Low-Capital SIA (from EUR 1): Pros, Cons, Limitations

One euro. That's the legal minimum you can put into a Latvian SIA and still receive a fully registered limited liability company. When Latvia introduced micro-capital SIAs, the intention was clear: lower the barrier for first-time entrepreneurs who couldn't afford the standard EUR 2,800 share capital. The reality, as of 2026, is more nuanced than the marketing suggests.

Micro-capital SIAs work well for specific situations. They create unexpected friction in others. Here's what the law actually says — and what it means for your business in practice.

How Micro-Capital SIAs Work

A micro-capital SIA follows the same registration process as a standard SIA, with one key difference: the share capital can be set between EUR 1 and EUR 2,799.

The trade-off is a mandatory capital-building mechanism. Until the share capital reaches EUR 2,800, the company must retain at least 25% of its annual net profit. You cannot distribute this portion as dividends, bonuses, or any other form of payout to shareholders.

In practical terms: if your SIA earns EUR 20,000 in net profit, at least EUR 5,000 must stay in the company. The remaining EUR 15,000 can be distributed — but only after the 25% retention is applied. This continues every year until accumulated retained profits push the capital to EUR 2,800.

For a company starting with EUR 1, reaching the EUR 2,800 threshold through profit retention alone takes time. A SIA earning EUR 10,000 annually in net profit would retain EUR 2,500 per year, reaching the threshold after about two years. A lower-margin business earning EUR 4,000 would take roughly three years.

There's a faster path: shareholders can make additional capital contributions at any time to reach EUR 2,800 immediately. This requires a shareholder decision and an amendment to the articles of association — straightforward but involving some paperwork and a small state fee.

When Micro-Capital Makes Sense

Testing a business concept. If you're not sure the business will work, committing EUR 2,800 upfront feels risky. A EUR 100 or EUR 500 SIA lets you get the legal entity, open bank accounts (though some banks look less favorably on very low-capital companies), and start operating. If the concept fails, you've risked less.

Capital-light service businesses. A consulting firm, a marketing agency, or a software development shop doesn't need significant starting capital. The EUR 2,800 sits in a bank account doing nothing. If your business model doesn't require inventory, equipment, or other upfront assets, micro-capital keeps your cash free.

Founders under 25. Younger entrepreneurs, in our experience, benefit most from the micro-capital option. They're typically starting with less savings and more flexibility on dividend timing.

When Micro-Capital Causes Problems

You plan to pay yourself through dividends. The 25% retention rule means you can't access all your profits. For founders who rely on dividend income (common in SIA structures to optimize between salary and dividends), the restriction creates cash flow headaches that a EUR 2,800 initial investment would have prevented.

You need bank financing. Banks evaluate SIA creditworthiness partly based on equity. A EUR 1 company has, on paper, EUR 1 in equity. Even if your revenue is strong, the optics matter. We've seen loan applications delayed or rejected because the applicant was a micro-capital SIA. Some banks charge higher fees or require additional guarantees.

You work with government tenders or large corporations. Some tender requirements include minimum capital thresholds. Large companies running due diligence on suppliers sometimes flag micro-capital SIAs as higher risk — not because of the law, but because of perception.

Multiple shareholders with dividend expectations. When two or three founders each expect dividend income, the 25% retention becomes a source of tension. Everyone agrees to the restriction at registration. Nobody enjoys it in year two when there's EUR 30,000 in profit and EUR 7,500 must stay locked in the company.

The Numbers: Micro vs. Standard

| Factor | Micro-Capital (EUR 1) | Standard (EUR 2,800) | |---|---|---| | Registration state fee | EUR 150–250 | EUR 150–250 | | Capital deposit | EUR 1 | EUR 2,800 | | Total initial outlay | ~EUR 600–1,350 | ~EUR 3,400–4,150 | | Profit distribution | Restricted (25% retention) | Unrestricted | | Bank perception | Lower | Higher | | Time to remove restrictions | 1–3+ years (or voluntary top-up) | Immediate |

The savings are real: roughly EUR 2,800 upfront. But that EUR 2,800 isn't gone — it sits in your company's bank account as an asset. You're not paying it to the government. You're capitalizing your own business. In our experience, founders who choose micro-capital to save EUR 2,800 often spend more than that in the first year on workarounds for the restrictions.

The choice is yours, but go in with open eyes. Micro-capital SIAs are a legitimate tool — not a shortcut.

Weighing Your Options?

The micro-capital decision affects your cash flow, banking relationships, and dividend strategy for years. Our team at Corvus Accounting & Tax can model both scenarios with your actual numbers and help you choose the structure that fits your business plan.

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