manner.
· In informal conversations, your Russian host will likely discuss several things, including personal achievements, prized possessions, travels, family, etc. Show them that you appreciate them.
· Russians follow European table manners, so they use a fork on the left hand and a knife on the right, with their wrists resting on the table.
· Older Russians are more traditional and conduct business in groups. Younger Russians are comfortable with the individualistic approach.
· It is beneficial to learn as much as you can about Russian culture, geography and history. Such topics will inevitably come into the conversation because Russians are very proud of them.
· Because they were under communist rule for close to 70 years, do not expect older Russian businesspeople to understand modern commerce that is a product of capitalism. You should remain patient while explaining your company’s position.
· Dress formally for business meetings. Women’s skirts should reach the points above the knees. Wear formal and well-polished shoes.
·. Include your advanced degrees in your business cards to impress your Russian counterparts.
· Each meeting usually ends with a ‘protokol’ that is an equivalent of a summary of the meeting. You are expected to sign it.
· Arrange business meetings for several weeks in advance. For meetings with government representatives, the dates are typically set six weeks before the meeting. Confirm the meeting two days before the actual date. Be sure to arrive on time but be prepared to wait for your Russian colleagues.
Business negotiations in Russia typically take a long time to conclude. Since they are conscious of hierarchy, see to it that the persons attending the meeting from your side match the Russian counterparts in age and company position. Russians will not make compromises. It is up to you to offer the right concessions.
Patience and a cool head are your shields when negotiating with prospective Russian business partners. Avoid mentioning deadlines as they might use them against you. Know that the cancellation of critical meetings is a common occurrence. It’s a typical tactic for negotiations. You might see your Russian colleagues walking out while you’re in a meeting, another common behavior. You have to wait until they come back. Keep in mind that putting pressure on them will not work.
These are the most important things you have to know when you’re thinking of doing business in Russia. Their culture, behavior and ways of doing business may be very different from what you typically encounter. Ensure that you do extensive research and
know more about Russia and its people before you go to Russia. At the same time, hire a professional translator if you’re keen to enter the Russian market since all your documents should have Russian translations.
Fast, Accurate and Excellent English to Russian Translations
Immigration and business documents should be accurately translated before you go to Russia for business. See to it that you choose the right translation company to provide you with excellent English to Russian translation services. Call Day Translations, Inc. at 1-800-969-6853 or send us an email at Contact us. We can easily connect your to our native-speaking Russian translator anytime. We are available 24/7, each day of the year.