starting a company in bulgaria on a budget - part 1

Nowadays, fast trading and connectivity between people allows creating and growing a business with minimal capital and costs for establishing and registering the legal entity through which to conduct business – whether in the form of a sole proprietor or a company (e.g. Limited liability company, Single-member limited liability company, General partnership, Limited partnership and so on).

This article focuses on LLC. and single-member LLC. as these are the most commonly applicable forms of commercialization in the Republic of Bulgaria. Today, they find the greatest scope of application precisely because of the low costs of establishment and registration of the LLC., and because of their flexibility and relatively simplified procedure for establishment and registration.

The article does not aim at the complete explanation of the legal framework of the Republic of Bulgaria regarding the establishment and registration of legal entities, but aims to present in a brief and clear way the main aspects of establishing and registering an LLC./single-member LLC., in a way that would be useful for those wishing to establish this type of company without having special knowledge.

This article does not constitute legal advice and the author is not bound by the information given. The articles is purely for informational purposes.

LIMITED LIABILITY COMPANY (LLC)

What is an LLC:

A limited liability company (LLC.) is a commercial company that is formed by mutual consent of two or more individuals or legal entities. There are no obstacles for these persons to be foreigners or EU citizens, but it is important in these cases that the documents be prepared in Bulgarian and translated into a language understood by the foreigner. These persons are responsible for the obligations of the company with their share contribution in the capital of the company – i.e. they are not liable for the company’s obligations with their own personal property. The capital of LLC. consists of the contributions of the partners. A limited liability company is established by singing a company contract executed in writing by the partners. The name of the company must contain the designation “Limited Liability Company” but in Bulgarian („Дружество с ограничена отговорност“) or abbreviated “ООД”. One of the main advantages that LLC. offers is the low amount of capital required for the establishment of the company. The capital of a limited liability company may be no less than BGN 2. The capital consists of the sum of the shares of the partners, each of which may be no less than BGN 1. The management of the LLC. is carried out by two obligatory bodies: the General Assembly and the Manager of the company. The General Assembly includes all partners of the company. The manager manages and represents the company before third parties. The manager may be a partner, but may also be a person external to the company.

List of necessary documents for establishing a limited liability company:

1. Bank note showing the deposited capital, which can be issued from a bank of your choice. In case you have chosen to register a limited liability company with a capital that is higher than BGN 2 (this is the minimum established by law), it is necessary to pay at least 70% of the capital.

2. Decalration of Consent given by the manager for the acceptance of management and for sampling his signature (specimen) – It is necessary the declaration be with a notarized signature of the manager.

3. Company contract

4. Protocol from the General Assembly meeting of the partners – The document must contain the decisions taken by the constituent assembly and the agenda of the meeting.

5. Decision of the General Assembly for the appointment of a manager

6. Application form A4 – You can find it on the website of the Commercial Register, download it and fill it out.

7. Declaration under Art. 13, para. 4 of the Commercial Register and Register for Non-profit Legal Entities Act (CRRNPLEA). With it, the applicant declares that the stated circumstances and the acceptance/convention of the presented for submission documents are true and authentic.

8. Declaration under Art. 13, para. 5 of the Commercial Register and Register for Non-profit Legal Entities Act (CRRNPLEA). The declaration is to be signed only when the applicant does not present the documents in person at the Commercial register.

9. Declaration under Art. 142, para. 1 of the Commercial Law (CA). The declaration is signed by the manager and it regards prohibition of competitive activity.

10. Declaration under Art. 141, para. 8 of the Commercial Law. The manager declares that he meets the requirements of the law to be a manager of a company.

11. Application for reserving the company name (D1), which is not obligatory and costs BGN 50.

12. License or permit, when the activity of the company requires such.

–        Procedure and duration:

The obligatory documents are filled out as follows: items 3, 4, 5 – by the partners; item 2 – by the manager, with the signature being verified by a notary; items 9 and 10 – by the manager; item 7 – by the manager or the partners; item 1 – issued by the bank in which the fund-raising account has been opened and the capital has been deposited; item 8 – by the bearer of the documents (in the case where the documents are submitted by someone else than the applicant).

After the documents are filled out, signed and where necessary – verified by a notary, incl. in the presence of an interpreter or translator, the documents are attached to the Application form A4 and are submitted with the Commercial Register. The documents can be submitted on paper, but can also be submitted electronically through the website of the Commercial Register. The latter option is preferable not only for the convenience of the applicant, but also because in the case where an applications is submitted electronically, the state fee is reduced by 50%. In the case of a limited liability company, the state fee for the initial registration of the company is BGN 110 – when submitting the documents on paper, and respectively BGN 55 – when submitting them electronically.

