Constituted charter capital with property rights and minimized taxes

Our company was contacted by a Client with a request to develop a legal model for the use of the real estate object owned by the Client in his business activities. The key problem was that the Client did not want to register his real estate object (a car washing complex) for the enterprise. The practice of doing business in our country shows that the property owned by the enterprise is like a “red rag” for inspection authorities and faithless counterparties. The judicial system is not ideal, and is often used to obtain disputable decisions for collecting debts, imposing fines and so on, if the enterprise owns property.

At the same time, the Client needed to use real estate in his business activity. The lease agreement also did not satisfy the interests of the Client, as the owner of the building was a natural person, whose income tax would offset the entire economic effect of the business activity in case of leasing premises.

It was necessary to find a solution that would allow to implement the advantages of the lease agreement (protection of property from recovery) and transfer of ownership of the object (tax minimization).

And we found such a solution: to include the right to use the property for a period of one year in the authorized capital of the enterprise. Our lawyers have analyzed the tax consequences of such a decision, the procedure of registration of the transfer of this right and came to the conclusion that it was the fastest and the most efficient way to satisfy the needs of the Client.

Later on, we included the right to use the real estate object in the authorized capital of a limited liability company. For the first time it was done in 2012, and then we did it annually through 2016. Our lawyers not only prepared and held a meeting of the company’s founders, developed the charter of the company, which did not raise any comments on the part of the registering authority, but also ensured the registration of the right to use the building in the company’s authorized capital by the real estate registering authorities.

Thus, thanks to the consultations held by the company’s lawyers, the Client managed to avoid payment of taxes, as well as the risks of property recovery in case of claims by the state, counterparties and third parties.

The most important thing is that the scheme of adding property rights to the authorized capital has stood up against the test of practice and proved its feasibility.