In today’s dynamic business environment, it is essential to find efficient ways to simplify a company’s structure and optimize operating costs. A company merger is a practical alternative to traditional liquidation, bringing entrepreneurs several advantages – from administrative simplification to improved tax efficiency.
What does the term company merger mean?
A company merger is a legal process in which one or more companies join together with the aim of creating a stronger and more efficient business entity. This process can take place in one of two forms:
- Merger – An existing company takes over the assets of the dissolved companies, which are then terminated.
- Consolidation – A new company is formed that acquires the assets of all participating companies.
A merger can be especially beneficial for businesses that want to manage their assets more efficiently and optimize their costs. It is often a faster and more flexible way to reorganize the business structure than going through the liquidation process.
Why choose a merger instead of liquidation?
While the liquidation of a company is often time-consuming and can take months or even years, a merger is administratively simpler and the entire process can be completed in a much shorter time. Liquidation involves many steps, such as settling liabilities, selling assets, and distributing funds among shareholders, which can prolong the business closure. In contrast, a merger is more efficient and allows for a quick integration into a new business model.
Avoiding the Minimum Tax
Since 2024, Slovakia has reintroduced a statutory minimum tax for legal entities. This tax must be paid even if the company reports a tax loss or if its tax liability is lower than the set amount of the minimum tax. For entrepreneurs who own multiple companies – for example, one actively operating and others with limited or no activity – merging them into a single entity offers an effective solution. By merging several entities into one active company, it is possible not only to reduce administrative burdens but also to avoid unnecessary payment of the minimum tax for “dormant” or duplicate firms.
This step is also suitable in cases where companies operate in the same or related sector and could function effectively as a single business unit.
Fewer separate entities mean less administration, simplified management, and reduced operating costs. Many businesses use this opportunity to unify their operations, which helps them become more flexible and efficient in the face of competition.
Why is cooperation with an auditor essential during a merger?
A merger is a complex process that includes legal steps, administrative tasks, accounting operations, and, last but not least, the auditor’s report, which forms an essential part of the application for registration of the merger in the Commercial Register.
Without this expert oversight, the entire process can become more complicated, less transparent, and more prone to errors. However, cooperation with a qualified auditor provides more than just meeting a legal obligation – it also helps you with accounting and tax matters, guides you in preparing the documentation, and ensures that the entire merger process complies with current legislation.
If you are considering a merger or need advice on its accounting, legal, or tax framework, consult professionals. A properly set-up process can save you time, costs, and unnecessary complications.
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