Small partnership (MB) accounting in 2026: simple and correct

Accounting for a small partnership is one of those areas where mistakes are costly – not only in money, but also in time. A small partnership (mažoji bendrija, MB) is a private legal entity with limited civil liability whose members may only be natural persons. This business form remains one of the most popular in Lithuania thanks to its flexible structure and simpler management requirements.

However, simpler management does not mean that MB bookkeeping is simple. In 2026 it is governed by several key laws – the Law on Financial Accounting of the Republic of Lithuania, the Law on Small Partnerships, the Law on Corporate Income Tax and others. As of 1 May 2022, the Law on Accounting was renamed the Law on Financial Accounting.

Every MB needs to understand three separate groups of obligations: organising the accounting, meeting tax obligations and filing the annual financial statements. This article is intended for MB members, managers and first-time entrepreneurs who want to understand which accounting requirements apply to an MB, which documents must be kept and how to avoid the most common mistakes. The information is relevant for 2026–2027, and the links point to the current versions of the legislation, including the accounting obligations of an MB under the Law on Small Partnerships.

Key takeaways

• An MB must keep financial accounts – this is a legal obligation, not a choice, and it applies from the day of registration.
• Three separate groups of obligations – organising the accounting, meeting tax obligations and filing the annual financial statements each have different deadlines and limits of liability.
• The MB's money and the members' money must be kept separate – mixing personal funds with the partnership's money is one of the most common and most costly mistakes.
• Documents must be recorded regularly – not just at year-end, but at least weekly, to avoid missed deadlines and lost invoices.
• The manager's responsibility does not disappear when accounting is handed over to an external provider – the duty to organise the accounting properly remains with the manager.

MB taxes and deadlines in 2026

Small partnership taxes, contributions and deadlines in 2026

Tax or obligation	2026 value	Form / document	Note	Source
Corporate income tax – standard rate	17%	PLN204	Return and payment are due by 15 June when the tax period coincides with the calendar year.	VMI
Corporate income tax – small entities	7%	PLN204	Income up to EUR 300,000, subject to the rules on related entities.	VMI
Corporate income tax for new small entities	0% for the first two tax periods	PLN204	For newly registered entities whose income for the tax period does not exceed EUR 300,000 (income of related entities is aggregated). Conditions: for three tax periods the activity is not suspended, the entity is not liquidated or reorganised, and shares are not transferred to new members.	VMI
State social insurance (VSD) and compulsory health insurance (PSD) contributions of an MB member	20.81%	SAV	Until 30 June the base is 50%, and from 1 July 90%, of the funds withdrawn for personal needs. Pension accumulation participants pay an additional 3% contribution. If the PSD base is below the minimum monthly wage (MMA) and the person is not covered by PSD on other grounds, the minimum PSD contribution of EUR 80.48 per month applies.	Sodra
Ceiling of the VSD and PSD contribution base	43 average wages (VDU) = EUR 99,422.45 per year	–	Annual base limit.	Sodra
Approval of the annual financial statements	Within 4 months of the end of the financial year	Financial statements and the members' decision	Article 23(3) of the Law on Small Partnerships; the set is approved by the meeting of members or, in a single-member MB, by the member's written decision (Article 15(3) of the Law on Small Partnerships).	–
Filing of the annual financial statements with the Centre of Registers	Within the same 4 months of the end of the financial year	Set of statements filed with the Register of Legal Entities (JAR)	The set must be both approved and filed within 4 months (Article 23(3) of the Law on Small Partnerships). When the financial year coincides with the calendar year – by 30 April.	e-Seimas
Personal income tax (GPM) on an MB member's income	Funds withdrawn for personal needs (profit paid in advance, Article 24 of the Law on Small Partnerships) – employment-related income, declared on GPM311 under income type code 02: 20% up to EUR 83,237.40, 25% up to EUR 138,729, 32% on the annual amount above that. Formally distributed profit (dividends) – 15%.	GPM311	A member cannot reclassify withdrawn funds as dividends at their own discretion. Profit is distributed by the meeting of members only after the set of annual financial statements has been approved (Article 26 of the Law on Small Partnerships); the member's share of profit is reduced by advances already paid, and any overpayment must be returned within 30 days. The rate thresholds apply to all of the member's annual income combined (salary from other employers, individual activity, rent, etc.), not only to MB payments, save for statutory exceptions. Income for 2026 is declared by 3 May 2027.	VMI
Mandatory VAT registration threshold	EUR 45,000	Registration application; FR0600 – VAT return	The threshold is assessed on the basis of the previous or the current calendar year, subject to exceptions.	VMI
Advance corporate income tax	Mandatory when the taxable income of the previous tax period exceeds EUR 300,000	FR0430, where applicable	Declared separately from the annual PLN204 return.	–
Retention of accounting documents	Accounting documents and accounting registers – 10 years; payroll calculation documents – 50 years; a longer period applies to sets of annual financial statements	–	There is no single retention period for all documents. Minimum periods are set by the index of document retention periods (Order No. V-100 of the Chief Archivist of Lithuania, 2011); check the current version in e-TAR.	–
Annual corporate income tax return	Normally by 15 June, when the tax period coincides with the calendar year	PLN204	The tax is paid by the same deadline.	–

