All in a name: Setting up a company in Croatia

by Hank Brill

If you're thinking of investing in Croatia and want to take advantage of this country's pre-EU membership status, the first step is to form a Croatian limited liability company. This enables you to purchase real estate, reside in Istria for six to twelve months at a time, earn money, and even participate in Croatia's fine national health plan.

Registering a company under Croatian law is comparable to forming an LLC in the U.S. One or more owners must create articles of incorporation, appoint directors, choose a company name, and establish a local address. It is also necessary to deposit 20,000 Kuna in a Croatian bank as start-up capital (a U.S. dollar currently equals about 5.5 Kuna). Once the documents are executed and filed with the Croatian commercial court, and if everything is in order, the company is registered within two to three weeks. The new company can then obtain a Croatian tax number, equivalent to an Employer Identification Number in the U.S. With the registration and the tax number, the fledgling firm is ready for business.

In Croatian or Latin

One of the pitfalls in the process, however, is that the Croatian courts are very picky about company names, which the law requires to be in Croatian, Latin, or the same as the name of one or more of the owners. We had personal experience with the court's stringent standards. Our first attempt at registering a company name, "Amerièke Komunikacije," was rejected on the grounds that it would be necessary to obtain the permission of the U.S. government in order to use the Croatian form of the adjective "American." We quickly learned that it was far easier to change the name than try to argue American law with a Croatian law clerk. Another American tried to use the name "Golgotha" for his firm that would open a "Christian café" along the Dalmatian Coast. The court rejected his choice on the grounds that "Golgotha" is an Aramaic word, not Croatian or Latin.

In neither case did the Croatian notary or attorney provide corrective or cautionary advice before the fact-partly because the application of the law is somewhat unpredictable, but there is also an attitude on the part of some Croatian professionals to let the client, especially foreign clients, learn through trial by error. After all, applications are rarely rejected outright. Instead, the applicant is invited to amend the petition, and local professionals charge again for their services, even if they failed to help the client avoid the mistake in the first place.

This is an extract from International Living's "Motovun's Magic Moment" out soon, full of facts and tips about moving to Istria.

[Editor's note: Hank Brill's Pula-based company, INKOM, works on behalf of English-speaking clients investing or seeking residency in Croatia. You can write to him at correspondence@inkom.hr]