Frequently Asked Questions
- What does the Starting a Business indicator set measure?
- What type of company is measured?
- What is the paid-in minimum capital requirement?
- Does the Starting a Business indicator set record the de jure (the law) or de facto (the practice) situation?
- How does the Starting a Business indicator set count procedures?
- How does the Starting a Business indicator set measure time?
- How are electronic (e.g. online) procedures recorded?
- Does the Starting a Business indicator set include steps such as tax registration or business licenses?
What does the Starting a Business indicator set measure?
The Starting a Business indicator set records all procedures, time, cost and paid-in minimum capital that are officially required for an entrepreneur to start up and formally operate an industrial or commercial business. These include obtaining all necessary licenses and permits and completing any required notifications, verifications or inscriptions for the company and employees with relevant authorities.
In Doing Business 2018, the team has expanded the area of research and collected information about infrastructure of the business registry, its transparency and relevant legal framework. This information is provided for information purposes only, and does not affect the performance of an economy on the ease of starting a business. Transparency of information at the business registry is discussed in the case study.
What type of company is measured?
Starting a Business considers two types of local limited liability companies (or their legal equivalents) that are identical in all aspects, except that one company is owned by five married women and the other by five married men. If there is more than one type of limited liability company in the economy and the assumptions of the case study satisfy the requirements for these forms of companies, the limited liability form most popular among domestic firms is chosen. Information on the most popular form is obtained from incorporation lawyers or the statistical office.
What is the paid-in minimum capital requirement?
The paid-in minimum capital requirement reflects the amount that the entrepreneur needs to deposit in a bank or with a third-party (for instance, notary) before registration and up to 3 months following incorporation. It is recorded as a percentage of the economy’s income per capita. Any legal limitation of the company’s operations or decisions related to the payment of the minimum capital requirement is recorded. The amount is typically specified in the commercial code or the company law. In case the legal minimum capital is provided per share, it is multiplied by the number of shareholders owning the company. Many economies require minimum capital but allow businesses to pay-in only a part of it before registration, with the rest to be paid-in after the first year of operation.
Does the Starting a Business indicator set record the de jure (the law) or de facto (the practice) situation?
Both. The Starting a Business indicator set records every procedure required by law. Procedures that are commonly done in practice are also recorded. In other words, when a procedure is not required by law, however the majority of entrepreneurs do it in practice – and vice versa – then this procedure is recorded by Starting a Business.
How does the Starting a Business indicator set count procedures?
A procedure is defined as any interaction of the company founders or representatives with external parties (for example, government agencies, lawyers, auditors or notaries) or spouses (if legally required). Procedures that must be completed in the same building but in different offices or at different counters are counted as separate procedures. If founders have to visit the same office several times for different sequential procedures, each is counted separately. The founders are assumed to complete all procedures themselves, without middlemen, facilitators, accountants or lawyers, unless the use of such a third party is mandated by law or solicited by the majority of entrepreneurs. If involvement of third parties is required, procedures conducted by external professionals on behalf of the company are counted as separate procedures. Each electronic procedure is counted as a separate procedure. Approvals from spouses to own a business or leave the home are considered procedures if required by law or if by failing to obtain such approval the spouse will suffer consequences under the law, such as the loss of right to financial maintenance., When only one gender is required to have permissions or additional documents for company incorporation, obtaining each such permission or document is considered additional procedure. In that case, only procedures required for one spouse but not the other are counted.
Only procedures required of for all businesses are recorded. Industry-speciﬁc procedures and procedures not related to business incorporation (for example, connecting to electricity, water, gas and waste disposal services) are excluded.
How does the Starting a Business indicator set measure time?
Time is recorded in calendar days. The measure captures the median duration that incorporation lawyers indicate is necessary in practice to complete a procedure with minimum follow-up with government agencies and no extra payments. It is assumed that the minimum time required for each procedure is one day, unless the procedure is done fully online – in that case, the minimum time is assumed to be half-day. Although procedures may take place simultaneously, they cannot start on the same day (that is, simultaneous procedures start on consecutive days). A procedure is considered completed once the company has received the final document, such as the company registration certificate or tax number. If a procedure can be accelerated for an additional cost, the fastest procedure is chosen if that option is more beneﬁcial to the economy’s distance to the frontier score.
How are electronic (e.g., online) procedures recorded?
A procedure is recorded as being done online if several conditions are met, including: (1) the online platform for the procedure exists and functions without major issues, (2) the majority of entrepreneurs use the online system, (3) no in-person follow-up is required after the online interaction is completed. Each electronic procedure is counted separately. If two procedures can be completed through the same website but require separate filings, they are counted as separate procedures. The shortest possible duration for an online procedure is half a day.
Does the Starting a Business indicator set include steps such as tax registration or obtaining a business licenses?
Both pre- and post-incorporation procedures that are officially required or commonly done in practice for an entrepreneur to formally operate a business are recorded. Any interaction with an external party within three a few months of registration will be considered a procedure, except value added tax or goods and services tax registration which will be counted whenever the assumed company turnover exceeds the determined threshold.