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✓ Company formation in Bulgaria explained
✓ Bulgarian limited company registration costs and options
✓ Open a new company in Bulgaria with a bank account from a distance
Bulgarian company formation is a straightforward procedure, the requirements of the applicable commercial legislation are clear and the whole process is fast and easy.
There are many advantages that can drive an investor to open a new company in Bulgaria but maybe the most important one is the lowest corporate tax rate in the entire EU. Corporate income tax in Bulgaria amounts to only 10 % on profit. Furthermore, profit itself can be minimised by various legal and accounting mechanisms of deducting different kind of expenses from company’s annual turnover. Thus, if you have a good accountant or business consultant, he can advise you about all possible expenses that are subject to deduction.
The second advantage, most valued by investors, is the minimum required registered capital. The minimum registered capital of a Bulgarian limited liability company (OOD or EOOD) is only 2 Bulgarian Levs which equals to a little more than 1 Euro. What does this practically mean? In the first place, it means that one can open a Bulgarian company at minimum possible costs within the EU. Capital increase can be made any time, therefore even some investors who expand their big businesses choose to establish small companies first and then transform them into medium or big ones by raising the capital. Secondly, the small foundation capital means that the business risks are absolutely minimal, because shareholders of Bulgarian limited liability companies are responsible to the amount of the foundation capital. Even if the company has a million debt – if its foundation capital is 1 Euro, then all financial responsibilities of the shareholders are limited to this 1 Euro.
The Bulgarian company registration procedure also has many benefits. After the 2016 amendments in Bulgarian Commercial Register Act a company in Bulgaria can be opened within 24 hours. Bulgarian Registry Agency has already upgraded its electronic online system which allows company incorporation applications to be reviewed and registered within 24 hours. Before the launch of the new system, applicants had to wait at least 4 working days from the moment of filing their application. Many would say that a 3-day shortening of the procedure does not make a big difference.
In most cases those three days are not of a significant importance. However, there are some investors, who prefer to come physically to Bulgaria and take part in the company setup process themselves. Many businessmen prefer to meet their lawyers and accountants face to face, to search for an office space and to get to know with the business environment. For them it is extremely beneficial to be able to obtain their company registration number as soon as possible. This number is needed for all steps following the initial registration such as: opening active current bank accounts, VAT and EORI registration, etc.
Obtaining the company registration number in 24 hours is particularly beneficial for the bank account opening and for the activation of online banking. There is no sense in having a company if it does not have a bank account with online access. Sometimes shareholders neglect this aspect of the company formation procedure. The point is that you cannot open a current account before the Bulgarian company is duly established. Furthermore, banks have very long and complicated procedures in cases when they should hand the security codes for the online banking to a third person acting through a power of attorney and sometimes client should wait more than a week or two to have the company’s account operational. On the other hand, if client is physically present in Bulgaria, the bank account and the activation of the online banking can be completed in a couple of hours.
To summarize, businessmen who are in a hurry and need a quick Bulgarian company setup can make it happen by a short trip to Bulgaria. For maximum three days you can have an operating EU company with a bank account and you can even receive your first payment from your customers.
The other option is to register a Bulgarian company from a distance by giving a power of attorney to a proxy, preferably a lawyer. Costs of professional services in Bulgaria are low as compared to other EU countries and excellent specialists in company incorporation matters can be found for a pretty fair price. There are online offers at very low prices, but these are usually offered by paralegals, accountants or consultants which do not have legal education and have nothing to do with Bulgarian corporate legislation. If you want to establish a dormant company, this option might work for you. But if you are a serious businessman looking for expansion of your business – using paralegal services is not advisable. Starting a Bulgarian limited company leads to a lot of legal and financial consequences for its shareholders. From this point of view cutting off some tens of Euros from initial expenses may result in thousands of potential losses of different kinds (administrative fines, loss of profit, confiscation etc.). There is a number of questions to be considered in advance and a variety of options – and only qualified corporate lawyers with deep knowledge of Commercial Law matters can advise which option is best for each particular case. Furthermore, attorneys operating under Bulgarian Bar Act are required to maintain professional indemnity insurance cover and can be held responsible for their actions, while non-lawyers and paralegals do not have such obligations and professional insurance.
Our corporate attorneys at Trifonov Law Offices start the process of establishing companies in Bulgaria with an in-depth analysis of the relevant specific requirements of the respective foreign investor and clarification of all the essential points:
- What is the purpose of the new company
- What type of legal form will fit most to the profile and needs of the business entity
- What are the specifics of the business that will be run by the company
- Who will be the owner/s and who will be the manager/s and what are the legal implications for them
- What powers will be granted to the manager/s by the shareholder/s
- What further expenses and costs should be expected after the company has been successfully registered
- What are the legal ways of reducing these further costs and at the same time working in compliance with Bulgarian legislation
- What can be done for tax optimization and tax planning
Some of the items listed above must be explicitly set in the company’s incorporation documents, namely Memorandum of Incorporation (Constitutive Deed) of a Bulgarian Single Member Limited Liability Company (SMLLC) or in the Articles of Incorporation for Limited Liability Companies (LLC) as well as in the Minutes of the General Meeting (General Assembly) of Owners of the company – all these being part of the papers submitted to the Registry Agency (a.k.a. Bulgarian Companies House). That is why it is always recommended that these documents are drafted specifically for each individual client by a lawyer specialised in corporate law, instead of using standard forms which do not take into consideration the specifics and the objectives of the client’s business.