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In Lithuania, if you are poor you can’t liquidate (close) your sole proprietorship, and they won’t let you get unemployment
benefits, either.

It works, or rather doesn’t, like this. Your business is not doing well and so you want to close it. So you go file the
appropriate papers and it is in liquidation status.

Now, that in principle is not a bad thing — for a large firm. For a measly one-person operation, it’s overkill to the max. In
order to get the thing liquidated, one has to show that one has paid all the taxes and all of one’s creditors, and has no employees and so forth. A lot of so
forth. Eventually one gets a piece of paper saying the thing is liquidated.

But –

the social security people (called SODRA) insist
that a sole proprietor is … operating a business, even if it’s being
liquidated, and therefore he or she has to cough up social insurance payments
(kind of like social security) plus also health insurance. In other words, it’s
not hooked onto income, not even gross income, but onto the concept of

So every month, these people are being hit for social security payments, even though they are not making a cent. Even though
they are bankrupt (and of course NO PERSONAL BANKRUPTCY either).

This includes those who have upped and left the country. Many have no idea that one can’t get off the hook for social insurance
payments once your company is being liquidated. This seemed to startle a member of the Parliament
who is on the appropriate Social Insurance/Security committee. Arturas Melianas was described as having stated, that if the company has no income,
there can be no question of having to pay social insurance. Seems the fellow doesn’t quite know what the reality is.

A Lithuanian citizen wrote me a few days ago. This poor soul  submitted papers for his company’s liquidation – and now he
finds he is being assessed hundreds of litas a month for social and health insurance. But this is not his greatest worry.

You see, he can’t liquidate the company if there is any debt, which there is – to the social insurance. Which keeps growing.

And until it is liquidated, he cannot … get unemployment benefits. They won’t let him.

A writeup of the general problem, in Lithuanian, is here.

Now, just to be fair and more or less complete: there are ways to avert the imposition of social insurance upon your sole
proprietorship. It is arcane, convoluted, and in-human, but it can be done. But it has to be done before filing for liquidation. Even afterward, things can be
done – for instance, your sole proprietorship can be converted to a corporation.

But normal people can’t do this on their own. And why should they have to?

In the USA, assuming there are no specific problems with the IRS, if one is the sole shareholder of a corporation, one simply walks away. If the state fees are not paid on a yearly basis, the thing is ‘liquidated’ for you. It no longer exists.

In regard to a sole proprietorship, things are even easier. It is not a company per se, so who cares. One has one, or twelve, and again, who cares. The creditors can sue you if they need to. And if one has no income, one pays no social insurance taxes, either.

Lithuania, and other Eastern countries, likes to do things the old Soviet way: control ab initio and not post hoc. That’s the key
to the solution.

But they don’t care.


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