What legal requirements apply to MB accounting in Lithuania?

Which laws and regulations must an MB know?

Small partnership accounting rests on several key pieces of legislation. Here are the main ones every MB manager should at least be aware of:

• Law on Financial Accounting of the Republic of Lithuania – the main accounting law, governing the organisation of accounting, documents, registers and the preparation of financial statements for all Lithuanian companies.
• Law on Small Partnerships of the Republic of Lithuania – sets out the procedure for establishing and managing an MB, the rights and duties of its members, and the preparation of the set of annual financial statements.
• Law on Reporting by Undertakings and Groups of Undertakings of the Republic of Lithuania – defines the rules for preparing and filing financial statements according to the company's category.
• Law on Corporate Income Tax of the Republic of Lithuania – governs the calculation and declaration of corporate income tax.
• Law on Value Added Tax of the Republic of Lithuania – applies to MBs registered for VAT.
• Law on Personal Income Tax of the Republic of Lithuania – applies to payments made to MB members.
• Law on State Social Insurance of the Republic of Lithuania – governs Sodra contributions.
• Law on Tax Administration of the Republic of Lithuania – lays down the rules for declaring, paying and administering taxes.

Secondary legislation also applies: rules on document retention, tax returns and the filing of financial statements.

Is an MB legally required to keep accounts?

The answer is unequivocal: yes. An MB must organise and keep financial accounts in accordance with the Law on Financial Accounting. This is not a choice but a legal obligation that applies from the date of registration.

In addition, the Law on Small Partnerships requires an MB to prepare a set of annual financial statements, have it approved by the meeting of members (in a single-member MB no meeting is convened – the member's written decision is equivalent to a meeting decision, Article 15(3) of the Law on Small Partnerships) and file it with the administrator of the Register of Legal Entities within the set deadlines. Once the set is approved, a decision is made on the distribution of profit.

MB bookkeeping is more than issuing invoices – it is the systematic recording of business transactions, the retention of documents and the preparation of statements. For more on who must keep accounts and what duties fall on company managers, read our article on accounting requirements in Lithuania.

Simplified or full accounting – which suits your partnership?

It is a common mistake to assume that an MB is automatically exempt from double-entry bookkeeping or financial statements simply because it is small. It is not. How accounting is organised depends on the MB's size and reporting category, the nature of its activity and the complexity of its transactions, its VAT status, whether it has employees, and the financial reporting rules in force.

