Advantages of the outsourcing using Bulgarian company

Do we have to owe an apology if assume that since reading this article in English you, the reader, are coming from someplace different than Bulgaria? (Or maybe we an apology to Bulgarians if someone perceives such prediction as a prejudice that Bulgarians don’t speak English well?) Well, rather likely we’re not wrong thinking that way. In fact, lots of foreigners consider the opportunity and eventually start their own Bulgarian company. And one of the main reasons for this happens to be the outsourcing of the activity from its previous location.

Eight out of ten cars in Europe hold parts produced in Bulgaria. No kidding, it was on the news recently. With no real Bulgarian car brand made in the country, there are still plenty of plants contributing parts and details for famous automobile brands. Other forms of production like clothing industry or machinery assembling also fall into the outsourcing segment. More often than that you would stumble on such Bulgarian company in the branch of contact service and clients support.

40 thousand people are employed in the industry and the number is about to double around 2020.

1 billion in annual turnover with the tendency to grow too – definitely, the segment develops rapidly. It means more and more businessmen from the outside see the advantages of outsourcing using Bulgarian company. The golden ratio of combining the quality of work and expenses summarizes the favors preferred by foreign companies. Employees work for substantially smaller salaries while providing similar quality. The taxation is also favorable – the income tax in the country has one of the lowest levels in Europe.

And Bulgaria is two hours away by plane from any country on the continent, it’s not India or Pakistan, it’s still in Europe. If you consider the option to outsource some of your company’s activity to Bulgaria, you could turn to BulgarianLaw.co for advice and legal support.

Setting up a company in Bulgaria – steps and legislation

Setting up a company in Bulgaria follows certain legislative rules. In recent years many foreign investors registered their company in Bulgaria because of profitable and stable economic situation in the country. Business is subject of 10 % corporate tax; the workforce is competent and not so expensive; there are investment opportunities in building construction, IT sector, properties, production and trading. Furthermore, level of personal income taxation is one of the lowest in the world.

A foreign natural or legal entity may establish a company in Bulgaria or could participate in the Bulgarian company as investing in it. The newly establish company, which is fully foreign or it is a Bulgarian with a foreign participation need to be registered in the Commercial Register. This registration requires filling out the application for registration and payment of state fee for company establishment and its registration. These cost-effective legal services provided by law firms are very important. All rights and obligations, which will have the founders of newly created and registered legal entity in the Commercial Register, must be clear to them, before proceeding to the actual registration. Establishment of a company in Bulgaria is determined by the Commercial Law and in particular of the Investment Promotion Law.

It is important to foresee and plan all local taxes, state fees, income tax, company type and capital shares type.

For this purpose, the foreign person must decide whether to invest in a company in Bulgaria as trade branch or sales representative, for example. If the foreigners want to open their own company, which will carry a number of benefits, it must choose the legal form – Joint Stock Company (in Bulgarian is abbreviated “АД”), Limited Liability Company (in Bulgarian “ООД”) and so on. Each legal form of the company has its specifications for incorporation, taxation, taxes and accounting, as well as its governing bodies – selection and compilation. All this preceded the actual registration, after that each company obtains Unified Identification Number (UIN or „ЕИК” in Bulgarian) and should open a company bank account for collecting the capital.

Setting up a company in Bulgaria made by experienced lawyers and jurists with experience in the company registration activity is the best choice. So every foreign investor or Bulgarian company will start or acquire investments profitably.

Limited Liability Company

The trading companies in Bulgaria are five types:

• Joint-stock company;
• Limited Liability Company;
• General partnership;
• Limited partnership;
• Partnership limited by shares.

Every firm that is registered in Bulgaria, no matter if the founder is a Bulgarian or a foreigner, is considered to be a Bulgarian legal entity. Its registration and being is according to the Bulgarian legislation.

The percentage of foreign participation in the Bulgarian firm’s capital can be up to 100%. Since the entry of the firm is in the Commercial Register, it is considered a qualified legal entity. The time needed for registration, erasure and announcement of acts for trading companies in the Commercial Register is three workdays after the receipt of the applications in the Commercial register, unless the law provides otherwise.

