What is the first thing I need to do?
You have some great business ideas, but you don’t know where or how to get started. One of the main issues you need to understand first is so-called. legal status of your company. There are a few options for this, but the main ones, as we said, are the most massive and most appropriate in the general case are the three – ET, EOOD (Ltd.) or COD.
Features of ET
Let’s first look at Freelance / ET /. In general, this is an outdated and not very effective form of managing your business, enjoying some tax exemptions in the past, but it is not a good option at present. It is difficult to point out the positive aspects of ET, and I will mainly dwell on the shortcomings of this form. First of all, ET is an unlimited liability company! What does this mean; In a simple explanation, this means that the natural person-trader is responsible to the creditors and the state for all of his personal assets, not only the real estate owned by the ET, but also all of his personal property (this includes your apartment, your car, your property etc.) At some point, if you for some reason sink into debts that you cannot cover except that you may need to terminate your business, you may find yourself completely personal property (master is exposed may find yourself on the road). Overall, the ET, as a matter of fact, is not considered to be a legal representative and is fully subject to the law on personal income tax. I do not recommend starting a new business using ET, but I urge those of you who are one-way traders through registered old companies to convert your status. If you are wondering how this can be done, you can always get in touch with us and get the information you need.
E / OOD – the best choice!
The other group I mentioned is the so-called limited liability companies. As you may realize, the biggest advantage lies in their name – their owners are liable to the creditors and the state to a limited extent, only to the extent of their share of the company’s capital. Unlike ET, whatever happens to the business you started your personal property will always remain protected and intact. The applicable law allows companies to open up to a size of 2 lev, which in this case will be the amount of your personal liability as an owner. At the same time, it makes getting started and starting a business accessible even for people with little financial resources. Depending on whether the company has only one owner or more partners, both types of EOOD and OOD are now adapted. Unlike ET, E / OOD is a legal entity and is therefore fully subject to the rules set out in the Law (о Corporate Income Tax Law {ЗКПО}).
Summary on the subject
Of course, no matter what form you choose, the commercial, labor, tax and legal characteristics, obligations are not simple at all. They require extensive experience and in-depth knowledge of the subject and this is of particular importance. I would also say that your first priority when starting a business is to find the right people to outsource your accounting services to. This way you can save many future problems and make the most of all legal tax relief and privileges at the same time. In conclusion, if you are still wondering which format to choose, I suggest betting on limited liability companies. The most appropriate and safe way to succeed.
Boncho Yanchev Assistant Controller