In practice, small MBs can use simpler document and register management. However, this does not mean that transactions may go unrecorded or that mandatory statements may be skipped. A simplified way of organising accounting does not remove the duty to substantiate income, expenses, assets, liabilities and settlements with members.

What tax obligations does a small partnership have?

MB accounting is inseparable from tax obligations. The most common tax obligations of an MB are:

• Corporate income tax – declared and paid annually.
• Personal income tax (GPM) – on certain amounts paid to MB members or other individuals.
• Sodra and compulsory health insurance (PSD) contributions – depending on the status of members, managers and employees.
• VAT – if the MB is registered for VAT or becomes obliged to register.
• Immovable property tax – if the MB owns taxable property.
• Land tax and other activity-specific taxes.
• Declaration of payments and employee data.

Tax rates and bases may change every year. Always check the 2026 rates against the current version of the legislation in the Taxes and their rates section.

Who can keep an MB's accounts?

Can you keep MB accounts yourself, without an accountant?

MB accounts can be kept by the MB's manager, another responsible person appointed by the partnership, a hired accountant, a company providing accounting services or a self-employed accounting service provider. Important: responsibility for the proper organisation of accounting always lies with the MB's manager or another responsible person specified in legislation.

Outsourcing the accounting to an external provider does not remove the manager's duty to ensure it is properly organised. Keeping the accounts yourself can be reasonable when there are few transactions, the MB has no employees, there are no complex VAT transactions, a reliable accounting system is used and an independent review is carried out periodically.

When is it worth hiring a professional accountant for MB accounting?

MB accounting becomes complex when the partnership is registered for VAT, trades with other countries, makes payments to MB members, has employees under employment contracts, receives subsidies or EU funding, manages fixed assets, plans a distribution of profit or the withdrawal of members, or operates in construction, transport or e-commerce.

In such cases professional help not only reduces the risk of errors but also saves time. These tasks can be entrusted to professional small partnership accounting services, which ensure that the accounting is properly organised.

How do you choose the right accounting software for a small partnership?

Choose accounting software by its features, not by price alone. The main criteria are: invoicing, import of bank transactions, VAT accounting, payroll and member payment accounting, fixed asset accounting, preparation of data for tax returns, user permissions and change history, and data backups.

The market offers both free and paid solutions – cloud platforms with bank synchronisation and VAT features. Before choosing an external service provider, check its experience with MBs, the software it uses and whether it has liability insurance. Most importantly, the system must let you trace every transaction.

How to keep MB accounts: step by step

What steps are required from the first day of an MB's activity?

How do you keep MB accounts from the very start? Here is a detailed list of steps:

1. Approve the accounting policy (the procedure for recording and valuing business transactions) – a document setting out the accounting principles, valuation methods and the procedure for recognising income and expenses.
2. Appoint the person responsible for accounting – the manager, a member or an accountant.
3. Set the procedure for submitting documents – who approves invoices and who signs off payments.
4. Open a company bank account – separate from the members' personal accounts.
5. Choose accounting software or a service provider.
6. Create a chart of accounts – the structure used to group transactions.
7. Separate the MB's money from the members' personal money – mixing them is one of the most common and most costly mistakes.
8. Set the procedure for accounting for members' contributions and payments.
9. Assess whether VAT registration is needed under the current version of the Law on VAT.
10. Draw up a tax return calendar – which returns will have to be filed and by when.

Even if it is not yet trading, an MB must keep accounts from the date of registration. MB accounting normally starts with structure, not with the first invoice. The sooner these steps are taken, the fewer problems there will be later.

How do you properly record day-to-day accounting documents in an MB?

Every business transaction must be supported by an accounting document. You need to record: sales income and purchases, service costs, wages and amounts paid to MB members, bank and cash transactions, the acquisition and depreciation of fixed assets, loans and settlements with members, as well as VAT and exchange rate differences.

Practical tip: record documents at least once a week. When everything is left until the end of the year, errors multiply exponentially – invoices get lost and filing deadlines are missed.

