Increasing number of companies established in Russia

newsletter 03/08/2016

Despite of all difficulties for the Russian business today, the number of companies registered in the Unified state register of legal entities demonstrates the positive trend. As of 1.07.2016, the number of active companies in the country amounted to 4,8 mln. This indicator increased by 24,3 th (or 0,5%) for the year. So Russia has almost reached the number of 5 mln registered companies and is listed in the Top-10 companies in the world by this parameter. Nowadays 24,5 mln companies are registered in the USA; more than 9,1 mln in the Great Britain; 8,3 mln in Brazil; 7,7 mln in France; 4,1 mln in Japan; 3,7 mln in Italy and 3,3 mln in Germany.

Indicator of business subjects’ number helps to show the size of the economy, level of development of the business environment and entrepreneurial activity.

Totally for the past 6 years, more than 389 th newly established or reorganized legal entities have appeared in Russia. They are real subjects of economic activity, paying taxes to the budget, providing of jobs, manufacturing finished products and rendering service (see picture 1).

Number and dynamics of legal entities registered in RussiaPicture 1. Number and dynamics of legal entities registered in Russia

The most popular legal form among the Russian enterprises is limited liability company (LLC). 82,4% or 3,9 mln LLCs are registered in Russia as of 1.07.2016. The popularity of this form can be explained with the simplicity of registration and lower downside risk within the cost of investment contributed by the shareholders.

14% of the registered legal entities follow to the share of non-profit organizations, which are:

  • state and municipal institutions – 254 th;
  • legal entities registered according to the special regulation of the Ministry of justice of Russia – 217,5 th (political parties, public associations, religious organizations, departments of international organizations and non-profit organizations);
  • consumer cooperatives – 89,6 th;
  • other non-profit organizations – 106 th.

Non-public and Public joint-stock companies are only 2,4% of totally registered legal entities: 93,1 th and 22,6 th relatively.

Structure of enterprises registered in Russia according to their legal form, as of 1.07.2016Picture 2. Structure of enterprises registered in Russia according to their legal form, as of 1.07.2016

As for the location of registered companies, the statistical data on 1.07.2016 is as follows: the Central federal district accumulated 37,7% or 1,8 mln of totally registered legal entities. The second place is for Privolzhskiy federal district with 16,3% or 778,3 th legal entities. The Northwest federal district with 13% or 622,0 th legal entities goes the third.

After joining the RF (the Crimean federal district has become a part of the Southern federal district), 40,6 th companies of the Crimean federal district were re-registered or re-opened (30,6 th in the Republic of Crimea and 10 th in Sevastopol).

Number of enterprises registered in Russia according to federal districts, as of 1.07.2016Picture 3. Number of enterprises registered in Russia according to federal districts, as of 1.07.2016

Speaking about regions, the majority of legal entities are expectedly registered in Moscow – 1,1 mln; 369,8 th are registered in Saint-Petersburg and 236,9 th – in the Moscow region. The share of 35,4% of totally registered companies and institutions of the RF falls to three mentioned regions. The following seven subjects increased this share up to 54,1%. This indicates extremely unequal allocation of wealth due to the displacement of population and in part the implemented budget policy (migration of human and financial flows to some key regions with a large number of subsidized depressed areas).

The number of companies in Moscow has reduced by 4,8 th, and in Saint-Petersburg increased by 10,5 th by contrast. The Northern capital demonstrates maximum increase in the number of organizations by the country in general.

Table 1. Regions with the highest absolute number of registered legal entities

Region Number of registered legal entities as of 1.07.2016 Increase/decrease in the number of registered legal entities to 1.07.2015 Share in the total number of registered legal entities as of 1.07.2016, %
      Total %  
1 Moscow 1 082 135 -4 792 -0,4 22,7
2 Saint-Petersburg 369 835 10 459 2,9 7,8
3 Moscow region 236 926 -61 0,0 5,0
4 Sverdlovsk region 165 462 -3 324 -2,0 3,5
5 Krasnodar territory 143 480 2 188 1,5 3,0
6 Novosibirsk region 136 645 -2 998 -2,1 2,9
7 Republic of Tatarstan 124 477 5 968 5,0 2,6
8 Chelyabinsk region 111 538 2 405 2,2 2,3
9 Samara region 109 632 -2 898 -2,6 2,3
10 Nizhny Novgorod region 100 449 3 042 3,1 2,1
  Total for Top-10 2 580 579 9989 0,4 54,1

The table 2 contains regions leading by the relative increase in the number of registered organizations for the year. Excluding already mentioned the Republic of Crimea and Sevastopol, Vologda and Voronezh regions where the number of legal entities has increased by 6,6% and 5,7% relatively, got in on the ground-floor. The growth more than by 5% was demonstrated by the Republic of Udmurtia, Ivanovo region and the Republic of Tatarstan. In general, 46 subjects have the positive dynamics of new legal entities registration.

Table 2. Regions with the highest relative increase and decrease in number of registered legal entities.

Region Increase/decrease in the number of registered legal entities to, % Number of registered legal entities as of 1.07.2016 Number of registered legal entities as of 1.07.2015
1 Republic of Crimea 19,1 30 627 25 725
2 Sevastopol 18,5 9 970 8 414
3 Vologda region 6,6 44 905 42 115
4 Voronezh region 5,7 58 084 54 935
5 Republic of Udmurtia 5,1 41 615 39 613
6 Republic of Tatarstan 5,0 124 477 118 509
7 Ivanovo region 5,0 35 675 33 989
8 Chechen Republic 4,4 10 169 9 743
9 Ulyanovsk region 3,5 28 803 27 819
10 Perm territory 3,2 80 903 78 426
... ... ... ... ...
76 Irkutsk region -2,9 60 821 62 633
77 Kirov region -4,2 36 355 37 938
78 Volgograd region -4,3 51 240 53 517
79 Magadan region -5,1 4 635 4 885
80 Republic of Ingushetia -5,6 4 980 5 275
81 Chukotka autonomous district -5,9 946 1 005
82 Republic of Altai -6,7 5 930 6 353
83 Kursk region -6,7 22 128 23 710
84 Republic of North Ossetia -7,3 10 000 10 790
85 Republic of Kalmykia -9,1 4 797 5 277

The opposite situation of reduction in the number of registered organizations is observed in 39 subjects of the federation. The anti-rating is headed by the Republic of Kalmykia and its decrease by 9,1% of companies. The number of legal entities in the Republic of North Ossetia decreased by 7,3% and by 6,0% in Kursk region and the Republic of Altai.

The fact of great number of registered companies is not indicates the quality changes of processes in the country: the stable economic growth, wide offer of jobs or high social standards of life. Sometimes “fly-by-night” companies established as real companies for shady financial arrangements. So the counterparties check in the current situation is not a luxury but a necessity.

Not only clear rules of game on the part of the government and fair demand on goods (services), but also the sources of long-term money in the form of investment or installation bank credits are necessary for the business successful development. Now it is difficult to speak about a favorable situation by well- known economic grounds. However there is no denying that for the past years the market system was created in Russia, and many companies, institutions and firms cooperate according to it; moreover completely new sectors have appeared. Enterprising spirit artificially limited in the Soviet years, has not disappeared and gains momentum again.