The Bulgarian Commercial Code defines the LLC (Bulgarian: Дружество с ограничена отговорност, short: ООД) in Art. 113 as a company established by one or more persons who are liable for the obligations of the company with their contributions to the capital of the company. Even in the form of a one-man company with limited liability (Bulgarian: Еднолично дружество с ограничена отговорност, short: ЕООД), i.e. a limited liability company with only one shareholder, the limited liability company remains a legal entity that is categorised as a corporation. The LLC can be founded by private individuals or legal entities. The persons involved may be either domestic or foreign. In accordance with Art. 115 from the Commercial code, the LLC is formed on the basis of a partnership agreement after entry in the commercial register. The articles of association must be concluded in writing in accordance with Art. 114 from the Commercial code. The constitutive content of the articles of association pursuant to Art. 115 includes:

• Company name, registered office and address of the company;
• Object of the company and duration of the contract;
• The company name, the actual identification code (EIK) of the partners;
• the amount of the capital; if the full amount of the capital is not counted when the company is established, the terms and conditions for its payment are specified in the contract. The deadline for the subsequent payment of the entire share capital must not be longer than 2 years from the registration of the company in the Commercial Register, corresponding to the capital increase.
• The amount of the shareholders' contributions;
• The method of management and representation;
• The benefits of the shareholders, if agreed;
• Other rights and obligations of the shareholders.

The partnership agreement must be signed by the founders in person or by a representative with an explicit notarial authorisation. An entry in the commercial register, a deposit of the share capital and the appointment of a managing director are required for the formation of the company. The managing director is authorised to apply for the company to be entered in the commercial register. The company name of the LLC must include the term ‘Дружество с ограничена отговорност’ or the generally understandable abbreviation ‘ООД’. In the form of a one-man company with limited liability, the company name must include the designation ‘Еднолично дружество с ограничена отговорност’ or the generally understandable abbreviation ‘ЕООД’ (Art. 116 BHG).

The company capital consists of the shareholders' contributions, which must currently amount to at least BGN 1 in accordance with Article 117 of the Commercial Code. After the introduction of the euro in Bulgaria, the minimum amount of share capital will be 1 euro. The capital is made up of the capital contributions of the shareholders and is entered in the commercial register. The amount of the shares can vary for the individual shareholders. A share can also be acquired jointly by several persons. If a share in the capital belongs to several persons, they can only exercise the rights arising from it jointly. They are jointly and severally liable for the obligations arising from this share.

The equity contributions must be paid in real terms. The shareholding represents the corporate relationship between the respective shareholder and the company. Company shares can be transferred, inherited and divided.

In order to secure the financial stability of the company and the interests of the company's creditors, the Bulgarian Commercial Code requires mechanisms for changing the capital that guarantee the minimum coverage of the capital by the company's assets. The two forms of capital change (increase and decrease) require an amendment to the articles of association and their entry in the commercial register. The GmbH has an organ structure and acts in commercial transactions through its organs. These are the general meeting of shareholders and the managing director(s), which are mandatory, and an auditor, which is optional.

The general meeting is the main corporate body because it forms and declares the will of the company. In accordance with Art. 136 from the Bulgarian Commercial Code, the general meeting consists of all shareholders, who can also act through their representatives with express authorisation (only in the case of legal entities as shareholders). The responsibilities of the general meeting are explicitly listed in Art. 137 from the BCC. These include amendments to the articles of association, capital changes and changes in the company, the acceptance and exclusion of shareholders, the selection of the company director, profit distribution, etc.

Requirement for registration of the company in the Commercial Register (Art. 119 of the Commercial Companies Act)

In order to register a limited liability company in Bulgaria in the Commercial Register at the Register Agency, it is necessary that

• the articles of association of the company are available
• a managing director has been appointed
• the minimum capital required by law has been paid up;
• If the company is established with a higher capital than the minimum capital required by law, at least 70 % of the capital must be paid up.

Unfortunately, however, the formation of companies by foreign natural and legal persons is currently quite difficult and takes several weeks, as the banks carry out numerous checks to open an account for the payment of the company capital. There is also no guarantee that a bank check will be favourable.

Rights and obligations of shareholders

According to Art. 123 of the Commercial Code, the shareholder has material rights (the right to a share in the profits and liquidation quota) and immaterial rights (the right to participate in the management of the company and the right to be elected as the company's manager). Intangible rights also include the individual collective right to information and control rights, the right to convene the general meeting, etc. The provision of Art. 124 of the Commercial Code also regulates the obligations of individual shareholders.  The material obligations include the obligation to pay the capital contribution. Failure to fulfil this obligation can lead to the exclusion of the shareholder. The immaterial obligations include participation in the management of the company, fulfilment of the resolutions of the Annual General Meeting, safeguarding the interests of the company, etc. The non-competition clause also applies to shareholders in the LLC.