How do you properly account for income and expenses in a small partnership?

Income is recorded according to recognition principles, not simply by the date the money is received. This is an important nuance of small partnership accounting that many beginners forget. Expenses must be related to the MB's activity, supported by proper documents, allocated to the correct period and kept separate from the members' personal expenses.

Booking personal purchases as MB expenses is one of the most common tax risks and can lead to additional taxes and penalties. Bank statements must be reconciled with the accounting records periodically – check that all receipts are recorded, that payments are posted to the correct accounts and that the bank balance matches the book balance.

How do you handle VAT accounting in a small partnership?

If the MB is registered for VAT, it has additional obligations. You can learn about the VAT return rules on the VMI (State Tax Inspectorate) website. The main steps are: issue VAT invoices correctly with the mandatory details, record output and input VAT separately, check the right to deduct VAT and file VAT returns by the set deadlines.

Where necessary, you must also submit i.SAF data, assess acquisitions of goods and services from other countries and separately assess reverse-charge cases. The VAT registration thresholds and rules for 2026 must be checked against the current version of the Law on VAT, because thresholds, exceptions and registration cases may change.

Which accounting documents are mandatory for a small partnership?

Full list of mandatory source documents for a small partnership

A small partnership's accounting documents form the basis of its bookkeeping. Here is what an MB's document file should normally contain:

• Sales invoices and VAT invoices.
• Purchase documents and contracts.
• Acceptance and transfer certificates for works or services.
• Bank statements and payment orders.
• Cash receipt and cash payment documents.
• Advance expense reports.
• Fixed asset acquisition and transfer documents.
• Stocktaking documents.
• Payroll documents (if there are employees).
• Decisions of MB members and decisions on the distribution of profit.
• Documents on loans and settlements with members.
• Copies of tax returns and accounting registers.

How do you correctly handle invoices and contracts in MB accounting?

An invoice must contain the details required by legislation. Documents of a VAT payer are subject to additional VAT invoice requirements. Before accepting a supplier's invoice, check the supplier's details (name, company code, VAT number), the date, the number and the description of the service or goods, the amounts and VAT, and the link between the purchase and the MB's activity.

Written contracts are especially important when the MB rents property, borrows from a member, pays advances, buys fixed assets or enters into transactions with related parties. Contracts help substantiate the economic substance of transactions and reduce tax risks. MB accounting is based on source documents – the more accurate they are, the fewer problems there are at year-end.

How long must MB accounting documents be kept by law?

A small partnership's accounting documents must be kept for the period set by legislation. The specific minimum periods are set by the index of document retention periods, approved by the Chief Archivist of Lithuania under the Law on Documents and Archives (Order No. V-100 of 2011); certain periods are also laid down in tax legislation. The current document retention periods are published in the Register of Legal Acts.

Different periods may apply to accounting documents, financial statements, payroll documents, fixed asset documents and tax documents. There is no single universal period for all of them – always check by document type. For more on which document retention periods apply to different types of accounting documents, read our article on accounting requirements.

How do you keep MB accounts simply and without errors?

How do you organise document flow efficiently in a small partnership?

Simple MB accounting is not a myth but a matter of organisation. An effective system can look like this: documents are sent to one dedicated email address, paper documents are scanned and stored in a digital archive, each document is assigned a responsible person, and invoices are approved before payment.

Bank statements are imported into the accounting software automatically, a reconciliation is carried out once a month, taxes and settlements with members are reviewed once a quarter, and stocktaking and closing procedures are carried out at year-end.

What are the most common organisational mistakes in MB accounting and how can you avoid them?

How do you keep MB accounts without errors? First, know where people go wrong most often:

• Mixing the MB's money with a member's money.
• Collecting documents only at the end of the year.
• Unclear payment purpose descriptions in bank transfers.
• Missing acceptance and transfer certificates.
• Unrecorded payments to members.
• Late VAT registration.
• Booking personal expenses as MB expenses.
• Discrepancies between the bank, the accounts and the tax returns.
• No approved accounting policy.
• Overlooked deadlines for filing financial statements.

