Bulgaria, located in Southeastern Europe, is emerging as an attractive destination for entrepreneurs looking to establish their businesses in the region. The country’s strategic location, favorable business climate, and competitive labor costs make it an appealing option for both local and foreign investors. However, before embarking on the journey of company formation in Bulgaria, you should be well-versed in the legal considerations and procedures involved. This article aims to provide an overview of the essential legal aspects one should be aware of when starting a business in Bulgaria.
Choosing the Appropriate Business Structure
The first crucial decision an entrepreneur must make is selecting the appropriate business structure. In Bulgaria, there are several options, each with its own legal implications:
Sole Proprietorship
A sole proprietorship is the simplest form of business structure, suitable for small-scale operations. Important thing to mention here is that the sole owner/the entrepreneur assumes unlimited personal liability for the company’s debts and obligations. This is way, this kind of business structure is not recommended and not use that often anymore.
Limited Liability Company
A Limited Liability Company (LLC) is a popular choice for many businesses. It offers limited liability protection to its shareholders, who are only liable for the amount of their contributions. The minimum required capital for an LLC is very low – EUR 1, compared to some other European countries. This is the fastest, cheapest and most secured option to start your business in Bulgaria.
Joint Stock Company
A Joint Stock Company (JSC) is more suitable for larger businesses with multiple shareholders. JSCs issue shares to their investors and are subject to stricter regulatory requirements. The minimum capital required is BGN 50 000.
Branch Office
Foreign companies can establish a branch office in Bulgaria, which operates as an extension of the parent company. The branch office does not have a separate legal personality and conducts business under the parent company’s name.
Trade Representative Office
Unlike a branch office, a representative office is limited to non-profit activities. Its primary purpose is to promote the interests of the foreign company and conduct market research. You can find out more about the TRO here.
Company Formation in Bulgaria
Regardless of the chosen business structure, the next step is to register the company with the Bulgarian authorities. The registration process typically involves preparing the required documents, deposit the capital in the bank and submit the company documents within an application form for company formation in Bulgaria – all relevant documents, including the notary deed and the application for registration, must be submitted to the Bulgarian Commercial Register. Upon successful registration, the company will receive a Unique Identification Code (UIC) from the Bulgarian Trade Register, which is essential for taxation and other official purposes.
Find more detailed information about registering a company in Bulgaria on our website.
Regulatory and Tax Considerations
Business Licenses and Permits
Certain business activities may require specific licenses or permits. Entrepreneurs must research and obtain any necessary authorizations before commencing operations.
Taxation
Bulgaria offers a favorable tax regime, with a flat corporate income tax rate of 10%. Additionally, the country has signed double taxation treaties with numerous countries to prevent the same income from being taxed twice. Find out more about the taxation in Bulgaria.
Value Added Tax (VAT)
Companies with an annual turnover exceeding a specified threshold OF BGN 100 000 must register for VAT purposes and charge VAT on their goods and services.
Starting a business in Bulgaria can be a rewarding venture, given its favorable business environment and geographical advantages. However, entrepreneurs must navigate the legal considerations and procedures diligently to ensure a smooth and compliant establishment of their enterprise. Seeking professional legal advice and assistance throughout the process can significantly contribute to the success of your business and its long-term growth in Bulgaria. If you need any assistance with some of the above mentioned, please, don’t hesitate to contact us anytime. We will get back with answer within 1 business day! I am personally at your disposal, too in LinkedIn.
