Nature of business
The decision depends on planned business activities.
The amount of available capital
When establishing legal entities of certain types, the founder of a legal entity must have certain amount of the authorised capital.
Taxes
The amount of taxes directly depends on the form of activities a person has chosen.
The degree of personal liability
If a person intends to limit his liability for business failures with his personal or family property, he or she should choose a legal entity of limited civil liability.
The number of founders
If there are several or more interested persons wishing to jointly conduct business activities, they should establish a legal entity for these business activities.
The degree of complexity of business activities
For example, conducting individual activities is easier than having a company, because there is no management structure or need to perform other formalities necessary for legal entities.
Types of companies available in Bulgaria
The Limited Liability Company, known in Bulgaria with its abbreviation OOD, is formed by limitedly liable shareholders. All shareholders bear the liability of the company’s obligations only to the extent of their deposited amounts. The minimum authorized capital represents the amount deposited by the shareholders.
Sole Proprietorship Limited Liability Company or Single-member Limited Liability Company (corresponding to the Bulgarian abbreviation EOOD) is another kind of Limited Liability Company, that is recognized by the Bulgarian law. The EOOD has the sole owner of the authorized capital who resolves on any issue connected to the company. Foreign investors usually find this kind of company the best option for their direct investments in Bulgaria.
The partnership limited by shares, or PLS, is a company governed by two types of partners: limitedly and unlimitedly liable. Bulgarian law requires at least one unlimitedly liable partner and at least three limitedly liable partners. PLS is established by the unlimitedly liable partner(s) who has the legal right to select the other stakeholders and is liable for the obligations of the legal entity with its personal property. The other partners are liable for sums no larger than the amount they have deposited. Minimum capital of BGN 50 000 (approx. EUR 25 000) is required
A general partnership is a company set up by unlimitedly and jointly liable partners, who are liable for the entity`s obligations with their personal property. This kind of company does not have its own capital. The minimum two partners of any country are required. The General partnership requires unlimitedly liable partners only. The partners are jointly and unlimitedly liable for the General partnership’s obligations with their personal properties and assets. The minimum two partners of any country are required, as they could be individuals or legal entities. The GP does not have own capital and must have at least one director from any nationality.
The Limited partnership is formed by limitedly and unlimitedly liable partners. At least one unlimited liable partner is required. That kind of partnera are liable with their own property, as opposed to the limitedly liable partners that are liable with an amount no larger than their deposit in the company.No minimum capital is required. The name of the LP must contain the name of at least one of the unlimitedly liable partners.
The Joint-stock company consists of limitedly liable shareholders only. The minimum capital BGN 50 000 (approx. EUR 25 000) and is divided in shares. This kind of company can provide additional financial resources for its activities by selling obligations.
The Joint-stock company consists of limitedly liable shareholders only, who are liable to the extent of their deposited amounts. Every shareholder has a certain an amount of shares and the sum of all shareholders` shares forms the capital of the company. Both EAD and AD correspond to Joint-stock company.
| Limited Liability Company/ Single-Member Limited Liability Company | Partnership limited by shares | General partnership | Limited partnership | Joint stock company | |
|---|---|---|---|---|---|
| Minimum authorised capital | BGN (approx. EUR 1) | BGN 50 000 (approx EUR 25 000) | This business entity does not have its own capital | There is no minimum capital | BGN 50 000 (approx. EUR 25 000). It is allowed, the company to be registered with just BGN 12 500 start capital (approx. EUR 6400) and the rest to be paid up in the next years |
| Minimum number of owners | 1 of any nationality | 3 of any nationality | 1 of any nationality | 1 of any nationality | 3 of any country |
| Owner eligibility | Individuals only | Individuals and legal entities | Individuals and legal entities | Individuals and legal entities | Individuals and legal entities |
| Non-residents may be the owners | + | + | + | + | + |
| Corporate flat tax rate | 10% on the net profit | 10% on the net profit | 10% on the net profit | 10% on the net profit | 10% on the net profit |
Good Business Tip #4: don’t guess, better test
There are lots of different regulations depending on business sectors. When starting a business you need to clarify what permits and licenses you need to acquire for your business field.
Bulgaria has two main tax categories – direct and indirect.
Direct taxes are:
- Corporate tax on the annual tax returns
- Income tax on the revenues of individuals
- Withholding tax
Indirect taxes are:
- Value Added Tax
- Excise duties
There are professions that are regulated by state and in order to exercise them, one is required to attain professional recognition by the state. It is a procedure, upon which a state entitles a person to engage in a regulated professional activity in its territory, considering holding of specific professional qualifications acquired in the other state.
Bulgaria has a simplified process of registering companies for foreign businesses. Note that you can register a company here from another country without necessarily coming to Bulgaria. This can be done through the power of attorney. Companies are registered with the Trade Register at the Recording Agency in three-seven days.
Employment procedures must be done according to the labor code. Also, you need to take into account:
1
- whether fixed-term contracts are prohibited for permanent tasks
- maximum cumulative duration of fixed-term contracts
- length of the maximum probationary period
- minimum wage
- the ratio of the minimum wage to the average value added per worker.
2
- a maximum number of working days allowed per week
- premiums for work: at night, on a weekly rest day and overtime
- whether there are restrictions on work at night, work on a weekly rest day and for overtime work
- length of paid annual leave.
3
- whether redundancy can be basis for terminating workers
- whether employer needs to notify and/or get approval from the third party to terminate 1 redundant worker and a group of 9 redundant workers
- whether the law requires employer to reassign or retrain a worker before making worker redundant
- whether priority rules apply for redundancies and reemployment.
4
- the notice period for redundancy dismissal
- severance payments
- penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected.