The Private Company (in Greek I.K.E.) has emerged as one of the most popular options for young entrepreneurs in Greece. But what exactly is an IKE and why choose it for your business? In this detailed guide, we'll explore everything you need to know about starting and running an IKE.
What is a Private Company (IKE)?
IKE is a flexible corporate form that combines the advantages of partnerships (GP, LP) and limited liability companies (SA). It was launched in 2012 and quickly became the most widespread corporate form in Greece.
What are the main characteristics of an IKE:
1. Limited Liability:
This is one of the most important advantages of an IKE. It means that the partners (i.e. the owners of the company) are not personally liable for the debts and obligations of the company. Their liability is limited to the amount they have contributed as capital to the company. This protects their personal assets in case the company faces financial difficulties.
2. Minimum starting Capital:
Unlike other corporate forms, such as the Societe Anonyme (SA), IKE does not require a minimum capital for its incorporation. This means that you can start your business with very little capital, even as little as 1 euro. This is a major advantage, especially for new entrepreneurs who do not have or do not wish to invest large amounts of capital.
3. Flexible Management:
IKE offers great flexibility in the management of the company. You can choose one or more managers, who can be either partners or third parties. The responsibilities of the trustees and how decisions are made can be set out in the company's articles of association, giving you the ability to tailor management to the needs of your business.
4. Tax Regime:
IKE is taxed as a legal entity, i.e. the company files its own tax return and is taxed at a rate of 22% on its profits.
The partners, if they so decide, receive dividends a part or all of the company's profits. The distribution of dividends is taxed at 5% and the partners receive the profits taxed. That is, no additional tax is incurred on their personal tax return.
Why should I choose an IKE for my business?
There are many reasons to choose an IKE for your business activity. IKE is an ideal choice for many entrepreneurs, as it combines the advantages of various corporate forms.
A key advantage over partnerships (GPs, LPs) is the possibility of incorporation with only one partner, i.e. as a single person company.
The limited liability protects the personal property of the partners, while the flexibility in management and the absence of minimum capital make it particularly attractive for new businesses. In addition, the simple incorporation procedure and the favourable tax regime governing all legal entities compared to sole proprietorships for profits above EUR 40,000 are significant advantages, making the IKE one of the most popular options for entrepreneurs in Greece.
When do I have to start an IKE?
The decision to start an IKE depends on several factors, such as the type and size of your business, your goals and the need for limited liability. It is important to consult with a qualified accounting firm to obtain personalized advice.
Disadvantages of IKE:
Like every other corporate form, the IKE has its disadvantages.
It is required to keep double-entry accounting books, which means complexity and increased accounting costs. It also restricts the free transfer of money from the company to personal accounts, as all the company's cash flows are monitored in detail.
The manager of the IKE is jointly and severally liable to the State. That is, in the event of the company incurring debts either to the tax authorities or to the EFKA, the personal property of the manager is not safe.
Procedure for starting an IKE company
The process of starting an IKE includes the following steps:
Choice of name: Choose a unique name for your company.
Headquarters Selection. As with all legal entities, we cannot use our residence as our registered office.
As with all other legal entities, as with most of the legal entities, we cannot choose our domicile: The articles of association are the main document of the ICE and contain the rules for its operation.
Application to the General Commercial Register (GEMI): the application is submitted electronically through the General Commercial Register (GEMI) platform.
Payment of the fee: Pay the prescribed fee for registration with the GEMI.
Payment of the fee for the issuance of a Tax Identification Number (TIN): you obtain a Tax Identification Number (TIN) for your company.
Supporting documents for starting an IKE
The basic documents for starting an IKE are:
Partners' details: the details of the partners are required, such as name, VAT number, email, address, profession, etc.
Incorporation fees: the payment of the incorporation fees from the Business Registry is required to complete the procedure.
The signing of a lease must be completed before the registration of the company: A lease or concession agreement or a deed of property ownership is required for the place of business.
What are the costs of an IKE company?
The cost of setting up an IKE varies depending on factors such as:
Lawyer's/accountant's fees: Fees for drafting the articles of association and filing the application with the Business Registry.
Possible notary's fees: If there is a contribution of real estate to the company, the incorporation through a notary is required.
Business Registry fees: the incorporation fee from the GEMI, which changes periodically, approximately EUR 15-30.
What should I look out for when starting a business?
Tax liabilities: Find out about the tax obligations of an IKE company. IKE is taxed at a flat rate on its profits. The tax rate is 22%, but it may change depending on the tax provisions in force at the time. If your business makes sales of goods or supplies of services, you will need to register for VAT and submit periodic VAT returns. Depending on the activity of the business, there may be other taxes, such as payroll tax or excise duty.
Insurance contributions: Ensure that insurance contributions are paid on time. In particular, as an employed partner or manager of the IKE, you must be insured with EFKA and pay the corresponding insurance contributions. However, if you are insured in a different country, you can get an exemption for your personal contributions. If you hire employees, you must also pay the employer's contributions. It is important to pay the insurance contributions on time, as late payment will lead to increases and fines.
Accounting monitoring: You should keep the company's accounting records correctly. IKE is required to keep complete and correct accounting records, in accordance with the Greek Accounting Standards (GAP). Every year, you must prepare and publish the company's annual financial statements. For better bookkeeping, work with an experienced accountant to ensure proper bookkeeping and timely submission of financial statements.
Conclusion
IKE is an attractive option for both young and experienced entrepreneurs due to its flexibility, limited liability and tax advantages. With the right planning and support, starting an IKE can be the first step to a successful business career.
How can our accounting firm help in starting a sole proprietorship?
At our accounting firm with long experience in starting any type of business, we can guide and advise you in your first steps as a new entrepreneur, but we can also take over the process entirely.
We hold one-on-one meetings, via telephone, zoom calls or via email, in order to answer all your questions and provide customized solutions for your needs.
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