The Bulgarian market manages to attract big and small foreign investors due to the benefits of registering a company with extremely low expenses, a corporate tax rate of 10%, and other business opportunities.
There are several types of companies provided for in the Bulgarian Commerce Act – a personal partnership, a limited partnership, a limited liability company, a joint-stock company, and exotics like the limited partnership with shares. Choosing the right type of structure for your business, however, can be a difficult task. Here we will discuss the types of companies anyone can register in Bulgaria, their pros and cons, plus some general advice on the topic.
What every good investor wants other than profit, is a good risk balance. Probably the best balance between costs, financial liability, and functional opportunities can be found in the limited liability company (LLC of „ООД“ in Bulgarian). It is the most commonly used type of company by both big and small investors, and for a good reason.
The LLC has low starting cost, but gives you excellent functional opportunities comparable to a joint-stock company in many cases.
The starting expenses for setting up an LLC include paying in a capital of as low as 2 BGN (or 1 EUR). Of course, there are other costs that have to be taken in, as well, like state and notarial fees, translations, if necessary, etc. But an LLC is very attainable for almost every budget, unlike the joint-stock company that as a requirement must have a minimum capital in the amount of 50,000 BGN (or around 25,000 EUR).
The LLC’s structure includes two corporate bodies:
- The General Meeting (GM) of shareholders, or the sole owner of the capital (SO); and
- The Managing Director/s (MDs).
The first corporate body is the decision-maker, and the second is the executioner.
The GM (or SO) has the authority the make the decisions on the most important topics of the company’s activity and structure – adding or excluding shareholders; appointing managers; increasing the capital; selling and buying shares, etc. Resolutions on these topics are taken in the form of minutes. If the GM needs even greater security in the decision-making process, the minutes can be certified by a notary when being taken. This, of course is to the detriment of speed in the decision-making, but the GM (or SO) have to freedom to choose their method of decision making.
The resolutions themselves have to be executed. This is where the MD comes in. His duty is to carry all necessary legal and factual actions in order for the resolutions of the decision-making body to be realized. The MD is appointed by the GM (or SO), and is also the main representative of the company. In the case that more than one MD is appointed, then the GM or SO elects how the company shall be represented – by each two or three MDs jointly; by each MD separately; or in another method. This gives the LLC much flexibility.
The steps of setting up an LLC include:
- Having an establishment General meeting in written form;
- Adopting Articles of Association in written form;
- Appointing an MD/s and having his/her consent given in a notary certified form;
- Paying in the chosen capital amount and paying a state fee (55 BGN or around 27 EUR).
While the upper three points are a matter of signing standard documents, paying in the capital means that a capital bank account has to be opened on behalf of the company by its MD.
This includes going through some bank “Know-your-customer” procedures where the origin of the funds has to be declared. If all is in order, the bank shall issue a certificate for paid-in capital.
When all said is done, you have a full set to electronically register your LLC at the competent authority, the Commercial Register and Register of Non-Profit Legal Entities. This process usually takes up to 2 full days.
Once your company is registered, it shall receive a company number, or a Unified Identification Code (UIC) (or ЕИК in Bulgarian), and is ready to do business on the market.
If you need to find the best functional solution for you, our team will be happy to give you advice on the setting up of your company and its management.