Numerous entrepreneurs from overseas decide for business formation in Bulgaria for reasons like a fast incorporation, a stable economy, a prolific business environment and varied encouragements offered by the government for foreign investors. Business persons interested in the types of Bulgarian companies can choose one of the five major forms the South-Eastern European country regulates for commercial corporations:
•limited liability company (LLC);
•joint stock company (JSC);
•partnership limited by shares.
Our company formation agents in Bulgaria are at your disposal with information and assistance at the time of company incorporation, regardless of the chosen structure for business.
Characteristics of the most common types of Bulgarian companies
The most common organizations are the limited liability companies and the joint stock ones. Both types of structures have differences, as well as common characteristics. The LLC and the JSC companies can be owned or established by one or more persons or legal entities. The minimum number of shareholders must be at least one. These two types of Bulgarian companies require different share capital. A limited liability company requires a capital of at least 2 BGN (1 EUR). The joint stock business entity must have at least BGN 50,000 share capital, with a minimum nominal value of 1 BGN per share.
There is a difference regarding the companies bodies. A limited liability company has a general meeting of stakeholders and at least one manager. In case of a joint stock company, besides the general meeting of shareholders, there is also a board of directors (with a minimum of three persons), along with a supervisory board and a management board, both with at least three members. An LLC founder must contribute with his/her interest, under the rule of being expelled from the association for not doing so. All partners have equal rights concerning the management, the profit, and the company’s affairs and the liquidation procedures.
The shareholders of a joint stock company have a liability limited by their contribution. The capital stock can be increased by issuing new shares, but it can also be lowered or canceled. Once a shareholder subscribes for shares, it is mandatory to contribute for them, otherwise, he owes interest. While an independent audit is not needed for an LLC regarding the annual accounts (with some exceptions), this one is mandatory for a JSC. Here is an infographic with details about the available companies in Bulgaria:
What information can be found in the Articles of Association?
The Articles of Association are the main documents of a company, and these contain the following information:
•the name of the owners, plus details about their nationality;
•the name of the company, the business address of the firm in Bulgaria;
•the capital contribution of each member of the company in Bulgaria;
•the name of the board managers and their responsibilities;
•the voting rights and the mode of election of company members.
Who can set up partnerships in Bulgaria?
The Bulgarian limited partnership represents an entity set up by one or more partners, but with two categories of partners: general partners liable for the business liabilities and limited partners who invest money. The latter receive benefits (capital gains, income, and tax benefits) similar to dividends. The fees and a percentage of the income are collected by the general partner.
A Bulgarian general partnership is formed by minimum two persons, under a joint trade name, to develop commercial transactions by occupation. It doesn’t require a minimum share capital and the partners share unlimited liability regardless of their investments in the partnership. All the partners participate equally in the business administration and profit share.
A Bulgarian partnership limited by shares represents a mixture of a joint stock company and a limited partnership. The business form must have at least three limited partners chosen by the general partners from subscribers. Their liability is influenced by the share contribution.
If you need more details about how you can set up a company in Bulgaria, you may get in touch with our agents in company formation who will help you open a company in this country. We may also help you with information if you are interested in opening a business in Portugal, Austria or Liechtenstein, through our local partners.
We invite you to watch a video about the types of companies available for incorporation in Bulgaria:
Can I set up a subsidiary in Bulgaria?
Yes, foreign companies can establish subsidiaries in Bulgaria which can operate under the rules of limited liability companies or joint stock companies. Subsidiaries in Bulgaria are registered at the Bulgarian Commercial Registry as soon as the Articles of Association are provided. In respect to the Companies Act, our team of advisors can assist foreign investors in setting up their companies, whether they are branches, subsidiaries or any other structures.
What is a shelf company in Bulgaria?
A shelf company in Bulgaria is known as a ready-made company which is already registered on the market and ready for business activities. This runs as a limited liability company or as a joint stock company, depending on the type of operations the foreign investor wants to establish in the market. Among the benefits of a shelf company in Bulgaria, we mention the fast operation on the market, as there is no need for approvals or incorporation time. If you need a shelf company in another country, such as Latvia, we can put you in touch with our local partners.
