Bulgarian company formation: Sole trader or Limited Liability?

The legislative frame in Bulgaria broads on wide when it comes to options for creating a new firm. Several variations of business entities are permitted by the law – some convenient for sole traders, others supposed to be employed by corporations of a much bigger size. The goal of this article about Bulgarian company formation is to compare advantages and negatives of the most popular types of small firms – Sole proprietorship vs. Limited Liability Company?

Single players and family enterprises often choose the first kind. Preferred option when it comes for a shopkeeper, a hairdresser, a car mechanic working at his home garage or a freelancer making some additional income. The state fee to register Sole Proprietorship (ET) is much lower than the OOD/EOOD types. The patent tax could be lower if the firm covers one specific segment of activity. Such entity marches through the shortest cut in the process Bulgarian company formation and also it’s easy and fast to be folded if needed.

Flipping on the other side – on the top of cons list is the fact that all personal property of the owner is at stake in case of creditors’ claims. If owing money to the bank or the supplying agent, you might lose your personal car or your family house (or at least your part of it).

Limited Liability Company occurs to be a better option regarding what’s been said in the previous sentence.

Owners are responsible for the debts of the firm up to the amount of their respective share of capital and no personal asset is jeopardised. The tax is always flat and the rate is 10 percent, while for sole traders it could go up to 15 percent. The bar has been set low enough and the initial minimum capital requirement is only 2 BGN (1 Euro), so ET advantage for that matter appears to be insignificant.

But it takes more time to start Limited Liability Company and it takes, even more, time – half a year at best, to fold such entity. Which type is more suitable for you depends on the funds starting the business, the span and specifics of activity. Not sure what kind to choose before going for Bulgarian company formation? Ask us – at BulgarianLaw.co we have the experts who can give you key advice for your future business.