An Individual Company (IĮ) in Lithuania is a private legal entity owned by 1 natural person. Lithuanian legislation uses the English term individual enterprise. Its defining legal feature is unlimited liability, which means the owner’s personal property can be exposed when the enterprise cannot meet its obligations.
An IĮ requires no minimum authorised capital and can employ other people. Its one-owner structure makes it relevant to solo businesses, but liability, taxes and future ownership plans deserve careful attention before registration.
Founders still choosing a legal form can compare the main types of companies in Lithuania before deciding whether IĮ, MB or UAB fits the planned business.
What is an Individual Company (IĮ) in Lithuania?
An Individual Company, known in Lithuanian as individuali įmonė and abbreviated IĮ, is a private legal entity with unlimited liability. It is established by 1 legally capable natural person and becomes legally established once registered in Lithuania’s Register of Legal Entities.
Lithuania’s Law on Individual Enterprises states that the enterprise must have its head office in Lithuania. The law also requires a single natural-person founder.
The owner may manage the enterprise personally. If another person is appointed as manager, that arrangement is recorded in the enterprise’s regulations.
An IĮ has its own legal identity, assets and obligations. Unlimited liability still creates a direct financial connection between the business’s debts and the owner.
Is an IĮ the same as individual activity?
An IĮ and individual activity are separate ways to conduct business in Lithuania. An IĮ is a registered legal entity. Individual activity is carried on by the individual personally under the applicable registration and tax rules, without creating an IĮ legal entity.
This distinction affects taxation, accounting, registration and liability.
Someone working alone therefore has more than one route. The wider process of starting a business in Lithuania includes both the choice of legal form and the registrations that follow.
For a freelancer or consultant, individual activity may be sufficient in some circumstances. An IĮ becomes more relevant when the person wants to operate through a registered legal entity while retaining sole ownership.
The liability difference deserves particular attention because an IĮ owner remains personally exposed to unpaid enterprise obligations.
Who is an IĮ suitable for?
An IĮ can suit a person who expects to remain the sole owner, wants a Lithuanian legal entity and accepts personal responsibility for business obligations. It can work for consultants, tradespeople and other small owner-managed businesses that do not need outside shareholders.
Lithuania’s Innovation Agency confirms that there is no minimum authorised-capital requirement and that the owner can work in the enterprise without an employment contract.
Other people can also be employed by the company.
IĮ for freelancers and consultants
For freelancers, revenue alone does not determine whether IĮ is the right structure.
A consultant earning €60,000 a year with few business costs may reach a different conclusion from a retailer with the same revenue but more contractual risk, stock and employees.
The useful questions are:
- How much personal liability does the activity create?
- Will the business remain under 1 owner?
- How will the owner withdraw money?
- Will employees be hired?
- Are foreign clients involved?
- Is outside investment likely later?
Those factors make the comparison more practical than choosing solely by a headline tax rate.
IĮ vs MB vs UAB: which fits?
IĮ, MB and UAB can all be used for small businesses in Lithuania, but their ownership and liability rules are different. IĮ keeps ownership with 1 natural person and has unlimited liability. MB and UAB provide limited liability and allow broader ownership structures.
| Feature | IĮ | MB | UAB |
|---|---|---|---|
| Owners or members | 1 natural person | 1 to 10 natural persons | 1 or more natural or legal persons |
| Liability | Unlimited | Limited | Limited |
| Minimum capital | None | Members set contributions | €1,000 |
| Additional owners | No | Yes, within member limit | Yes |
| Corporate owners | No | No | Yes |
| Outside investment | Restricted by structure | Possible within MB rules | Better suited to share investment |
| Owner-managed business | Yes | Yes | Yes |
The current legal-entity comparison published by Innovation Agency Lithuania confirms the main differences in ownership, capital and liability.
IĮ vs MB
An MB can have between 1 and 10 natural-person members and provides limited liability. An IĮ has only 1 owner and unlimited liability.
Both structures can begin without the €1,000 authorised capital required for a UAB.
The ability to add members makes an MB in Lithuania relevant for a founder who is alone today but expects genuine co-ownership later.
IĮ vs UAB
A UAB provides limited liability and allows both individuals and legal entities to own shares. It requires at least €1,000 in authorised capital.
An IĮ avoids that capital requirement but places greater personal financial exposure on the owner.
The share-based structure of a UAB in Lithuania also makes it better suited to businesses planning to add investors or transfer ownership through shares.
How do you register an IĮ?
An IĮ is established by preparing its regulations, securing a Lithuanian registered office, appointing a manager where necessary and registering the enterprise with the Centre of Registers. The enterprise legally exists from the date it is entered in the Register of Legal Entities.
The Centre of Registers currently lists the enterprise regulations and forms JAR-1, JAR-S, JAR-T and JAR-VO-V among the registration documents.
A typical setup follows these steps:
- Choose the IĮ name.
- Arrange the registered office.
- Prepare the enterprise regulations.
- Appoint a manager if required.
- Prepare the registration forms.
- Complete the applicable verification process.
- Submit the IĮ for registration.
- Complete tax and social-insurance setup.
The Centre of Registers currently publishes a €21.12 registration fee for an individual enterprise.