Establishing a branch in Bulgaria
Large companies from abroad can establish branches in Bulgaria without any major efforts or harsh formalities. There are a few important conditions at the time a branch is open and among these, it is good to know that this entity can perform the activities under the regulations of an OOD or limited liability company which needs to the registered with the Commercial Registry in Bulgaria. A branch can be registered by a local lawyer who can act on behalf of your company in Bulgaria or by a representative with a power of attorney. The Memorandum of Association and the Articles of Association are the main documents of a branch in Bulgaria. Besides these, a declaration showing that the foreign company intends to open a branch in Bulgaria is needed, alongside the balance sheet from the previous year and the certificate of good standing. Just like any other entity, the branch is subject to taxation, therefore, a significant step before opening it is to apply for the VAT number with the Department of Revenue in Bulgaria. We remind that our team of advisors can provide assistance to foreign companies and their representatives in opening a branch in Bulgaria.
What is a holding company in Bulgaria?
A holding company is chosen by foreign investors interested in purchasing shares in small or medium companies in order to control their activities and commercial interests on the market. In most cases, there is a need of 80% of the shares in order to legally operate as a holding company, however, there are situations in which 5% is sufficient for a foreign company to control a local one in Bulgaria. The conditions are clear in the case of a holding company and refer to a payment of at least 25% of the capital at the time a company is acquired. It is good to know that holding companies can be set up as limited liability companies or as joint stock companies. As for the corporate tax rate for holding companies in Bulgaria, this is set at 10% rate.
Joint stock companies in Bulgaria
Joint stock companies can be established with a minimum share capital of BGN 50,000 and a minimum of three members part of the management board. The registration of a joint stock company starts at the Commercial Register in Bulgaria with all the documents requested, among which the Articles of Association, and a proof that the company is registered for social contributions and tax purposes. The minimum share capital can be deposited in a Bulgarian bank account which can turn from a temporary account into a permanent one. Joint stock companies in Bulgaria are subject to other requirements like having a board of managers who need to meet once every year.
Joint ventures in Bulgaria
Joint ventures in Bulgaria can be formed by at least two partners who can be the shareholders or the investors of the company. This is a legal partnership which can be easily established if all the requirements are respected. For instance, a joint venture can be established as soon as a name reservation is made, and the Articles of Association prepared and drafted to the Commercial Register in Bulgaria. Being considered a partnership, a joint venture in Bulgaria will function if a contract is made in this sense, with information about the general rules in the firm and the rights of each owner. This is an important contract which needs to be submitted to the Registry Agency and the Ministry of Justice in Bulgaria. A joint venture is a preferred partnership for foreign investors who can deal businesses with Bulgarian partners whom which they can create such an entity. One of the advantages of a joint venture in Bulgaria is that there is no limit in matters of local partners who want to enter such a partnership, as the legislation is less restrictive in this sense. We kindly invite you to ask for complete assistance from our team of consultants in Bulgaria if you are interested in establishing a joint venture in Bulgaria.
What is a liaison office in Bulgaria?
Foreigners have the possibility of establishing a liaison office which is a representative office of a foreign company in Bulgaria. This is normally the official business channel that makes the connection between a foreign company and the business climate in Bulgaria, without any activities on the market. The only things a liaison office can do are related to the marketing activities, searching for investment opportunities in Bulgaria and promoting the company’s products and services on the Bulgarian market. A liaison office can be established if a decision made by the company from abroad is issued in this matter, plus information about the representative person of such office in Bulgaria.
We invite you to get in touch with us for complete information about the available company types in Bulgaria.
Call us now at (+44) 203-287 0408 to set up an appointment with our specialists in company formation in Sofia, Bulgaria. Alternatively you can incorporate your company without traveling to Bulgaria.
As our client, you will benefit from the joint expertize of local lawyers and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Bulgaria.