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Company Formation In Hungary

In this article, we will mention Company Formation in Hungary and other details as a company forms and its responsibilities in Hungary.

If you are planning to start up a business, you may read this article before which gives you a brief overview of company registration in Hungary.

Basic Legal Definitions

Above all, one must understand the very basic legal terms about enterprises in Hungary. Here you may find some definitions you should review before going ahead with the article.

1. Unlimited liability: the owner of the enterprise, in a proportion of his ownership, has full financial responsibility for all the debts of the company. I.e. his private holdings could also be subject to diligence.
2. Limited liability: the owner of the enterprise is only responsible for the liabilities of the company up to the capital he provided.
3. One-person company: there is only one owner of the company who, usually, also acts as a CEO.
4. Limitation in size: limitation of revenue, number of employees, registered capital or number of business relationships.
5. Private enterprise: an enterprise run by a private individual. Private enterprise is not a legal person.
6. Company: an enterprise that is a separate legal person.

The state provided the founding documents template: if a template determined by local legislation is applied during the company registration, the fees and time may be significantly reduced.

The template allows little customization, however that usually satisfies the needs of most of our Clients.

Company Forms In Hungary

You should be able to decide what type of business you would like to start with.

Below is a very simplified and brief but well understandable comparison of the possible legal business forms in Hungary (not considering public limited liability company – NYRT – as an option).

 

Description	Private enterprise	Associations (KKT, BT)	Limited liability company (KFT)	Private limited liability companies (ZRT)
Legal person?	No	Yes	Yes	Yes
Limited in size?	No	No	No	No
Company registration needed?	No	Yes	Yes	Yes
Minimum registered capital	N/A	1 HUF	3 000 000 HUF	5 000 000 HUF
Limited liability?	No	Unlimited for a min. 1 owner	Yes	Yes
Is there a one-person option?	N/A	No	Yes	Yes
Pros	Easy and cheap to start and end, regulated by personal income tax law	No minimal registered capital, legal person	Legal person, very popular: this is considered as a “standard” form in practice, no limitation. Can be applied to any goals. E.g. very big companies use this form	Limited liability, can issue shares but that can only be distributed non-publically
Cons	Unlimited liability, not a legal person, has no separate CEO. Although it is unlimited in size the taxation possibilities are restricted	One of the owners has unlimited liability, only that owner is entitled to represent the company (i.e. act as a CEO)	There is a minimal registered capital and the establishment costs more	More restricted regulations on the operation, higher establishment costs

The Process Of Company Formation In Hungary

About the process, we suggest reading our article, Company Registration in Hungary I Step by Step.

The Basic Process Of Company Registration Is As Follows:

1. Consulting With a Local Expert

Before taking any steps, it is very advisable to visit a local expert. Our company can provide you with the necessary information to make the right choice.
You can check the Hungarian Promotion Agency to see which sectors may be proper for your investment.

2. Making The Decision On The Legal Form Of The Enterprise

Depending on the activity you would like to carry out, a different legal form might be appropriate for you. However, as a rule of thumb, a limited liability company is considered the most suitable company form in Hungary and it may be your best choice.

3. Nominating The Owners and The CEO

You may establish a one-person enterprise. If not, you will need at least one additional partner. You also need to decide the ownership ratio.

4. Choosing a Proper And Unique Company Name

The company name must be unique (no similar name is registered in the Hungarian company register), should not contain a historical reference, although, applying foreign country names is possible (e.g. Solutions of Germany Hungary Szolgáltató Kft.). The full English name is also possible.

5. Choosing The Main Business Activity

You should pick at least one main activity, for which we can provide the proper statistical code (TEÁOR).

6. RAISING THE NECESSARY FUNDS FOR THE REGISTERED CAPITAL AND THE REGISTRATION COSTS

Depending on the company form, you should be able to pay the necessary funds. Legally, registered capital must not be paid at the time of establishment. Nonone-person companies may postpone it for a maximum of 1 year. However, in practice, registered capital is usually paid with petty cash.

7. PICKING A PROPER ACCOUNTANT

The company, from the very beginning, needs some administrative tasks to be completed, even if it does not carry out any actual business activity. An expert is essential for a newly established company.

8. REGISTERING THE COMPANY

For this, you will need to visit a lawyer in person, using an attorney is not possible.

Our team is ready to help you at this stage too. We will book an appointment well in advance before your arrival based on prior communication. All you have to do is to visit our office.

The company is established by the founders’ contract which must be signed by every owner in person, in front of the lawyer.

Please check Frequently Asked Questions about Company Establishment in Hungary.

9. PREPARING THE SPECIMEN OF SIGNATURE (SOS)

If the CEO is a foreign citizen, he will need to visit a public notary to obtain a bilingual Sos or accept a Hungarian version prepared by the lawyer. The general manager also has to provide an Assignment for Delivery.

I.e. foreigners should nominate a person who will take and forward their deliveries in Hungary. We undertake this responsibility as part of our seat providing service.

10. OTHER TASKS

Once the company is registered, opening a local bank account and submit the necessary registration forms.

WHAT DOCUMENTS ARE NEEDED FOR COMPANY FORMATION IN HUNGARY?

A valid passport each of the owners and the CEO. This document may be sent in a scanned version

Founding documents and declarations of the CEO. If the owners and/or the CEO are foreign persons than an official translation should also be prepared in order to submit it to the court. We may prepare the translation for a much lower fee by legally undertaking the responsibility of translation.

A specimen of signature. This will be prepared by a public notary or the lawyer.

HOW MUCH TIME DOES IT TAKE TO COMPANY FORMATION IN HUNGARY?

If you send all the necessary documents in advance, we are able to book all appointments well before and you will have to visit Hungary only once. The administration, in this case, will take about 1 day. Please note that the public notary may have a suitable appointment between 7 and 14 days.

By using the template, the registration procedure itself may be reduced to 2 days. That means you will have your company officially registered within 2 days. We will send you the registering documents by email, you will not have to come to Hungary for taking the documents.

After the company is registered, you will have to open a bank account in Hungary, however, for an additional fee, we may undertake these tasks an attorney.

Gurcan Partners is a professional law and consultancy firm. Please get in touch with us. We are ready to help you with all the necessary services of Company Formation in Hungary.