Choosing The Best Legal Structure For Your Business In Bulgaria

Published on September 29, 2025 and written by Cyril Jarnias

Bulgaria, with its rapidly growing economy and business-friendly environment, is attracting an increasing number of foreign entrepreneurs. However, to succeed in this promising market, choosing the right legal structure for your business is crucial. This decision will significantly impact your taxation, legal responsibilities, and ability to grow your operations. In this article, we will explore in detail the various options available and guide you through the process of selecting the most suitable legal structure for your project in Bulgaria.

Main Types of Legal Structures in Bulgaria

Bulgaria offers several legal forms for businesses, each with its own characteristics and advantages. Here are the main options to consider:

1. Limited Liability Company (OOD)

The OOD (Drujestvo s Ogranichena Otgovornost) is the Bulgarian equivalent of the French SARL. It’s the most popular legal form in Bulgaria, particularly suitable for small and medium-sized enterprises. It offers several advantages:

• Relatively low minimum share capital: 2 leva (approximately 1 euro)
• Shareholders’ liability limited to their contributions
• Flexibility in management and decision-making
• Possibility of having a single shareholder (EOOD – Single-Member Limited Liability Company)

The OOD is particularly favored by foreign investors for its simplicity in formation and management. It suits a wide range of commercial activities and services.

2. Joint Stock Company (AD)

The AD (Aktsionerno Drujestvo) is equivalent to a public limited company. It’s more suitable for large enterprises or projects requiring significant investments. Its main characteristics are:

• Higher minimum share capital: 50,000 leva (approximately 25,000 euros)
• More complex structure with a board of directors or supervisory board
• Ability to issue shares and be listed on the stock exchange
• Enhanced credibility with partners and financial institutions

The AD is often chosen by companies with significant growth ambitions or requiring substantial external financing.

3. Branch Office

A foreign company can also choose to establish a branch office in Bulgaria. This option offers certain advantages:

• No minimum capital required
• Simplified registration process
• The branch has no separate legal personality from the parent company

However, the branch has limited autonomy and the parent company remains fully responsible for its activities.

Advantages and Disadvantages of Different Legal Structures

Each legal form has advantages and disadvantages that are essential to weigh before making your choice.

Limited Liability Company (OOD)

• Low startup capital required
• Simplified formation and management procedures
• Flexibility in share distribution and decision-making
• Limited liability for shareholders

• Limited capacity to raise significant funds
• Sometimes less prestigious image than AD for certain partners
• Restrictions on share transfer

Joint Stock Company (AD)

• High capacity to raise capital
• Possibility of being listed on the stock exchange
• Image of solidity and credibility
• Ease of share transfer

• High minimum share capital
• More complex governance structure
• Higher operating costs
• Increased reporting and transparency obligations

Branch Office

• No minimum capital required
• Simplified registration procedure
• Direct control by the parent company over activities

• No separate legal personality
• Unlimited liability of the parent company
• Limited autonomy in operational decisions

Tax Implications of Different Legal Structures

Bulgaria’s tax regime is one of the most attractive in the European Union, with a corporate tax rate of 10%, one of the lowest in the EU. However, tax implications can vary depending on the chosen legal structure.

Taxation of OOD and AD

OODs and ADs are subject to the same basic tax regime:

• Corporate tax: 10% on profits
• VAT: 20% (with registration threshold of 50,000 BGN annual turnover)
• Dividends: taxed at 5% for individuals (0% for EU resident companies under certain conditions)

• Possibility to benefit from simplified tax regime for small businesses under certain conditions
• Flexibility in executive compensation (salaries or dividends)

• Specific tax regime for listed companies
• Possibility to benefit from tax incentives for large investments

Taxation of Branch Office

The branch is taxed as a resident entity in Bulgaria, but with some particularities:

• Profits are taxed at 10% in Bulgaria
• No withholding tax on profits repatriated to the parent company (subject to tax treaties)
• Need to comply with transfer pricing rules for transactions with the parent company

Tax Optimization

Regardless of the chosen structure, there are tax optimization opportunities in Bulgaria:

• Preferential tax regimes for R&D activities
• Tax exemptions in certain special economic zones
• Tax credits for job creation in high-unemployment regions

Legal Responsibilities Associated with Each Structure

Legal responsibilities vary depending on the chosen legal structure, impacting daily management and the obligations of directors and shareholders.

Responsibilities in OOD

• Liability limited to the amount of their contributions
• Obligation to participate in general meetings
• Voting rights proportional to shares held

• Personal liability in case of management misconduct
• Obligation to maintain regular accounting
• Duty of loyalty to the company

Responsibilities in AD

• Liability limited to the amount of their shares
• Right to participate and vote in general meetings
• Right to information about company management

• Joint liability in case of management misconduct
• Obligation to comply with corporate governance rules
• Duty of care and loyalty to the company and shareholders

Responsibilities in Branch Office

• The parent company is fully responsible for branch activities
• The branch’s legal representative has limited powers defined by the parent company
• Obligation to maintain separate accounting for activities in Bulgaria

Common Obligations for All Structures

Regardless of the chosen legal form, certain obligations are common:

• Compliance with Bulgarian labor law for local employees
• Compliance with environmental and safety regulations
• Obligation to file annual accounts and tax returns
• Compliance with anti-money laundering and anti-corruption rules

Process for Selecting the Optimal Legal Structure

Choosing the right legal structure for your business in Bulgaria requires thorough consideration and careful analysis of several factors. Here is a step-by-step guide to help you in this crucial process:

1. Assess Your Needs and Objectives

• The nature of your activity
• Your short and long-term growth objectives
• The number of partners or shareholders envisaged
• Your financing needs

2. Analyze the Advantages and Disadvantages of Each Structure

• Management flexibility
• Formation and operating costs
• Tax implications
• Legal responsibilities

3. Consult Local Experts

• Consult a lawyer specialized in Bulgarian business law
• Get advice from an accountant on tax aspects
• Exchange with other foreign entrepreneurs established in Bulgaria

4. Consider Image and Credibility

• Your image with clients and partners
• Your ability to attract investors
• Your credibility with financial institutions

5. Plan for the Future

• Possibility to change legal structure later
• Ease of partner entry or exit
• Ability to adapt to rapid growth

6. Evaluate Overall Costs

• Formation fees
• Annual operating costs
• Tax and social charges

7. Make an Informed Decision

• Weigh the pros and cons of each option
• Discuss with your potential partners or shareholders
• Choose the structure that best matches your vision and objectives

Conclusion

Choosing the right legal structure for your business in Bulgaria is a crucial decision that will significantly influence your future success. The OOD remains the most popular choice for its simplicity and flexibility, but the AD may be more appropriate for large-scale projects requiring significant capital. The branch office, meanwhile, offers an interesting solution for foreign companies wanting to test the Bulgarian market before a more substantial commitment.

Whatever your decision, it’s essential to fully understand the tax, legal, and operational implications of each structure. Bulgaria offers an attractive business environment, but careful planning and advice from local experts are indispensable to maximize your chances of success.

Remember that choosing the legal structure is just a first step. Effective management, a clear strategy, and a good understanding of the local market will be equally crucial for the success of your business in Bulgaria.