How to register a Limited Liability Company

The minimal necessary capital of the LLC is 2 levs. The shareholders’ liability to the amount of share capital is limited; the corporate governance structure simplified.

The shares can be transferred or inherited.

The structure of LLC is consisted of: General meeting of shareholders and one or more managers, whose job is to manage the company and to represent it in respect of third parties. There are no restrictions about a foreigner to be appointed manager of a company.

The procedure is:

• Check the electronic register of the Commercial Register and/or retain business;
• Conducting Constituent Assembly Approval of Memorandum of Association or Articles of Association, the appointment of manager/s;
• Tabling the size of the share capital in an escrow bank account;
• In specific activity, upon submission of documents to the Commercial Register should be presented permission from the competent authority.

The documents you will need are: Application for registration; Article of Association or Memorandum of Association; Memorandum of incorporation; Notarised specimen signatures of each appointed governor; Declaration under Article 142 of the Commerce Act, signed by each appointed governor; Declaration under Article 141 par. 8 of the Commerce Act, signed by each appointed governor; Bank statement for paid-up capital; Document for paid state fee for setting up a LLC; Extract from the Commercial Register for a foreign partner entity; Decision of managing and representative body of the partner entity; Declaration under Article 13, par. 4 of the Commercial Register Act, signed by the governor applicant; Appropriate license or permission under a special law to perform specific activities.

Legal support Bulgaria

Go out on the street for a survey or put it online and ask random people two simple questions. Let the first one be: “Have you ever needed legal service by any mean?” Majority of respondents perhaps would answer “No”, without even thinking too much. Here comes the second question: “Have you ever had any kind of trouble regarding employment contract, property agreement or whatever signed document?” Let us guess – many people who answered “No” on the first question, said “Yes” on the second.

And maybe you could ask the “Yes” type respondents of the second question one more thing: “After you had some kind of issue, have you considered legal support next time you had to sign any paper and do you consider asking for such help in the future?” And off the record – does it have to be like this? Why do we always search for professional support after we have some kind of problem and not before something has gone wrong? Well, there are wise men that can see far enough and don’t let such things happen to them.

When do we need legal support in Bulgaria?

Let’s exclude the work of the notary though performing certain legal formalities might seem routine, but it is highly responsible job. In case of company formation you need advice from a professional who is well aware of the law and the procedure of registration of new found business entity. After the company is ready to go, it also has to go through issues such as banking management and loans, tax planning, etc. We’ve already mentioned services as preparing and reviewing contracts, transfer of properties and real estate issues. Needless to say that in case of litigation calling to a lawyer is inevitable. General legal disputes, tax audits and tax court cases, business and corporate law court cases, administrative law and administrative procedures, criminal trials – you name it.

You don’t have to burn your fingers to know the pot is red hot. Ask somebody who has gone through challenges you never have experienced. And before you answer “No” to the question of legal support necessity in Bulgaria, better think twice.

Legal aid for bank accounts opening and management in Bulgaria

 It is necessary a legal aid to open or manage a bank account in Bulgaria. Actually the business of a company is moving precisely of the receipt and disbursement of cash flows. For the company investment policy are important leases, granted on corporate loans for projects, terms of depositing money and other conditions offered by a banking institution. Especially for companies, which are planning to investment in the country or to establish a new partnership in Bulgaria, remote opening and management of this kind of service is an advantage.

Why will you choose legal aid in Bulgaria for an opening and management of bank accounts?

The usage of this kind of services will help you to open an account in Bulgarian bank from a distance, and also to use the best conditions and offerings on the banking market in the country. Bulgarian banks have a very good cash deposit policy and can rely on different types of deposits; the interest in the second type is slightly higher in view of the conditions offered by the banks. The interest tax accrued on deposits is very minimal; and the funds guarantees are fully covered in the legal framework for regulating the activity of the banking sector in the Bulgaria.

