The limited liability company (Ltd) is one of the most common legal forms for establishing a business in Bulgaria. It is a legal entity, which has owners (founders), called partners, who participate with capital and whose liability is limited to the amount of their share. This makes the Ltd. a suitable legal form for both a small company, as well as for a larger business, as it combines some flexibility with lower risk for owners than a sole trader (MEAT).

 

Main characteristics of OOD

1. A legal entity

 

Ltd. is a separate legal entity, which has rights and obligations, other than those of his partners. That's what it means, that the company may enter into contracts, to own property and assume obligations in his own name.

2. Limited liability of partners

The most important characteristic of an OOD is, that the partners have limited liability. That's what it 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 made specific personal commitments (for example, sureties).

3. Capital at Ltd

The minimum capital for establishing an LLC in Bulgaria is 2 BGN, making registration accessible and inexpensive. The capital is distributed in shares among the partners, with each share having a certain nominal value.

4. Partners

Ltd. may have one or more partners. If the company has only one owner, it is called a Sole Proprietorship (Ltd).

Partners participate in the management of the company and have rights, corresponding to their share of the capital. They can take decisions at a general meeting of partners, by making decisions on important matters such as distribution of profits, capital increase, change of management and others.

5. Establishment of Ltd

• Articles of Incorporation (partnership agreement)

To establish a Ltd, it is necessary to draw up a partnership agreement (with more than one partner) or articles of incorporation (at EOOD). This document regulates the rights and obligations of the partners, as well as the management of the company.

Basic elements of the partnership agreement:

– Name and headquarters of the company

– Subject of the activity

– Amount of capital and allocation of shares

– Manner of management and representation of the company

• Company name

The name of the LLC must be unique and not coincide with the names of other companies in the Commercial Register. It must necessarily contain the designation "OOD" or "EOOD", if single.

• Registration in the Commercial Register

The registration of the Ltd. is carried out in the Commercial Register at the Registration Agency.

Documents required for registration:

– Application for registration (sample A4)

– Articles of association or memorandum of association

– Document of contributed capital (certificate from a bank for the deposited amount)

– Decision on the appointment of a manager

– Specimen of the manager's signature

– Sample declarations

– Document for paid state tax

– Registration fees

• The state fee for registering an Ltd. is approx 160 BGN. when submitting the documents on paper and 80 BGN. when submitting electronically.

6. Management of Ltd

• Manager

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

The manager has the power to enter into contracts, to represent the company and organize its activities.

• General meeting of partners

In an LLC, the main decision-making body is the general meeting of partners. It decides important issues like distribution of profit, accepting new partners, change of company agreement and other strategic decisions.

Decisions in the general meeting are usually made by majority vote, which is proportional to the share of the partners in the capital.

• Control

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

7. Ltd. Accounting and Taxes

• Accounting

 

Ltd. is obliged to keep double-entry bookkeeping. This includes keeping records of income and expenses, balances, cash flow statements and other financial documents.

Unlike sole traders, which can keep simplified accounting, Ltd. follows strict accounting rules.

• Taxes

The profit of the Ltd. is subject to corporate tax, who is in Bulgaria 10% on the company's profit.

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

Ltd. also submits an annual financial statement, which includes balance sheets, income and expense statements, as well as other documents.

• VAT registration

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

• Insurances

There are different options for insuring partners and managers, depending on the insurance goals of the owner of a company. In the presence of the company's activity, there is a need to exercise insurance rights and obligations with some exceptions.

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

8. Termination of Ltd

• Voluntary termination

Ltd. may be terminated by decision of the partners. Termination includes liquidation of the company, whereby the assets are sold off, liabilities are repaid, and the remaining funds are distributed among the partners.

• Bankruptcy

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

9. Advantages and Disadvantages of Ltd

• Advantages:

Limited liability: The partners are liable only up to the amount of the contributed capital.

Easy management: Структурата на ООД позволява съдружниците да вземат колективни решения и да управляват бизнеса ефективно.

По-добра репутация: ООД е предпочитана правна форма за бизнеси, които искат да изглеждат по-надеждни и устойчиви в очите на партньори и кредит

Регистрацията на ООД е важен етап в развитието на бизнеса и трябва да бъде направена, когато се планира извършване на икономическа дейност, за осигуряване на правна защита, за привличане на партньори и инвеститори, и за повишаване на организацията на бизнеса. Съществуват и законови задължения, свързани с отчетност и данъци, които трябва да бъдат спазвани след регистрацията.

For a detailed consultation, contact the Marilena-Consult EOOD team.