If the accounts have been kept poorly for some time, cleaning up and restoring neglected accounts can help correct the accumulated errors and get back to orderly bookkeeping.

Is it better to keep MB accounts digitally or on paper?

Electronic documents may be used provided their authenticity, integrity and accessibility are ensured. A digital document must be stored in a way that makes it possible to establish its content and origin later.

Paper documents should not be destroyed simply because they have been scanned – some documents are subject to requirements to keep the original or to preserve evidential value. A monthly accounting checklist should cover: whether all invoices are recorded, whether the bank is reconciled, whether the VAT return is prepared, whether payments to members are recorded and whether there are any overdue payments. Regular control is the cheapest prevention.

Which tax returns and statements must an MB file?

How and when does a small partnership file its corporate income tax return?

An MB files its annual corporate income tax return on form PLN204. If the tax period coincides with the calendar year, the return is normally filed and the tax paid by 15 June of the following year, unless otherwise specified for a particular year.

An obligation to pay advance corporate income tax may arise when the taxable income of the previous tax period exceeds the set threshold. Check the threshold applicable in 2026 against current VMI information and the current version of the Law on Corporate Income Tax. You will find more on declaring corporate income tax on the VMI website.

How is personal income tax on MB members' income declared?

According to VMI, a permanent resident of Lithuania declares certain income received from an MB personally, by filing the GPM311 return. Amounts received by an MB member may be: employment-related income, income from distributed profit, funds withdrawn for personal needs, payments under a civil contract, loan repayments, or advances and other amounts to be accounted for.

Each type of income is taxed differently – with different personal income tax rates, declaration procedures and responsibilities. Funds withdrawn for personal needs are treated as profit paid in advance and declared under income type code 02, while the 15% dividend rate applies only to profit formally distributed by the meeting of members. A small partnership's accounting documents must clearly reflect the nature of each payment.

How do you prepare annual financial statements and file them with the Centre of Registers?

An MB must prepare a set of annual financial statements: a balance sheet, a profit and loss account, explanatory notes and other statements required for its reporting category. The set must be approved by the meeting of members (in a single-member MB – by the member's written decision) and filed with the administrator of the Register of Legal Entities no later than 4 months after the end of the financial year.

The statements are filed with the administrator of the Register of Legal Entities electronically. Without this step, MB accounting is not complete. Sodra obligations depend on the person's status – whether they are an MB member, the manager or an employee under an employment contract. The social insurance and PSD base of MB members may depend on the funds withdrawn for personal needs and on the rules in force in the particular year.

What accounting mistakes do MB managers make most often?

The five most common MB accounting mistakes to avoid

1. Using MB funds without a legal basis – members' personal purchases with MB cards, unexplained transfers.
2. Attributing payments to members to the wrong type of income – for example, a payment of distributed profit is declared as a loan. Each type has different tax consequences.
3. Missing VAT deadlines – delaying VAT registration after the registration threshold has been exceeded.
4. Annual financial statements not filed with the Centre of Registers – this can lead to fines and even liquidation proceedings.
5. Unsubstantiated expenses and missing source documents – such expenses cannot be recognised for tax purposes.

How do you correct accounting errors properly, and what penalties apply?

Errors are corrected not by deleting earlier entries but by making traceable adjustments. You may need to prepare an accounting memo, adjust the registers, file an amended return with VMI or Sodra, and recalculate the tax and late payment interest. Tax errors are corrected under the relevant tax law and the VMI procedure for amending returns, described in the tax administration rules.

Risks arise from unfiled returns, unpaid taxes, incorrectly calculated VAT, unsubstantiated transactions and failure to keep documents. Penalties are set under the current version of the Code of Administrative Offences, the Law on Tax Administration and the specific tax laws – each case is assessed individually.