Corporate tax and individual income tax are much more minimal than similar taxes in many European countries. So in current dynamic time, moving the assets of a person, whether natural or legal, in the Bulgarian bank is an excellent option. The terms of the banks are different for personal business account and company business account. Overall, for business development banks have preferential offers on business accounts of companies. When a bank account is opened, you can take full advantage of online management from any place in the world. The credit and debit cards in Bulgaria are compatible with international standards and can be used anywhere.

In order to take advantage of all good offers of deposit, withdrawals, credit and financial assistance to operate with Bulgarian banks it is better to use legal aid in Bulgaria. So professionals will open your bank account and will manage it wisely, if you deem that is necessary. You will obtain the best options for you and your business.

Establishment a company in Bulgaria – different types and specification

Establishment a company in Bulgaria is determined by a number of specific features. A company may have a different organisation, activities, belonging and may be registered in the country in various forms. According to its size, a company in the country, whether foreign or not, can be micro, small, medium or large. More common are companies whose activity brings them a profit and they can be national or international (there are two or more partners form different countries). Overall the different types of companies in the country according to their organisation and their methods of control are most important, which is reflected in their form of registration.

Establishment a company in Bulgaria – types and specification

In our country you can register companies with sole control or corporation. The first are managed and controlled entirely by one person who takes full responsibility for the actions of the company. Such companies are registered in Bulgaria as “ET” (Sole Proprietorship). The next type is sole limited liability company (or in Bulgarian is “ЕООД) is a special form of one-man company. Commercial law regulates the procedure of registration and the management of a company, whether it is a corporation or a sole proprietorship. In “ET” the business owner takes full responsibility with the corporate assets and with the personal properties! Capital for the setting up a similar company is minimal, and accounting and taxes are more simplified.

Limited liability company (LLC or in Bulgarian “ООД”) is a corporation with limited responsibility, and its specific type is Sole limited liability company.

Whether the company is a single entity or not each of the partners are responsible accordingly to the extent of its contribution in the capital of the company. The number of the partners could be up to 20 for this kind of company and it is managed by a General meeting of Shareholders and a Manager. Initial capital is minimal and accounting and tax declaration concern the distribution of the profit among shareholders and their personal incomes.

Limited and General partnerships are special forms of setting up a company in Bulgaria.

They have unlimited liability and are initiate by a contract between several parties for the establishment of a common business. Its management is very difficult to be determent and such companies have heterogeneous taxation.
The most popular type of corporate business in Bulgaria is “AD”. The joint stock company is registered with initial capital, number of partners, management organisation, type of activity, etc. It is a subject of corporate tax, employees and managers are subject of income taxes. The profit is distributed and accounting is common.

Mixed types of Corporations in Bulgaria

Company with mixed characteristics in their nature are called corporations and they are registered under the Commerce Act in Bulgaria. In business, the legal process of the establishment of a corporation or company with corporate character is called incorporation. In Bulgaria corporations could be registered from Bulgarian legal or natural persons and foreign ones. In a Bulgarian company, which is Limited Liability Company (LLC, in Bulgarian “OOD”), Joint-Stock Company (JSC, in Bulgarian “AD”) or Limited partnerships (LP, in Bulgarian “KD”), as a corporate form, they may also have a foreign participation on its establishment.

By law, the registration of corporations with international participation is not so different from Bulgarian corporations without foreign participation, but they have specific characteristics. Initially a registration requires the necessary registration papers, which is better to be prepared by experienced lawyers, who are fully aware of the procedure of corporation registration. It can be done electronically or in a standard way by paper, which is entirely the choice of your representative.

If the future partner registered as a legal or natural entity in the country of the partner’s residence is very important.

This is significant because the legal framework requires different things from both types of international participants in the newly established corporation. If a shareholder or participant in the share capital of the company is a natural entity, who is a resident of another country, in that case it does not require additional documentation. It is required only the physical presence of your partner. But if you partner is a legal entity, then it is required a document of the current status of the foreign company from the states of residence and registration of the company. It is mandatory that this document to be translated and legalized by a certified translator.

