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Limiting of Liability with the Slovak Ltd.

Professional articles according to existing Ltd.

The purpose of this professional article is to visually explain how to detach the strategically risky fields of company business from Limited Liability Company, which the Ltd. company is protected against intervention of third persons or creditors. As this article has been elaborated for businessmen, its content will trace a fictive example, whereby it is simultaneously the model study for active advisors of SLC-Europe.

Initial situation:

The existing Ltd. would like to operatively enforce in a new strategic field, however it would like to keep the liability at the same time in this field as the only one and alone that in case of questions regarding the guarantee/liability the basic competences of Ltd. and mainly the company property would not be touched.

These variants can be applied:

  1. to start business in a new strategy area of parent Ltd.
  2. to form a new Ltd. for the new area of business
  3. to form a new limited partnership, the limited partner of which is the parent Ltd.
  4. to form the Slovak Ltd., which as the limited partner of LP will take over the liability

Variant 1: To start business in a new strategy area of parent Ltd.

Advantages resulting thereof:

  • the budget-price variant

Disadvantages resulting thereof:

  • in case of liability the entire property of Ltd. is affected and so it becomes the lost/destroyed one

Variant 2: To form a new Ltd. for the new area of business

Advantages resulting thereof:

  • Securing of parent Ltd. through risks of the new strategy area

Disadvantages resulting thereof:

  • high basic capital
  • Additional claim in case of insolvency, if the entire owner’s equity has not been deposited
  • high costs to form the company (costs for the attorney/for the notary public)
  • high current expenses for bookkeeping

Variant 3: To form a new LP, the limited partner of which is the parent Ltd. .

Advantages resulting thereof:

  • financially advantageous formation of a company
  • strategic separation between the parent Ltd. & and the new strategic business area

Disadvantages resulting thereof:

  • in case of liability, the LP will be sued as the first, whereby the liability passes to a limited partner and also the parent Ltd. together with its property is affected
  • unnecessary administrative costs (the additional bookkeeping, etc.); in any case the protection of liability of the parent Ltd. does not arise through this model

Variant 4: To form the Slovak Ltd., which as the limited partner of LP will take over the liability

Advantages resulting thereof:

  • the bargain-price formation of Ltd. (EUR 1,980)
  • the low owner’s equity (EUR 5,000), but yet the full recognition of liability right by the general partner (the Slovak Ltd.) in case of insolvency! (in contradiction with the English Limited, which is treated as the personal company in case of insolvency on the basis of non-disposable owner’s equity)
  • through Ltd. & CoKEG (limited profit-making partnership) in Austria the client acquires the “Austrian company“ with the number in the Austrian Companies Register and the tax number! (the Slovak Ltd. is the exclusive general partner)
  • the full tax recognition by the Tax Office, since all taxes are paid in Austria and the Ltd. company represents only the package of liability
  • simple handling for the tax auditor conducting only the bookkeeping of limited partnership after all, in principle the distribution of profits is regulated according to amount of deposits of the limited partners
  • flexible handling with the general partner (as far as Slovakia would not be interesting on any grounds, the relocation of a company into some other country and the replacement of the general partner in Austria can be relatively simply done with maintaining the company registration number and the tax number

Disadvantages resulting thereof:

  • many tax auditors argue out of this procedure, because they have not met this topic in praxis up toady (in case of need, we will be glad to advice you personally through a tax auditor)

the tax auditors, who want to get more detailed information, are offered to get the personal advisory directly in your office; accept please the direct contact to Mr. Eder, if you want to be advised through telephone: 0699-17551065 (Austria)

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