Everything about the OOD - limited liability company

The limited liability company (OOD) is one of the most common legal forms for establishing a business in Bulgaria. It is a legal entity that has owners (founders), called partners, who contribute capital and whose liability is limited to the amount of their share. This makes the OOD a suitable legal form for both small and larger businesses, since it combines a degree of flexibility with lower risk for the owners compared to the sole trader (ET).

Key characteristics of the OOD

1. Legal entity

The OOD is a separate legal entity that has rights and obligations distinct from those of its partners. This means that the company can enter into contracts, own property and assume obligations in its own name.

2. Limited liability of the partners

The most important characteristic of the OOD is that the partners bear limited liability. This means that they are liable for the company's obligations only up to the amount of their capital contribution. Their personal assets cannot be used to cover the company's debts, unless they have undertaken specific personal commitments (for example guarantees).

3. Capital of the OOD

The minimum capital for establishing an OOD in Bulgaria is BGN 2, which makes registration accessible and inexpensive. The capital is divided into shares among the partners, with each share having a defined nominal value.

4. Partners

An OOD may have one or more partners. If the company has only one owner, it is called a single-member limited liability company (EOOD).

The partners participate in the management of the company and have rights corresponding to their share of the capital. They can make decisions at a general meeting of the partners, where decisions are taken on important matters such as the distribution of profits, increasing the capital, changing the management and others.

5. Establishing an OOD

• Articles of incorporation (partnership agreement)

To establish an OOD, it is necessary to draw up a partnership agreement (when there is more than one partner) or articles of incorporation (in the case of an EOOD). This document governs the rights and obligations of the partners, as well as the management of the company.

Key elements of the partnership agreement:

• Name and registered office of the company

• Scope of activity

• Amount of the capital and distribution of the shares

• Manner of management and representation of the company

• Name of the company

The name of the OOD must be unique and must not coincide with the names of other companies in the Commercial Register. It must mandatorily contain the designation "OOD" or "EOOD" if it is single-member.

• Registration in the Commercial Register

Registration of the OOD is carried out in the Commercial Register at the Registry Agency.

Documents required for registration:

• Application for registration (form A4)

• Partnership agreement or articles of incorporation

• Document for paid-in capital (a bank certificate for the amount paid in)

• Decision to appoint a manager

• Specimen of the manager's signature

• Declarations using the prescribed form

• Document for paid state fee

• Registration fees

• The state fee for registering an OOD is about BGN 160 when documents are submitted on paper and BGN 80 for electronic submission.

6. Management of the OOD

• Manager

The OOD is managed by a manager, who is appointed by the partners and represents the company before third parties. The manager may be a partner or an external person.

The manager has the authority to enter into contracts, to represent the company and to organize its activity.

• General meeting of the partners

In the OOD, the main decision-making body is the general meeting of the partners. It decides important matters such as the distribution of profit, the admission of new partners, changes to the partnership agreement and other strategic decisions.

Decisions at the general meeting are usually taken by a majority, which is proportional to the partners' share in the capital.

• Control

The partners have the right to exercise control over the manager's activity by reviewing the company's accounting documents and reports.

7. Accounting and taxes of the OOD

• Accounting

The OOD is required to keep double-entry accounting. This includes maintaining registers of income and expenses, balance sheets, cash flow statements and other financial documents.

Unlike sole traders, who can keep simplified accounting, the OOD follows strict accounting rules.

• Taxes

The profit of the OOD is subject to corporate tax, which in Bulgaria is 10% of the company's profit.

When the company distributes its profit in the form of dividends to the partners, an additional dividend tax of 5% is withheld.

The OOD also files an annual financial statement, which includes balance sheets, income statements, as well as other documents.

• VAT registration

The OOD is required to register under the Value Added Tax Act (VAT) if its annual turnover exceeds BGN 100,000. Voluntary VAT registration is also possible. There are also other circumstances leading to mandatory, so-called "partial" registration under the VAT Act.

• Social-security contributions

There are various options for insuring partners and managers, depending on the insurance objectives of a company's owner. When the company has activity, the need arises to exercise social-security rights and obligations with some exceptions.

Workers and employees in the OOD are insured under an employment contract.

8. Termination of the OOD

• Voluntary termination

The OOD may be terminated by decision of the partners. Termination involves the liquidation of the company, in which the assets are sold off, the obligations are settled, and the remaining funds are distributed among the partners.

• Insolvency

If the OOD cannot cover its obligations, it may be declared insolvent. This is a procedure in which the company's assets are distributed among the creditors.

9. Advantages and disadvantages of the OOD

• Advantages:

Limited liability: The partners bear liability only up to the amount of the paid-in capital.

Easy management: The structure of the OOD allows the partners to make collective decisions and manage the business effectively.

Better reputation: The OOD is a preferred legal form for businesses that want to appear more reliable and stable in the eyes of partners and credit

Registering an OOD is an important stage in the development of a business and should be done when economic activity is being planned, to provide legal protection, to attract partners and investors, and to improve the organization of the business. There are also legal obligations related to reporting and taxes that must be observed after registration.

For a detailed consultation, contact the team of Марилена-Консулт ЕООД.