Rights and duties of the managing directors

One or more managing directors are appointed to represent and manage the company. The managing director is the sole representative body of the company. He is elected by the Annual General Meeting and entered in the commercial register. The entry in the commercial register requires the presentation of his notarised consent together with a specimen signature. In accordance with Art. 141, Para. 7 of the Commercial Code, the relationship between the managing director and the company is governed by a contract. The managing director is subject to a non-competition clause - he is prohibited from concluding transactions in his own name or in the name of third parties, from participating in general partnerships, limited partnerships or other limited liability companies, from being a member of the management bodies of other companies if they carry out a comparable activity, etc. In the event of a breach of these obligations, the managing director is obliged to compensate the company for any damage incurred.   However, the company may release the managing director from this non-competition clause. The managing director's power of representation can be terminated under the following conditions:

• incapacitation or death of the managing director;
• by resolution of the Annual General Meeting;
• at the request of the managing director.

Termination of a shareholder's participation in the company

The shareholder's participation in the company is terminated

• by death or total disability;
• by exclusion;
• in the event of dissolution by liquidation - in the case of legal entities;
• in the event of bankruptcy.

A shareholder may also terminate his/her participation in the company by giving written notice of termination, which must be given at least 3 months before the date of termination.

In addition, a shareholder may be excluded by the shareholders' meeting following written notice of termination if:

he fails to fulfil his obligations to participate in the management of the company's business;

• fails to comply with the resolutions of the shareholders' meeting;
• acts against the interests of the company;
• fails to make an additional cash contribution

Termination of the company

The dissolutionn and liquidation of the LLC are carried out in accordance with the rules set out in Art. 154 et seq. Commercial code. They are carried out according to the general rules for dissolution and liquidation of limited liability companies as well as according to some special rules.

A limited liability company in Bulgaria can be dissolved under the following circumstances:

• After the expiry of the period specified in the articles of association;
• by a resolution of the shareholders adopted by a majority of 3/4 of the capital, if the articles of association do not provide for a larger majority;
• by merger and amalgamation with a public limited company or another limited liability company;
• in the event of bankruptcy;
• by order of the district court in the cases provided for in this Act.

The articles of association may also provide for other grounds for the dissolution of the company.

The limited liability company may be dissolved by the court under the following conditions pursuant to Art. 155 of the BCC:

• at the request of the shareholders whose shares in the company in total represent more than 1/5 of the capital, if there are important grounds;
• at the request of the public prosecutor's office if the company's activities are unlawful;
• at the request of the public prosecutor's office if the company remains without a managing director for a period of 3 months.

The liquidator of the company is the managing director, unless another person is appointed by the agreement or by resolution of the shareholders' meeting. At the request of the controller or the shareholders holding at least 1/10 of the capital, the court may appoint other liquidators.

Dissolution of a limited liability company with only one natural partner

In accordance with Article 157 of the Commercial Code, a company whose capital is held by a natural person is dissolved upon the death of that person, unless otherwise provided for or the heirs request the continuation of the company.

If the capital is held by a legal entity, the company must also be dissolved upon its dissolution.

Taxation

According to the Bulgarian Corporate Income Tax Act, a tax rate of 10 % is levied on the profits of the limited liability company. The tax payable is declared once a year in an annual tax return. The assessment basis for this tax is the profit, i.e. if a company does not make a profit, the tax is not payable. The assessment period is the calendar year. If the tax is paid late, interest is charged.

In addition, the limited liability company must also pay value added tax (VAT) if it has registered voluntarily or compulsorily under the VAT Act. VAT registration is mandatory if the taxable turnover reaches BGN 166,000 (from 1 January 2025, before BGN 100,000) or more in a period not longer than the last 12 consecutive months preceding the current month. The limited liability company must register within 7 days of the end of the tax period in which you have reached this turnover by submitting an application for registration (Article 96, paragraph 1, first sentence of the VAT Act). Under certain conditions, VAT is refundable.

If the profits of a public limited company are distributed, a dividend tax of 5% of the gross amount to be distributed must also be paid on the amount to be distributed.

In addition to these taxes, an annual property tax is payable if the company registered in Bulgaria owns a property, e.g. an office. This annual tax amounts to 0.01 to 0.45% of the tax value of the property. If the company owns a car, tax must be paid on the vehicle.

If you want to set up a limited liability company in Bulgaria, you need to think about the following questions in advance:

• Name of the LLC;
• Shareholder/s:
• Object of the company;
• Registered office and business address;
• Amount of capital;
• Managing director/s: