Unlimited liability company (d.n.o.)

In Slovenia, an unlimited liability company must be established by at least two local or foreign individuals or legal entities who have decided to conduct a business activity together.
All company members are liable for the company's obligations.

The establishment of the limited liability company does not require minimum share capital, so the company may be registered without any assets being paid in. Despite this fact, company members contribute equal amounts, unless agreed otherwise.
The contribution may be monetary, in kind, rights, or services performed by each individual company member. The value of an in-kind contribution has a monetary value.

The advantages of an unlimited liability company are:

• no fixed minimum share capital;
• greater creditworthiness than a sole trader;
• company members may pay in share capital in services.

The disadvantages of an unlimited liability company are:

• all assets of company members are liable to meet company obligations;
• company members are closely connected to the company and also greatly depend on each other;
• the form of legal organisation is riskier than that of corporate entities (e.g. LLC).

In addition to the description of the activity and company's organisational form (d.n.o.), the registered name must contain the surname of at least one company member and state that there are other company members.

All company members are entitled and obliged to run the business. If management of the company is transferred to one or several company members by a contract of members, other company members may not run the company's business. Each company member is entitled to represent the company. The contract of members may stipulate that the company is represented by all or some company members jointly.

At the end of each business year and based on annual financial reports, profits and losses are established, and each company member's share in the profits or losses is assessed.
Each company member is entitled to a share in profit, i.e. of 5% of their capital share. If the profit is not enough to cover the payment of dividends, dividends are reduced appropriately. The remaining profit is distributed equally between company members.

Losses are covered by the same principle. If the company makes a loss, the calculated share of each company member and all cash withdrawn by each member during the business year is offset against each member's capital share.

The amount of the capital share changes each business year according to the level of profits or losses.

In Slovenia, An unlimited liability company (d.n.o.) is a taxable entity that is obliged to pay corporate income tax which is taxed at a rate of 20%. There are also specific rules on how profit payments to company members are taxed.

In contrast to corporate entities in which the tax obligation for company members arises at the moment of actual payment of profit, the obligation to pay tax for members of an unlimited liability company arises when the proportional part of profit is apportioned to each member, regardless of whether the company member has actually been paid their share of profit.

The increase in capital share is taxed; therefore, the tax position is not affected by any additional company member's disposal of this profit.

The contract of members outlines the mutual rights and obligations of members, and the following should be emphasised:

• The company must reimburse company members for expenses relating to the business of the company. Company members may also claim indemnification against damages caused directly due to business management or hazards inseparably connected with business management.
• Company members are obliged to promptly hand over all benefits received from third parties in relation to business management.
• Each company member has a right to a share in the company's profits.
• If the company operates at a loss, each company member has to bear the consequences relative to their share of capital.
• Each company member is entitled to withdraw cash from the company's cash register, up to the value of 5% of their capital share annually.
• Each company member has the right to manage the company's business, except when company members agree otherwise in the contract of members.
• Each company member may represent the company if they are not explicitly excluded from so doing by the contract of members; it may be decided that the company is to be represented by all members or some company members jointly.

An unlimited liability company may be established at a notary, to whom the following information should be provided:

• company name;
• head office and business address;
• founders' identification data (personal name, personal identification number, permanent address for individuals, company, identification number and business address of legal entities, tax number for foreign natural and legal entities);
• identification data and representation type (partner, manager or procurator);
• type of representation (independently or jointly);
• limitations on representation authorisations;
• main activity code.

Based on this data, the notary prepares all the documents necessary for entry in the Companies Register, i.e.:

• contract of members in the form of a notarial record or personal document in which all the partners’ signatures are certified;
• if the company is represented by managers and partners, a decision on the appointment of managers is required.

Documents can be prepared by partners themselves, while signatures must be certified by a notary in each case.
The founders must be present at the compiling and signing of all documents (individuals or authorised representatives of the business). Each founder may be represented by an authorised representative. In the case of the establishment of a company by contract in the form of a notarial record, the authorisation for representation should be in the same form, i.e. in the form of a notarial record.
The decision made by the register court regarding the registration of the company in the Companies Register, the Agency of the Republic of Slovenia for Public Legal Records and Related Services (AJPES) determines the main activity code and company identification number.