When you become a partner with a person who is not a Bulgarian resident or company which is registered in another country then the whole process is accompanied by a translator who knows the written and spoken language of the foreign entity. According the Bulgarian law all documents are formed and signed in the presence of your partner. Translation of all documentation is also required. If you want that your foreign partner to be the manager of the corporation, then it is necessary to be presented a notarized signature in the presence of an interpreter. The whole process has its specific steps, so for the establishment and registration of corporations of mixed type in Bulgaria it is very important to rely on legal firm experienced in commercial law. So your business will start in the right way.

Legal basis and establishment of corporations in Bulgaria

 The corporations in Bulgaria are actually a company with corporative features. According to Bulgarian legislation they can be several types, but they have always used as their base the characteristic of a capital company and the accumulation of primary and secondary capital. The members of corporate or a company have limited liability according the law. Commercial Act always governs the registration and operation of corporations and varieties of partnerships. According to it, there are three legal types of corporations in Bulgaria – Limited Liability Company (LLC, in Bulgarian “OOD”), Sole Limited Liability Company (SLLC, in Bulgarian “EOOD”), Joint-stock company with share capital and shareholders (JSC, in Bulgarian “AD”) or Limited partnership again with shares (LP, in Bulgarian “KD”).

Corporations in Bulgaria can be registered by Bulgarian residents or foreign investors. But to choose among all the forms of corporate companies and to do successful registration is required specific knowledge and which type is the most suitable in each current situation. Consultations during corporate establishment, its registration and preparation of all necessary documents and following representations, assistance and talks on behalf of the new company with banks and state institutions is better to be  and state ones need to be completed by lawyers. To establish this kind of company has specific features of share distribution, initial capital, types of members, etc.

For example, in both types of LLS, the property and shares of shareholders of established corporate entity are strictly recorded.

Only for SLLS, the founder could be a natural person or even state representative. In Limited partnerships the partners are numerous and they are divided into two groups of entities – with unlimited and limited liability. The most common form of corporations in Bulgaria is JSC where each partner brings capital and receives the corresponding number of shares of the capital. The shares have nominal and market value and at the end of the year the profit is distributed as dividends.

All this is a matter that bears the specific character and is strictly regulated by the law. Therefore, the setting up only local, mixed, or foreign corporation in Bulgaria requires professional intervention of the law firm and professionals. Then the whole process will be fast, secure and most importantly legal according the laws of the country.

Corporation Bulgaria

What happens in Vegas, stays in Vegas! Whatever company is formed in Bulgaria, is considered Bulgarian by law regardless of the origin of its founders. This meaning is provided by the law in the country which determines any corporation as Bulgarian legal person even if the individuals who form it are foreign citizens. Thus so every business entity is subject of the national legislation and has to perform its activity according to the norms permitted by the government.

But being a Bulgarian company does not set any limit to the size of the share that belongs to foreign individuals. Whole 100 percent could be owned by a person or persons with nationality different than Bulgarian and that business entity has the same rights and obligations as any corporation formed by local persons only.

Joint stock companies have to face certain requirements to be created, exist and operate in the country. The minimum initial capital for such corporation to be listed at Trade Register amounts to 50 000 BGN (around 25 500 Euros). There are legally established restrictions on the transfer of shares. A worldwide principal is available in Bulgaria – specific for the joint stock company is the lack of personal involvement of the shareholders in the company’s activity.

Corporate structure of such company has strictly defined hierarchy. Joint-stock company has to convene General meeting of shareholders. Participants in this assembly elect and approve Board of Directors and Supervisory Board in case of a two-tier management system. Any public company is obliged to post the minutes from the General meeting online for a period no shorter than one year.

So incorporation of joint-stock company is not some simple task and legal service for formation of such entity is inevitable.

The amount and complexity of documents that has to be prepared is a task better to be entrusted to experienced professionals. It is not a Limited Liability Company that sometimes cab be formed and entered at Trade Register without the help of experts. Forming corporation in Bulgaria gives a promise of success if it is supported by lawyers and advisors who know what has to be done for a proper launch.