Founders who want legal support through the process can use Lawhill’s Individual Company formation service. The service includes document preparation, registration support, registered-address assistance and submission to the Centre of Registers.
Does an IĮ need a Lithuanian address?
Every IĮ must have its registered office in Lithuania. The address forms part of the company’s official registration and is used for legal and administrative correspondence.
Where the founder does not own suitable premises, consent from the premises owner may be required.
This can matter more for international founders who are establishing the company remotely and do not maintain their own Lithuanian office.
After registration, banking creates a separate compliance process. Opening a business bank account can involve identity checks, beneficial-owner information and questions about the planned business activity.
How is an IĮ taxed in 2026?
An IĮ can be subject to 0%, 7% or 17% corporate income tax in 2026, depending on whether the enterprise satisfies the statutory conditions for the lower rates. Owner withdrawals create a separate personal-tax layer and should be assessed independently.Supporting Image:
Standard corporate income tax
Lithuania’s standard corporate income tax rate is 17% from the 2026 tax period.
The current rates are confirmed by the State Tax Inspectorate.
7% rate for small entities
A qualifying small entity can use a 7% corporate income tax rate where its income for the tax period does not exceed €300,000 and the other requirements of the Corporate Income Tax Law are satisfied.
The €300,000 threshold is only one condition. Ownership and relationships with other entities can affect eligibility.
0% for qualifying new entities
A qualifying newly established entity can apply a 0% corporate income tax rate during its first 2 tax periods.
VMI states that the conditions include income of no more than €300,000 for the relevant tax period, qualifying natural-person ownership and compliance with the rules covering liquidation, reorganisation and changes in participants.
The 0% rate therefore requires a facts-based eligibility check.
How does an IĮ owner get paid?
Money taken from an IĮ by its owner can fall into different tax categories. VMI distinguishes amounts treated as employment-related income from income distributed from after-tax profit, so the way money is withdrawn affects personal income tax and social-insurance treatment.
The VMI rules for IĮ owners identify 2 common classifications:
- income connected with employment relations, using income code 02;
- income distributed from profit, using income code 27.
For a permanent Lithuanian resident, IĮ-owner income is generally treated as B-class income, meaning the owner declares and pays the applicable personal income tax after the tax year.
Income code 02 is tied closely to the amounts used for the owner’s social-insurance contribution base.
Income from distributed profit under code 27 is generally subject to the 15% rate applicable to distributed profit.
Individual circumstances, other annual income and tax residence can affect the final calculation.
What Sodra contributions apply in 2026?
IĮ owners are covered by Lithuanian state social insurance and compulsory health insurance. In 2026, the contribution base changes during the year: 50% of personal withdrawals applies through June 30, while 90% applies from July 1.
For 1 January to 30 June 2026, Sodra calculates VSD and PSD on 50% of the amount withdrawn for personal needs and declared under income code 02.
From 1 July 2026, that base rises to 90%.
According to Sodra’s 2026 rates, the standard rates for IĮ owners are:
- VSD: 13.83%
- PSD: 6.98%
- VSD with additional 3% pension accumulation: 16.83%
The 2026 minimum monthly salary is €1,153. Sodra uses it when calculating the standard monthly PSD amount in applicable cases.
The mid-year contribution-base change is one reason older IĮ tax examples can produce misleading 2026 estimates.
What does unlimited liability mean?
Unlimited liability means an IĮ owner’s personal property can be used to satisfy enterprise obligations when the IĮ cannot meet them from its own assets. This is the biggest structural risk to assess before choosing IĮ over a limited-liability entity.
Suppose an IĮ owes creditors €20,000 and has €8,000 in business assets available to meet those obligations.
The fact that the enterprise is a legal entity does not automatically confine the remaining exposure to that €8,000. The owner’s personal property can become relevant because IĮ has unlimited liability.
The exact enforcement position depends on the debt, available assets and other circumstances.
Businesses that borrow significant amounts, enter larger commercial contracts or operate in sectors with higher financial exposure should weigh this rule carefully.
Can an IĮ hire employees?
Yes. An IĮ may hire employees even though it can have only 1 owner. Employment and ownership are separate legal relationships, so a person can work for the enterprise without receiving an ownership interest.
This distinction matters once a solo business starts growing.
The owner does not have to turn an employee, specialist or other contributor into a business partner merely because that person works for the company.
Hiring employees will bring employment, payroll and Sodra obligations into the business.
Can an IĮ have a partner?
An IĮ can have only 1 natural-person owner. Someone may work for the business as an employee or under another valid arrangement, but genuine co-ownership requires a legal form that allows additional owners.
A founder expecting another person to receive an ownership interest should account for that before registering.
An MB allows up to 10 natural-person members. A UAB allows multiple shareholders and can also have legal entities as shareholders.
That future ownership question can matter as much as the initial registration cost.
Can a foreigner establish an IĮ?
Lithuanian law defines the IĮ founder as a legally capable natural person, while separate immigration, identification, tax-residence and registration requirements can apply to foreign founders. A foreign entrepreneur should therefore check both company-law and personal-status requirements before formation.
