Every entrepreneur should organize their business in an appropriate legal form. For this purpose, they may decide to act independently or to associate with other individuals to form a trading company.
The trading company is a classical legal form for the organization of commercial activities. In Bulgaria, it is often referred to colloquially as a “firm.”
Do I need a company?
If you intend to do a commercial activity, the answer is yes!
Although there are 5 types of commercial companies in Bulgaria, the most popular ones are the limited liability company (OOD, including the single-member limited liability company – EOOD) and the joint-stock company (AD).
There are several basic things you need to know about the essence of any commercial company:
– It is a completely separate entity from its owners and has a property of its own;
– It independently assumes rights and obligations – becomes a party to contracts, buys, sells, takes orders, pays, and fulfils other obligations it undertakes;
– It is liable for its obligations up to the extent of the assets of its own – in general, its owners are not personally liable for the obligations of their company, except for the contribution they have made to the capital; the reverse is also true – the company is not liable for the personal debts of its owners – its partners.
What kind of trading company should I choose?
The type of company depends primarily on the volume of activity and whether it matters to you who exactly you partner with in business.
A large business, for example, is often organized as a joint stock company and raises a lot of capital. The minimum under Bulgarian Commercial Law is 50,000 BGN.
In these companies, capital is paramount, and often shareholders remain anonymous. It doesn’t matter to an individual shareholder who the other shareholders in the company are.
The situation is quite different with a limited liability company. This form is appropriate for small and medium-sized businesses since the minimum required initial capital is 2 BGN. Such companies are easy to manage, and the relationships between the partners are based to the greatest extent on mutual trust.
Generally, the most appropriate form of company for your startup business is a limited liability company (OOD). This is the case whether several people with a common business idea unite or when you will be doing business alone. In the latter case, it would be better to establish a single-member limited liability company.
It should be noted that although a popular form for conducting commercial activities in the 90s, the sole trader (ET) is not a recommended organizational form today. The reason is that it does not protect the personal property of the trader as a limited liability company (OOD) does. Doing business as a sole trader in many cases can have undesired tax defects that could lead to personal liability of the individual. However, there are still cases where exercising independent activity for remuneration does not necessarily require establishing a commercial company. For example, if the activity is of such a nature that:
– It is closer to craftsmanship;
– It is incidental, or
It is not expected shortly to be able to cover the required costs of maintaining a company,
then it might be more advantageous for you to conduct business as an individual – a freelancer, whether under a civil contract or as a self-employed person. This should be assessed for each specific case.
What does “limited liability” mean?
Here, it refers to the personal company owners’ property liability to the company creditors.
In this case, limiting liability means that the owners will not become liable in terms of their personal property for the obligations of their company. The exception is the contribution they made to the capital initially. This contribution becomes part of the company’s property. In other words, your car or family home cannot be sold because of unpaid by your company invoices.
Registration of limited liability company OOD/EOOD
The limited liability company (OOD)registration occurs quickly and can be done electronically. It is good to have answered a few questions beforehand:
Shall I be in business alone or with partners?
Please consider that important company decisions should be made by all partners and each partner’s vote weights according to their percentage share in the capital in the decision-making.
What will be the name of the company?
Here comes your creativity!
However, consider that the company name should not coincide with or be misleading about the name of another company already registered.
You can check occupied company names on the Commercial Register website: www.portal.registryagency.bg -> Register -> Commercial Register and Register of Legal Entities -> Inquiries -> Rights over the company/name.
How much capital should I contribute?
Capital is each partner’s monetary contribution to start its commercial activity according to the company’s needs.
Each partner can contribute money and personal property, to become part of the capital – movable property, receivables, and real estate.
The paid-in capital becomes the company property, which uses it as its asset when starting the business.
You determine the specific amount of capital at your discretion. We would recommend not establishing a company with a minimum capital of 2 BGN.
Such an amount is unrealistic in terms of initial expenses. It does not inspire confidence in other traders who would negotiate with you, and in some cases, you might find it difficult to obtain financing.
What should be the object of the business and the registered office address?
Formulating the subject of the activity also depends on you. Usually, you receive assistance in formulating it from an attorney. It is good to know that whatever you write, the type of business you might want to do cannot be limited.
However, the registered office address is important as this is where documents and books can be served on you, including by administration or court.
It is, therefore, a good idea to ensure that the address you choose is kept up to date so that you do not suffer any negative consequences because your company cannot be found at the address.
Procedure
After clarifying the basic questions about your business, attorneys prepare the necessary documents. Then you must visit a notary to certify the manager’s signature and a bank to open a subscription account and deposit the capital.
The Commercial Register examines the documents submitted within a few days and enters the new company with the register and your company is ready for business.
The register will provide your company with an individual identification code (EIK). By this number or by name, all persons, banks, and institutions can inquire about your company and see who is registered as an owner and manager.
Fees and expenses
The fees are generally as follows:
– BGN 55 – Commercial Register fee if the documents are submitted electronically using an electronic signature; if you go on-site with paper documents, you shall pay a double fee of BGN 110.
– BGN 6 – notary fee;
– bank charges – depending on the tariff of the bank you choose to open a capital subscription account;
– attorney’s fee;
——————————————————————————————— At LegalMasters.bg, we help entrepreneurs every day to build the legal basis of their business and its proper launch – we consult and assist in the entire procedure for establishing a company. Through LegalMasters.bg, you can easily and entirely request online assistance when establishing a Limited Liability Company or a single-member limited liability company – EOOD. See also the other online legal services in the Business category or contact us at contact@legalmasters.bg or tel. 089 30 50 449. ———————————————————————————————
Final recommendations from us:
Get an electronic signature – there are already enough administrative and banking services that you might use remotely, which will significantly ease your daily activities and relieve the administrative burden on your business.
Don’t forget to keep track of the deadlines for submitting the Annual Financial Report of the company, and other deadlines under the Corporate Income Tax Act, the Value Added Tax Act, and laws related to fulfilling your duties to the State.
Generally, your accountant should take care of this, but you should also stay informed and plan the relevant activities yourself.
Dear Readers, All materials published on LegalMasters.bg are for informational purposes only. These materials reflect the personal views and professional opinions of the respective attorneys from the team. They should not be perceived as comprehensive legal analyses or particular legal advice. Before taking or not taking legal action on the issues discussed, seek professional legal advice for your specific case.