Which preventive measures protect an MB from accounting errors?

• Regular monthly reconciliation of the accounts.
• Approving and following the accounting policy (the procedure for recording and valuing business transactions).
• Documenting and classifying payments to members.
• Sticking to the tax return calendar.
• A periodic advisory review by a professional.
• Correcting errors promptly – not leaving them “for later”.

Practical MB accounting examples and cases

How do you organise the accounting of a newly established MB from the first month?

Illustrative example: a single-member MB providing IT services, with no employees and not registered for VAT. In the first month it is advisable to: confirm the manager and the person responsible for accounting, open a bank account, prepare a chart of accounts, choose an accounting system, assess whether VAT registration is needed, set the procedure for payments to members, and draw up document archiving rules and a tax return calendar.

How does a small partnership differ from an association of apartment owners or a gardeners' association?

A small partnership (MB), an association of apartment building owners (DNSB) and a gardeners' association are different legal forms. Their accounting, reporting and governance rules are not the same.

DNSBs and gardeners' associations have separate legal regulation relating to members' contributions, common-use property and governing bodies. This article covers only the small partnership under the Law on Small Partnerships.

Two illustrative MB accounting examples: without VAT and with VAT

Example 1: an MB with two members, one of whom is the manager and keeps the accounts personally. The MB has no employees, its income is up to EUR 45,000 per year and it is not registered for VAT. Day-to-day accounting covers recording invoices, bank reconciliation and accounting for members' withdrawals for personal needs. The corporate income tax return is filed on form PLN204 by 15 June. A member who has received payments declares them on form GPM311.

Example 2: an MB that is registered for VAT and has one employee. Additional tasks: filing VAT returns, submitting i.SAF data, payroll accounting, Sodra reports and declaring employee data. In this case small partnership accounting requires more resources and a more professional approach.

Note: all examples are illustrative and are not official VMI or Sodra interpretations. In each case, assess the MB's status, the member's or manager's status, the type of payment, the VAT status and the tax period.

Conclusions and recommendations

Small partnership accounting is not a formality but the foundation of the business. Follow the Law on Financial Accounting, keep the MB's money separate from the members' personal funds, support every transaction with a proper document and file documents with VMI, Sodra and the Centre of Registers on time. Classify the amounts paid to MB members correctly and use the tax rates in force in 2026.

If your MB's accounts are not yet in order, start with these steps: reconcile the bank account and cash balances, gather all income and expense documents, separate out payments to members, list the returns that have not been filed, and check the balances of debts and taxes and the filing status of the financial statements in the Centre of Registers system. MB accounting that is kept responsibly and on time costs less than fines and correcting errors.

Further information: official sources and tools

Where can you find up-to-date information on MB accounting and taxes?

• e-seimas.lrs.lt – current versions of laws and their amendments.
• e-tar.lt – the official Register of Legal Acts.
• vmi.lt – guidance on tax returns, VAT, personal income tax and corporate income tax.
• sodra.lt – social insurance and PSD contributions, rates and deadlines.
• registrucentras.lt – filing of annual financial statements and Register of Legal Entities procedures.

Which templates and documents are worth preparing for MB accounting?

A small partnership's accounting documents can be standardised using these templates: a draft accounting policy, document submission rules, an invoice register, a bank reconciliation form, a fixed asset card, an advance expense report, a register of payments to members, a monthly accounting checklist and a checklist for preparing the annual financial statements.

These templates are practical tools, not official forms of the authorities – unless a specific form is mandatory under legislation.

Need help with small partnership accounting?

If you want your MB's accounts to be in order from day one, contact a professional accounting specialist. Our team will help you organise your bookkeeping properly, prepare your tax returns, ensure that payments to members are classified correctly and protect you from costly mistakes.

Contact our accountants today – the first consultation is free.

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