International management professionals have a number of important decisions to make when setting up an enterprise in the European Union, and choosing what type of legal entity is right for your enterprise often requires a robust knowledge of European law and commerce.
If operating within one EU member state, businesses can be formed as limited liability companies, sole proprietorships, partnerships, or a variety of other nationally registered entities, depending on their particular needs and purposes. If operating across multiple EU member states, however, businesses can also choose to do business as one of the supranational legal entities recognized by the EU, such a European cooperative society (SCE), a European public limited liability corporation (Societas Europaea, or SE), or a European Economic Interest Grouping (EEIG).
While EEIGs are not suited to every type of business, they can offer a number of appealing benefits for those who are pursuing some sort of economic activity in partnership with individuals or businesses from other EU member states.
If you’re interested in a career in international management, here’s a quick overview of EEIGs to help you understand what they are, how they work, and the benefits (as well as the drawbacks) they offer to their members.
An EEIG Can Generate Profit for Members, But Not for Itself
To form an EEIG, there must be at least two members – whether natural persons or businesses – from two different European member countries, working together to facilitate, develop, or improve the economic activities of its members. Unlike some other entities, an EEIG requires no capital to form.
Although the purpose of an EEIG must be to further the economic activities of its members, it’s also worth nothing that an EEIG may not be intended to make profits for itself. Any profits from an EEIG must be divided among its members, where they will be taxed by whatever jurisdiction each member of the EEIG operates within. If a German individual or company became part of an EEIG, for example, that individual or company’s share of the EEIG profits would be taxed under German tax law.
Geneva Business School students develop the ability to analyze business structures during their MBA
EEIGs Can Offer a High Degree of Flexibility to their Members
One of the benefits of EEIGs is that they offer a high degree of flexibility. An EEIG, for example, can transfer its official address to another jurisdiction within the EU simply by moving its head office to another member state. In this case, the grouping is de-registered and then re-registered on the new register. Once this is complete, the newly re-registered grouping will be subject to the internal law of the head office’s new official country.
EEIGs can be great vehicles for establishing cross-border cooperation and taking advantage of the economic freedom offered by the EU, but there are also limitations that professionals in international management careers should be aware of so that they can make the right decisions when planning cross-border business activities.
An MBA in International Management Gives You the Expertise to Decide
One potential drawback of EEIGS is that all members share unlimited joint liability for debts. This is an important counterweight to the contractual freedom allowed by EEIGs, and the fact that they are not required to provide any minimum amount of capital, but could be a concern for some, depending on the nature of their enterprise.
Ultimately, the suitability of an EEIG to any given enterprise will depend on the requirements and purposes particular to that enterprise, and professionals will need to use the knowledge, expertise, and judgement they’ve developed during their MBA in International Management to make the right decision as to whether it’s the best choice.
GBS gives students the expertise they need to manage international companies
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