For international founders, ownership and residence are separate issues.
Being allowed to establish or own a business does not itself grant a person permission to reside or work in Lithuania.
Electronic registration can also depend on whether the founder has access to an accepted qualified electronic signature and meets the conditions for electronic submission.
Where those conditions are unavailable, documents may need to follow a notarial or other permitted registration route.
What if your clients are abroad?
An IĮ can provide services to clients outside Lithuania, including customers elsewhere in the EU. VAT treatment depends on the transaction, the customer’s status and the applicable place-of-supply rules, so a foreign client does not by itself determine whether VAT registration is required.
This is particularly relevant for software developers, consultants and other service businesses billing companies elsewhere in Europe.
Under current VMI rules, the general domestic VAT registration threshold is €45,000 for taxable supplies treated as taking place in Lithuania.
The threshold is assessed using the current or preceding calendar year under the rules introduced from May 1, 2025.
Certain cross-border transactions create VAT registration obligations independently of whether the €45,000 domestic threshold has been exceeded. VMI specifically identifies services supplied in another EU member state under the relevant place-of-supply rules as one such case.
An IĮ dealing with EU customers may therefore need VAT registration in Lithuania even when Lithuanian VAT is not added to a particular B2B invoice.
Is IĮ accounting simple?
IĮ accounting depends on the enterprise’s activity, tax status and operational complexity. Some IĮ businesses may use simpler accounting arrangements, but the legal form does not guarantee light bookkeeping, especially once VAT, employees or more complex transactions are involved.
Innovation Agency Lithuania specifically cautions that IĮ accounting is, in many cases, no simpler than UAB accounting.
The workload can increase when the business:
- registers for VAT;
- employs staff;
- owns significant business assets;
- handles cross-border transactions;
- makes different types of owner payments.
Accounting requirements should therefore be considered before choosing IĮ primarily for perceived administrative simplicity.
What happens when an IĮ grows?
An IĮ can later be transformed into another legal form, including a UAB, subject to the legal requirements for the transformation. This gives a solo owner a route to change structure when the business develops beyond the limits of a one-owner enterprise.
Lithuania’s Law on Individual Enterprises specifically provides for transformation into a private limited-liability company.
A structural change may become relevant when the business:
- needs additional owners;
- wants outside investment;
- takes on greater contractual risk;
- needs a share-based ownership structure.
The transformation rules include requirements around the enterprise’s assets, obligations and the capital of the resulting company.
Planning for future ownership can therefore reduce the chance of choosing a structure that needs to be changed soon after formation.
Should you buy a company instead?
A founder choosing IĮ is creating a new one-owner legal entity. Buying an existing company is a separate route, usually aimed at someone who wants an already registered company and is comfortable using its existing legal form.
People comparing registration with acquisition may encounter businesses for sale in Lithuania as another way to enter the market.
A ready-made company in Lithuania can reduce the incorporation work because the legal entity already exists.
The current ready-made-company service is centred on UAB structures with €1,000 share capital. It should therefore be treated as an alternative to forming an IĮ rather than as a ready-made IĮ option.
Conclusion
Choosing an IĮ comes down to the way the business will actually operate. A solo owner may value the absence of minimum capital and direct control, while personal liability and the one-owner limit can carry more weight as contracts, revenue and business exposure grow.
Founders comparing IĮ with MB or UAB should assess the structure against their tax residence, expected withdrawals, cross-border activity and future ownership plans before filing the registration.
The broader company formation options in Lithuania can also help frame that decision.
Lawhill has more than 13 years of experience assisting local and international founders with Lithuanian company formation and corporate legal work. Contact Lawhill’s legal team to discuss which structure fits the planned business and how the registration can be handled.
FAQ
Is Individual Company the official English term?
Lithuania’s official English translation of the relevant law uses individual enterprise for individuali įmonė. “Individual Company” is also used in English-language business material. Both refer to the IĮ legal form in this context.
Can an IĮ have 2 owners?
No. An IĮ is established and owned by 1 natural person. If genuine co-ownership is planned, MB or UAB provides a structure that permits additional members or shareholders.
Does an IĮ require share capital?
No minimum authorised capital is required for an IĮ. For comparison, a UAB requires at least €1,000 in authorised capital under the current Lithuanian company rules.
Is the owner personally liable?
Yes. IĮ is an unlimited-liability legal entity. If the enterprise cannot meet its obligations from its own property, the owner’s personal property can be exposed.
Can an IĮ hire employees?
Yes. The enterprise may employ other people while remaining owned by 1 natural person. Hiring an employee does not give that person an ownership interest.
Can a foreigner open an IĮ?
Foreign founders can establish businesses in Lithuania, but company registration, immigration status, tax residence and electronic identification are separate matters. The founder’s nationality and residence situation should be checked before registration.
Can an IĮ become a UAB?
Yes. Lithuanian law provides a procedure for transforming an IĮ into a private limited-liability company where the applicable requirements are met.
Is IĮ good for freelancers?
It can fit a freelancer who wants a registered legal entity, intends to remain the sole owner and accepts unlimited liability. Individual activity, MB and UAB should also be compared because each route changes taxation, liability and future ownership options.