The opening of a fund–raising account, in which the initial capital of the company will be deposited, may take from a few minutes to several days – depending on various factors (e.g. policies of the respective bank; whether the partners are Bulgarian or foreign citizens, etc.).

If everything is in order with the documents, the company must be registered within 3 days from the submission of the application with the attached documents in the Commercial Register. Meaning that indeed it is possible for a limited liability company to be established and registered within one working week.

–        Total costs:

Costs vary with relation to the different circumstances within each individual case and no final figure can be given which will be applicable in all scenarios. However, if we assume that your aim is the fastest and most economical establishment and registration of an LLC. and assume that the partners are Bulgarian individuals or legal entities that have decided to establish the company with a minimum capital of BGN 2, then the costs to be made for the establishment and registration of the company would approximately amount to the following:

– For opening a fund–raising account – the fee varies from bank to bank, but on average about BGN 20-30;

– For depositing capital – BGN 2 + accrued bank fees for the transaction;

– For verification by a notary of the managers’ signature on the Declaration of Consent – around BGN 10-20.

– For consideration of the application and the attached documents, submitted to the Commercial Register – a state fee of BGN 110, resp. BGN 55 when submitted electronically.

It is important to specify that although optional, it is highly recommended that the drafting and preparation of the documents be done with the assistance of a lawyer, in order to ensure fast, efficient and lawful establishment of the company in accordance with the wishes and goals of the partners and the company itself. This, of course, would be an additional cost, the amount of which would depend on the mutual agreements reached between the lawyer and the client.

It is also important to specify that if the partners are foreign persons, it would be necessary to prepare a written translation of the documents. If the manager is a foreign person, when performing the notarization of the Declaration of Consent for acceptance of management and a sample of the signature (specimen) of the manager, a translator must be present, to whom remuneration must be paid for the time during which he performed translation. The remuneration of the translator again depends on the agreement reached between the parties, but on average varies around BGN 40 per started hour. The presence of a translator makes the notarization procedure more expensive, as the notary charges an additional fee due to the presence of a translator, who also signs the notarized document.

SINGLE-MEMBER LIMITED LIABILITY COMPANY (single-member LLC.)

What is a single-member LLC. and how is it different from the LLC. mentioned above:

The single-member LLC. is a variant of the LLC., but unlike it, it is established by a single person – it can be a Bulgarian or foreign natural or legal person. Instead of partners, we have only a sole owner of the capital. He is responsible for the obligations of the company with his share contribution in the capital of the company, meaning that he is not liable with his personal property. In the same way as in the LLC., single-member LLC. is a capital company the capital of which is divided into shares. As with the LLC., he capital of the single-member LLC. also cannot be less than the legal minimum of BGN 2. No company contract is drawn up for the formation of a single-member LLC., but instead a Statute is drawn up. The name of the company must contain the designation “single-member LLC.” but in Bulgarian (Еднолично дружество с ограничена отговорност) or abbreviated “EООД”. Decisions with regards to the activities of the company are made by the sole owner of the capital. The sole owner of the capital may also be the manager of the company, so that he manages and represents the company personally or through an authorized person. The manager may also be a person external to the company. In this case he is chosen by the sole owner of the capital.

List of necessary documents for establishing a limited liability company:

1. Bank note showing the deposited capital, which can be issued from a bank of your choice. In case you have chosen to register a limited liability company with a capital that is higher than BGN 2 (this is the minimum established by law), it is necessary to pay at least 70% of the capital.

2. Decalration of Consent given by the manager for the acceptance of management and for sampling his signature (specimen) – It is necessary the declaration be with a notarized signature of the manager.

3. Comapany Statute.

4. Protocol for the decision to establish the company – The document must contain the decisions taken by the sole owner of the capital and the agenda of the day.

5. Decision for appointment of a manager.

6. Application form A4 – You can find it on the website of the Commercial Register, download it and fill it out.

7. Declaration under Art. 13, para. 4 of the Commercial Register and Register for Non-profit Legal Entities Act (CRRNPLEA). With it, the applicant declares that the stated circumstances and the acceptance/convention of the presented for submission documents are true and authentic.

8. Declaration under Art. 13, para. 5 of the Commercial Register and Register for Non-profit Legal Entities Act (CRRNPLEA). The declaration is to be signed only when the applicant does not present the documents in person at the Commercial register.

9. Declaration under Art. 142, para. 1 of the Commercial Law (CA). The declaration is signed by the manager and it regards prohibition of competitive activity.

10. Declaration under Art. 141, para. 8 of the Commercial Law. The manager declares that he meets the requirements of the law to be a manager of a company.

11. Application for reserving the company name (D1), which is not obligatory and costs BGN 50.

12. License or permit, when the activity of the company requires such.